INDUSTRY players are concerned over the government’s announcement to increase the minimum wage to RM1,500 a month which takes effect beginning May 1.
Malaysia Association of Cleaning Contractors president Noruddin Idris said this step is too soon as there are only two months left and most of their contracts are still running at the old wage rates.
Therefore, cleaning contractors will still be receiving the old salary when the new rates are implemented.
“An increase of RM300 in basic salary will increase Employers’ Provident Fund contribution to RM39, RM5.30 contribution to the Social Security Organisation, RM3 contribution for Human Resources Development Fund, RM0.075 contribution for Personal Insurance Scheme, and provision for annual and medical leave of RM21.15.
“This means that the actual increase in labour cost is RM362.53, and this does not include an increase in overtime rate and across the board increased salary for other operatives and office staff,” he said in a statement yesterday.
Most of the ongoing cleaning contracts were quoted based on the current minimum salary of RM1,200 so companies would have to bear an additional cost of over RM300 per cleaner per month, as most clients refused to entertain requests for a price review.
Noruddin explained that 75% of the cost goes to labour for a cleaning contract and a 25% in labour cost would increase the total cost by 18.75%.
Therefore, with a gross profit of 10%, the contractors would suffer a loss of 8.75%.
He suggested that the government implement an increment for 2023 as well as annually for the succeeding years to enable cleaning contractors to include the expected increase in salary in their quote.
“Cleaning plays an important role in promoting tourism and foreign investment.
“If we continue to be burdened with various problems and sudden cost increases, it will be difficult for contractors to play their role effectively in keeping the country clean,” he added.
Meanwhile, Malaysian Association of Hotels CEO Yap Lip Seng believed that the real problem is the definition of wages itself.
Restricting the minimum wage order to basic wage only would not promote productivity or efficiency nor it encourage employers to provide better motivational benefits to employees.
Most hotels are already paying salaries which are higher than the current minimum wage and if it also includes non-statutory benefits, it further exceeds the proposed new minimum wage of RM1,500.
“The continuous increase in basic wages in actual fact does not increase national productivity, instead it does more damage to the economy by forcing inflation with the same or even less production.
“Productivity is key to growth and it differs between industries and this is the main reason why a same mandatory minimum wage for all industries and sectors will not work,” he explained in statement yesterday.
Yap warned that when the government forces a same minimum wage on entry, the workforce of different industries carrying different work values will in turn force sectors of higher value to increase it even higher.
If the hotels operate through a direct cost-based business model, the additional costs will be channelled to customers through a price increase or widespread inflation.
However, he said hotels would need to brace absorbing losses as they operate in such an environment where the demand and price fluctuates to market trends.
“This will not go well with the hotel industry as it struggles to recover with limited resources and after having lost talents throughout the pandemic.
“On a larger view, due to the government’s commitment to ensure equal remuneration without discrimination, the minimum wage will apply to all workers including foreign workers,” Yap added.
Despite foreign workers’ contribution to the Malaysia’s economy, it would bring implications towards them as most, if not all, will only be sent back to their own country.
Therefore, he believed the GDP of countries such as Nepal is highly dependent on remittances, which contributes more than 30% of its GDP.
“Increasing minimum wage blindly without addressing needs of different sectors and industries is not a good policy.
“Contrary to popular belief, salary is not to be blamed for unemployment and the government needs to address various economic and also social factors impacting unemployment as well as underemployment,” he said.
Meanwhile, the Federation of Malaysian Manufacturers (FMM) was disappointed its suggestions on the matter were not considered.
Its president Tan Sri Soh Thian Lai said the new minimum wage represents an immediate increase of 25% on the basic salary which will have a knock-on effect to the overall payroll cost and have a spiralling impact on business cost and could potentially derail business and economic recovery.
Based on the findings of the recent FMM-MIER Business Conditions Survey for the second half of 2021, majority of the respondents opined that the RM100 increase in the minimum wages is an acceptable rate in the current economic conditions.
“In this regard, we proposed for the minimum wages adjustment to be implemented gradually with a RM100 increase in the third quarter of 2022 and a subsequent adjustment in 2023/2024 to reach RM1,500,” he said in a statement yesterday.
The survey also noted that the escalating cost of doing business would have a profound impact on business recovery and sustainability.
“While we note that the micro enterprises that make up 78.6% of the 97.4% of the micro, small and medium enterprises (MSMEs) establishments in the country would be exempted from this new minimum wage, SMEs with employees up to 200 are not spared and such a steep increase would have an undesirable impact on their business recovery.
“Furthermore, given that foreign workers would also enjoy the wage increase, it would lead to an additional outflow of close to RM2 billion annually (based on 1.6 million legal foreign workers) which will eventually rise to close to RM6 billion annually,” he added.
Additionally, employers continue to plan for salary increments in 2022 and this would further address the cost of living pressures.
On the other hand, the Malaysian International Trade Union Council welcomed the move.
Its president Datuk Mohamed Shafie Mammal said the announcement came at a time when most people, especially bottom 40% income group workers, are still struggling with the impact of the Covid-19 pandemic.
“I hope the government stays true in delivering its promises without any delays.
“As the implementation of the latest minimum wage involves all workers, the government must ensure that implementation and enforcement involve all sectors including the domestic sector,” he said.
Human Resources Minister Datuk Seri M Saravanan also welcomed the announcement as it is in line with the Cabinet’s decision on March 11.
“This measure is also expected to make a positive contribution in stimulating the country’s economy through increasing the purchasing power of workers,” he said in a statement yesterday.
Saravanan says his ministry will announce more details on the mechanisms and implementation of the new minimum wage rate soon.
Source: https://themalaysianreserve.com/2022/03/21/increasing-minimum-wage-not-holistic-solution-industry-players-say/