Dr Felix Moh
KUCHING (March 23): The Sarawak Oil Palm Plantation Owners Association is concerned about the impact of the new minimum wage set to take effect on May 1 on the sector as the commodity’s prices fluctuate, saying an increase in wages will have far-reaching consequences.
Its chief executive officer Felix Moh said the impression given by Plantation and Commodities Minister Datuk Zuraida Kamaruddin that the plantation sector was not facing any problems in implementing the new RM1,500 minimum wage was misleading.
“It is possible that the minister could have been wrongly advised or is not well versed in business operation. Oil palm is labour intensive. The labour-to-area ratio for an average plantation is one worker to 10 hectares.
“Therefore, any small percentage increase of input cost would have significant impact on subsequent cost of operation. As a result, the operation of oil palm plantations must be prudently managed.
“Labour cost accounts for 30 per cent of the oil palm operation, meaning any slight increase in wage will significantly increase the cost of labour for the plantation due to the numbers of workers involved,” he said in a statement.
Zuraida had told the press that the average salary level in the plantation sector was around RM2,000 to RM2,500 per month and therefore, it would not be a problem for the sector to comply with the new minimum wage.
Moh said as an example that an increase of RM400 per worker for a 1,000ha plantation would mean the plantation has to come out with an additional RM40,000 per month to pay their wages.
“It is important to note that this cost is incremental, meaning an increase in the number of workers in a particular plantation due to its bigger size will directly require more funds for paying wages i.e. RM80,000 extra for 2,000ha plantation,” he said.
He said such impact might not just stop there as other workers who are earning a salary of RM1,500 might want to have their salary increased too to commensurate with their skills and experience, which would cause a ripple effect that affects the whole company’s hierarchy.
Moh, however, agreed that the majority of workers in oil palm plantations were earning more than RM2,000 a month.
“But the minister should be mindful that oil palm plantations practise a piece rate system whereby worker’s pay is not based on how many hours they work, but rather on the number of tasks they complete that links to productivity.
“Nevertheless, the oil palm plantation is still obliged to the Minimum Wage Act that any increase in the wage rate will be taken into calculation for new tasks’ rates. For example, an increase of 25 per cent of wage following the implementation of the new minimum wage will directly increase the cost of existing task by the same amount,” he said.
Therefore, he said Soppoa reminded the Zuraida that palm oil was a commodity and its price is subject to correction when demand slows down.
“The increase of 25 per cent in labour cost may not seem significant at this high crude palm oil price now but what happens if one day the crude palm oil prices return to the 2014-2019 levels of between RM2,100 to RM2,700 per tonne?
“Bear in mind that other input costs like fertilisers and chemicals have already more than doubled. Soppoa is not stingy in employees’ wages and welfare but a company must be managed sustainably in order to ensure long-term viability and employment,” he said.
Earlier, Moh said the hike in minimum wage was a hasty government decision and the last thing the business community expected during this critical period as during the last two years of the Covid-19 pandemic, tens of thousands of businesses ceased operation.
He said Prime Minister Datuk Seri Ismail Sabri Yaakob’s announcement that the RM1,500 minimum wage will be implemented from May 1 had stunned the entire business community.
“Many found that it was so inappropriate for the PM to announce such an important policy that affects all walks of life in a political event.
“The public may wonder whether the PM was instructing that particular political party to implement minimum wage solely or otherwise? On top of that, the refusal of the PM to listen to the pleas by the business communities on the postponement of minimum wage demonstrated the erosion of his credibility in upholding the true spirit of Keluarga Malaysia,” he said.
Ismail Sabri had announced the wage hike during the Umno General Assembly in Kuala Lumpur last Saturday.
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