FMM to govt: Give employers wage credit, subsidy to ease burden of wage hike

Tan Sri Dato Soh Thian Lai – Bernama file photo

KUCHING (April 29): The Federation of Malaysian Manufacturers (FMM) has called on the government to provide all affected employers a wage credit or subsidy to lessen their burden following the minimum wage adjustment to RM1,500.

FMM president Tan Sri Dato Soh Thian Lai said such assistance should help employers ease the cost impact.

According to him, the increase in minimum wage is ultimately going to further push the cost of production and lead to greater inflationary pressures.

“The government should ensure that the business recovery continues at the intended speed for Malaysia to remain competitive in the global arena as a preferred supply chain hub and investment destination in the region,” he said in a statement yesterday.

Soh pointed out that the economy would also see an immediate monthly outflow of close to RM500 million with the repatriation of funds by foreign workers (based on 1.6 million legal foreign workers) with no direct positive impact to the local economy.

“As it is, the industry is facing an influx of cost increases as businesses continue to rebuild their performance to the pre-pandemic levels.

“They are experiencing an escalation of operating cost with the rise in raw materials; logistics cost due to high sea freight rates caused by global shortages in containers; increasing energy prices due to the rising commodity prices; labour shortages especially in bringing in foreign workers, and the stringent conditions imposed; and impending cost arising from the amendments to the Employment Act.

“The weakening of the Ringgit is also impacting revenue. In addition, margins are being eroded due to the weakening of the Ringgit,” he said.

He said FMM is disappointed that its call for progressive adjustment to the minimum wage has been totally disregarded in the gazette of the Minimum Wages Order 2022 on Wednesday.

He feared that the immediate jump of the country’s minimum wage to RM1,500 will result in a steep cost increase and reverse the otherwise optimistic business recovery this year.

“The industry has repeatedly affirmed that it is supportive of a review of the minimum wage but based on the current economic factors where the business environment continues to be fragile, a progressive adjustment with a RM150 increase this year and a further increase of another RM150 next year to reach the RM1,500 minimum wage would be more manageable for the industry.

“The increase in the minimum wage from the current RM1,200 or RM1,100 to RM1,500 represents an immediate increase of 25 per cent to 36 per cent on the basic salary which will have a tremendous knock-on effect to the overall payroll cost and have a spiralling impact on business cost that could potentially derail economic recovery,” he said.

Soh added that the small and medium enterprises (SMEs), especially those in the suburban areas, would be most impacted with this sharp rise in wage cost given that only the micro enterprises will be exempted for a period of eight months until December this year.

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