Malaysian employers baulk at new minimum wage regulations

Author: Thomas Maresca | Date: 13 Jul 2016

Government insists new rates must be paid to workers immediately

Malaysia officially raised its minimum wage on 1 July and some business leaders are already warning that it may have far-reaching effects on both consumer prices and staffing levels.
 
“The impact will be quite great,” says Ho Su Mong, president of the Malaysia Singapore Coffee Shop Proprietors’ General Association. Ho warned that the members of his group, numbering some 20,000 businesses, would probably have to raise prices to counter the new labour costs.
 
“In view of the increase, I think our members cannot make ends meet without adjusting the prices of goods that they're selling,” he says. “We are hoping the government can delay a bit on this new minimum wage raise to help our members to adjust to the new economic situation in the country.”
 
Minimum Wage Order 2016 (MWO 2016) mandates a raise from Malaysian Ringgit MYR900 to MYR1,000 per month in peninsular Malaysia, home to major cities such as Kuala Lumpur and Penang, and from MYR800 (USD200) to MYR920 (USD230) in the provinces of Sabah, Sarawak and the federal territory of Labuan (islands north of Sabah). The minimum wage is not applicable to domestic workers.
 
New daily minimum wages will vary from MYR38.46 for a six-day work week to MYR57.69 for a four-day work week on peninsular Malaysia and MYR35.38 to MYR53.08 in Sabah, Sarawak and Labuan.
 
Some organisations have called for a delay in implementation, warning that the higher wage may not only cause price increases but a wave of employee layoffs.
 
In May, executive director of the Malaysian Employers Federation (MEF), Datuk Shamsuddin Bardan, told Malaysian national news agency Bernama that 30,000 employees would be retrenched, or laid off, if the Minimum Wage Order 2016 was enforced.
 
The wage increase comes at a time when Malaysia’s economy has been sluggish, with rising inflation and lower consumption and private investment growth. The Malaysian Rating Corporation Berhad (MARC) recently revised its 2016 GDP growth estimate downward to 4.1 per cent, from an earlier 4.4 per cent.
 
Despite calls for a delay in implementing the new wage, human resources minister Datuk Seri Richard Riot said that employers must move forward immediately with the new pay scale, which was announced in October 2015.
 
“Employers must honor the new rates for minimum wage without any delay,” he said in a statement. “Claims that they are not prepared because the economy is not good are also unfounded.”
 
Malaysia’s government officials also dispute claims of adverse effects from the new minimum wage.
 
In June, deputy human resource minister Datuk Seri Ismail Abd Muttalib told the Malaysian Senate (the Dewan Nagara), that implementing new minimum wage would not cause a wave of employee dismissals.
 
“Data of the [ministry’s] manpower department, which will enforce the minimum wages order, does not show any dismissal of workers following the implementation of the minimum wage,” he said.
 
The Malaysian Trades Union Congress (MTUC) has urged employers to implement the order without delay: "Implementation of the revised minimum wage was actually delayed for 18 months,” said secretary-general N Gopal Krishnan in a statement. “Therefore strict enforcement in the implementation of comprehensive guarantee is necessary.” The MTUC did not want “employers to give any further reasons for not paying the minimum wage," he said.