KUALA LUMPUR: The government needs to take a more holistic approach in the review of the minimum wage and consider the many cost increases that are taking place.
Experts are also concerned that higher expenses for wages would translate to higher cost of products and services.
Federation of Malaysian Manufacturers (FMM) President Tan Sri Soh Thian Lai said the government needs to engage with stakeholders to understand the current business sentiment.
"While there is a provision for the review of the wages order provided in the legislation, we urge the government to take cognisance of the many cost increases which the industry is facing this year and a more holistic approach in their review process of the minimum wages order including having proper and earnest engagement with stakeholders to understand the business sentiments and acceptable increase under the current circumstances," he told Business Times.
The National Wages Consultative Council Act 2011 has a provision for the wages order to be reviewed at least once every two years.
The last review of the minimum wages order was in May 2022 which saw an increase of the minimum wages from RM1,100/RM1,200 to RM, 1,500.
"The increase resulted in an immediate increase of 25 per cent to 36 per cent on the basic salary which also resulted in a tremendous knock-on effect to the overall payroll cost as salaries of staff earning and near minimum wage levels had to be adjusted to maintain wage differentials between grades and seniority amongst the employees.
"This in return resulted in spiralling impact on business costs," he said.
Soh added there were various cost increases in 2024 to date including the increase in utility cost (electricity, gas and water), continued depreciation of the ringgit as well as the increase and expansion of scope of the service tax.
New tax measures introduced in Budget 2024 as well as policy changes are adding to the overall cost of production.
Soh cited FMM Business Conditions Survey which revealed that the industry is already expecting an increase in production cost in the first half of 2024 (1H24) as a result of the many cost increases faced.
Concurrently, the survey also revealed that the business prospects for 1H24 are positive with economic conditions expected to improve and with manufacturing activity likely gain some momentum, albeit slowly.
"There are therefore concerns that the positive business prospects could be weighed down by the impact of rising cost of productions and derail the expected business growth including the positive impact anticipated in the labour market," added Soh.
Universiti Kuala Lumpur Business School economic analyst Associate Professor Aimi Zulhazmi Abdul Rashid said minimum wage policy was meant to counter the market forces in the rise of cost of living.
He also noted the rate of inflation should be the benchmark for comparison.
"Obviously employers will not be adamant and not oblivious to the new policy which will certainly raised their wages expenses, which likely to be transferred to higher cost of products and services, putting pressure on their profit margins especially those in the industry regulated by price control or those industries competing with foreign businesses," he added.
Human Resources Minister Steven Sim said in Dewan Rakyat yesterday that the government will review the minimum wage this year in accordance with the National Wages Consultative Council Act 2011.
In his ministry's winding up speech, the minister said the government will consider views of all stakeholders including employers and employees as well as socioeconomic reports.-end-s