JOHOR BARU: K. Muniady, a managing director of a consulting services company, is facing a grim reality.
With the new RM1,700 minimum wage order in effect since yesterday (Feb 1), his small consulting firm, which employs more than five workers, is struggling to keep up with rising costs.
The company's monthly payroll is expected to surge, while its monthly revenue remains stagnant.
"This increase forces us to either absorb the cost or pass it on to clients. We can't afford to absorb it, so naturally, our service prices will rise. But with the current economic downturn, will customers even pay?" said Muniady.
He said there is a need for government intervention, whether in the form of tax incentives, wage subsidies, or a moratorium on compliance.
"It's impossible to avoid a cascading effect, with price hikes hitting consumers. Another factor to consider is those earning just above the new minimum wage. They will see no increase in income but will face rising costs," he told the New Straits Times.
"It's a double blow - higher wages for some, but higher expenses for all," he added.
The predicament extends beyond consulting firms.
Spa operator Rohani Saad faces the same dilemma. The Johor-based spa owner said while business picks up on weekends, weekday sales remain sluggish.
"We operate seven days a week, but the income is not steady. Most of our clients are Singaporeans who usually cross the border on Saturdays and Sundays. Paying higher wages when revenue fluctuates makes survival uncertain," she said.
Her eight therapists at two branches in Angsana Mall and Larkin previously earned a base salary of RM1,500, with Employees Provident Fund (EPF) and Social Security Organisation (Perkeso) contributions, despite receiving commissions and tips.
"With the economy as it is, paying RM1,700 per worker is tough. New spas are opening in Johor Baru almost daily to attract Singaporeans, making competition fierce. A wage hike will hit our business hard," she said.
Meanwhile, Tian Soon, who runs a family-owned hardware store with his sons and their wives, pays them RM1,500 each, plus a hefty year-end bonus tied to revenue. The company also covers their housing, food, and children's education.
"It's ridiculous that I must comply with this new ruling. Most small, medium entrepreneurs (SMEs) are family-run and should be treated differently," he said, adding that the government should focus on real economic growth instead of using the minimum wage as a populist move.
The minimum wage of RM1,700 per month took effect yesterday, marking a RM200 increase from the previous rate. The move, announced in Budget 2025, impacts 4.37 million workers and applies to all businesses with five or more employees, as well as professional sector employers regardless of workforce size. Smaller businesses with fewer than five employees have until August 1 to comply.
For daily and hourly wage earners, the Minimum Wages Order 2022 sets a new rate of RM7.21 per hour.
The Human Resources Ministry positioned the wage hike as part of a broader strategy to boost worker earnings and productivity, aligning with policies such as the Progressive Wage Policy and skills training initiatives. However, the ministry clarified that the minimum wage should not serve as a benchmark for graduates or skilled professionals, who should be paid based on qualifications and expertise.
Non-compliance with the wage order is an offense under the National Wages Consultative Council Act 2011 (Act 732) and carries penalties.
While the increase is seen as a step toward economic fairness, small businesses warn of financial strain, with many struggling to absorb higher labor costs.
