THE productivity linked wage system (PLWS) has been in the conversation for some years but stakeholders said the slow adoption of the remuneration scheme could be down to lack of awareness and high implementation cost.

The Malaysian Trade Union Congress (MTUC) has proposed that a PLWS act be enacted to compel employers to follow the system.

Employers, however, blame unions for not being open to this wage system, adding that a recent survey showed that almost 90,000 companies had implemented PLWS, benefitting some 4.43 million workers, and seeing a rise in profits, productivity and wages.

The government said it will continue efforts to ensure higher adoption of PLWS.

MTUC president Abdul Halim Mansor said Putrajaya should start by passing a PLWS act.

Halim said PLWS is a good wage model that the Human Resources Ministry has been talking about since 2000.

He said the idea behind PLWS is to increase a firm’s productivity by instilling innovative thinking in employees.

However, support from companies is lacking, he said.

“MTUC proposes that the ministry introduce a PLWS act and a yearly salary increment for employees. 

“This act will indirectly translate into a commitment by companies to adhere to it or otherwise they might have to face a penalty,” he said. 

Employers’ viewpoint 

Malaysian Employers’ Federation (MEF) executive director Shamsuddin Bardan said the PLWS will be a win-win situation for employers and employees.

The payment scheme is based on the performance of employees and profitability of companies, he said.

The national employment return (NER) survey and the Department of Industrial Relations found that 86,247 companies have implemented PLWS, benefiting 4.43 million employees.

Citing a study titled Implementing PLWS: towards a high-income economy, Shamsuddin said the benefits of implementing PLWS include increased profitability (10%), productivity (15%) and wages (10%).

“Based on findings from MEF’s salary survey for executives and non-executives 2018, 72.9% of respondent firms said they have implemented PLWS for executives, compared with 22.2% of companies that have not.

“For non-executives, 69.4% of respondent companies have implemented PLWS, as compared to 25.7% that did not implement PLWS,” he said.

About 90.9% of companies that responded to the MEF salary survey said PLWS has increased motivation and job satisfaction of employees.

It has also enhanced the career development (66.9%) and improved job specialisation based on the executive’s skills (53. 7%). 

The findings are similar for non-executives.

Asked about the challenges to implement PLWS, 59.5% of companies said lack of a fair and transparent performance appraisal system is one of the main hurdles, followed by inadequate knowledge of PLWS (42.6%) and reluctance of employees to change to a new wage system (39.9%).

The findings are similar among executives, with 60.1% of companies saying the lack of a fair and transparent performance appraisal system is the main challenge implementing PLWS, followed by lack of knowledge on PLWS (41.2%), and poor communication to keep employees informed on the implementation of PLWS (39.9%).

Shamsuddin said the reluctance of unions to embrace PLWS is another hindrance.

“One of the issues faced by employers is the reluctance of unions to review the provisions of contractual bonus to enable employers to grant higher incentives based on performance of employees and profitability of employers.

“MEF had proposed that the government incorporate the provisions of Section 48 of Singapore’s Employment Act into the Malaysian Employment Act to enhance implementation of PLWS.

“However, such proposal was not taken up by the government.”

Lack of awareness

The Economic Report released recently by the Finance Ministry highlighted the low adoption of PLWS in Malaysia despite several studies pointing towards its benefits.

The low adoption can be attributed to lack of awareness and the (lack of) assistance from the government in relation to the system.

“Furthermore, resistance from trade unions and high implementation cost also contributed to the slow adoption,” the report said. 

Among the measures the government will take to encourage firms to adopt PLWS include preparing a comprehensive study on the system, raising awareness among trade unions and effective promotions and campaigns. – October 21, 2019.