MALAYSIAN employers are dismayed the economic stimulus package unveiled on Thursday did not address the issue of minimum wage.

Amid the Covid-19 health crisis, they had expected at least a suspension in the implementation of the new minimum wage rate that came into effect on January 1.

Putrajaya raised the minimum wage of workers in 57 urban areas and cities from RM1,100 to RM1,200 in Budget 2020 to help them cope with higher living costs.

The Human Resource Ministry earlier stated the minimum wage rate would be periodically reviewed to ensure that it matched the times.

But employers told The Malaysian Insight the government had failed to do that. 

They felt a deferment of the new rate would assist them to weather a slumping economy that had been hit hard by the coronavirus outbreak.

Some employers and business associations said the higher minimum wage would nudge businesses further into the red.

 “Many businesses”, particularly small and medium enterprises (SMEs), could be forced to shutter as they face cashflow problems.

SME Association of Malaysia president Michael Kang said he was disappointed the economic stimulus package announced by former prime minister Dr Mahathir Mohamad failed to address the wage issue.

He said the inevitable economic slowdown due to the virus epidemic, coupled with the hike in minimum wage, could see businesses fail.

The government should be aware by now that the minimum wage policy actually benefitted foreign, not local, workers, Kang said.

Foreign workers are hired on a contract basis and any premature termination of the contract could lead to costly compensations, he said.

“They cannot be terminated at any time.”

Locals who are permanent workers, on the other hand, could be axed without such considerations if a company falls on hard times.

Human Resources Ministry figures show that fewer than 100,000 locals earn RM1,200.

“Covid-19, political turbulence also impacted us hard. There are no new orders. No one is willing or foolhardy enough to invest in Malaysia now,” he said.

The sectors hardest hit by the Covid-19 outbreak are the service industry, followed by manufacturing.

Meanwhile, Malaysian Employers Federation executive director Shamsuddin Bardan told The Malaysian Insight that the employers’ union has been calling for a delay to the implementation of the minimum wage policy.

Shamsuddin said this is because there is still much confusion over the exact enforcement date and employers in small towns have yet to be briefed by the relevant agencies.

At present, employers are taking a wait-and-see approach and keeping their fingers crossed for a last-minute change, he said.

Malaysian Association of Hotels chief executive officer Yap Lip Seng said the minimum wage rate of RM1,200 would have a massive impact on the hospitality sector.

He said hoteliers in Sabah and Sarawak would bear the brunt of the impact.

“There will be a domino effect in the rise in the cost of doing business,” he said.

“We understand the government’s intention behind the policy but we would also like to remind the government that there were promises to subsidise employers.”

Yap said the salaries of employees account for most of the hotels’ operating costs – 28% of revenue on average.

“The RM100 increase is expected to cost employers up to RM130 because of other related costs, at base level. That comes up to an approximately 10% increase in payroll costs overall, depending on the size of operations.”

The minimum wage was last revised in 2019 from RM920 to RM1,100.

Yap said while the hospitality industry, including in Sabah and Sarawak, generally accepted the earlier increase, they were taken aback when it was announced that it had again been reviewed upwards to RM1,200 in “vaguely defined major cities”.

While the industry is still abiding by the gazette to implement minimum wage from February 1, they are hopeful of a temporary hold on the order. – March 2, 2020.