WAGE subsidies are not much help to small and medium-sized enterprises (SMEs) facing new pressures caused by higher commodity prices and supply chain problems as economies reopen.

Logistics and transport costs, and demand for raw materials are creating financial constraints, business groups said.

Although wage subsidy programmes helped some employees keep their jobs, employers said that in the end it was but a drop in the ocean.

Ding Hong Sing, president of the SME Association of Malaysia, said employees in many SMEs were still on reduced salaries of between 20% and 50% of normal.

In the worst cases, where salaries were cut in half, some employees opted to resign or their companies have wound up.

At least 10% to 15% of SMEs went out of business last year, Ding told The Malaysian Insight.

SME closures can still be expected in the near term, but will be fewer than last year, while more established businesses are opting to sell off their factories, he added.

Finance Minister Tengku Zafrul Tengku Abdul Aziz said that, as of October 29, the government had issued RM19.2 billion in wage subsidies to allow companies to retain workers and avoid a further decline in employment.

The funding was said to have benefited 356,193 corporate employers to keep the jobs of 2.94 million local employees.

The government has made adjustments to the various phases of the wage subsidy scheme over the course of the pandemic in the past two years, such as increasing eligible salary limits and the number of employees covered.

Meanwhile, the Department of Statistics Malaysia reported slight improvements to employment figures as movement restrictions to combat Covid-19 were gradually eased and more economic sectors were allowed to operate.

Unemployment in August declined to 4.6% or 748,800 people, compared to 778,200 in July 2021.

The Malaysian Employers Federation (MEF) said wage subsidies had helped in retaining jobs and expected next year’s unemployment rate to drop further to around 4%, due to other measures.

This includes the government’s RM4.8 billion for employment protection measures (Jamin Kerja initiative) which is expected to create about 600,000 new jobs.

“By the third quarter of this year, the cash flow was better as the government had eased most of the restrictions and allowed most of the economic sectors to resume operations.

“Such measures were possible as the national vaccination programme showed positive results in getting the population to be vaccinated,” MEF president Dr Syed Hussain Syed Husman said, adding that, according to the Employment Insurance Scheme’s (EIS) latest report on November 12, some 36,253 employees had lost their jobs.

It was estimated that the number of lay-offs this year will be fewer than 70,000, he added.

Many unknowns

Ding predicts unemployed figures will hit 1 million for these past two years. He said companies are concerned about unknowns, such as new virus variants and new outbreaks, which could then see a return of movement restrictions.

As such, SMEs are taking the cautious approach and continuing to reduce the number of employees, keeping their workforce lean and trim.

“The pandemic has caused unpredictable situations. After the government allowed economic activities to reopen, companies then faced global logistics problems.

“Shipping schedules were disrupted and goods could not be transported as scheduled,” he said, as an example.

Operating costs have also increased, and operation procedures have changed too, with cash payments increasingly becoming the norm.

Suppliers and retailers are insisting on cash payments on delivery and are also shortening billing periods. – December 1, 2021.