THE drastic increase in minimum wage may derail businesses that are just getting back on their feet following pandemic-induced lockdowns, said the Federation of Malaysian Manufacturers (FMM).

President Soh Thian Lai said the federation is disappointed that the government did not heed its advice to progressively increase the minimum wage.

“The increase in minimum wage from RM1,200 to RM1,500 represents a 25% hike, which will have a knock-on effect on business and payroll costs and potentially derail business and economic recovery.”

Soh cited an FMM and Malaysian Institute of Economic Research survey from January 5 to February 10, saying that many agreed a RM100 hike would have been acceptable given the current economic condition.

“FMM proposed to the government for a gradual minimum wage adjustment to be implemented, with a RM100 hike in the third quarter of 2022 and subsequent adjustments to reach RM1,500 in 2023/2024.”

The survey found that most businesses are impacted by Omicron, the global supply chain disruption, rise in commodity prices and sea freight charges, labour supply shortages, as well as high electricity cost.

Prime Minister Ismail Sabri Yaakob yesterday announced that the RM1,500 minimum wage will take effect on May 1.

He said small and micro businesses are allowed to postpone the implementation as they may not have the ability to pay up.

Soh said 78.6% of the 97.4% micro, small and medium enterprises in the country are made up of micro businesses.

“Small and medium enterprises with up to 200 employees are not spared. Such a steep increase will have an undesirable impact on their recovery.

“Of FMM’s members, only fewer than 2% will be exempted.”

As the implementation will also apply to foreigners, Soh said this will lead to an almost RM6 billion outflow.

“We appeal to the government to reconsider its decision to increase the minimum wage to RM1,500 in May, and implement a progressive increment approach instead.

“A gradual adjustment will still be able to address the high cost of living, which is a result of the pandemic and subsequent supply disruption.

“Employers are also continuing to plan salary increments this year, and this will further address the high cost of living.” – March 20, 2022.