THE shortage of foreign workers in the construction sector is hitting contractors hard as the current crop of workers are demanding higher daily wages, industry players said.

They said existing workers are now demanding almost double the wages they had agreed on.

This shortage of foreign labourers is suppressing the progress of recovery as the nation transitions to the endemic phase of Covid-19, industry players said.

Troy, a project consultant at a private firm in Kuala Lumpur, said this has been the trend since the construction sector was allowed to operate after the easing of Covid-19 standard operating procedure.

“During the pandemic, a lot of foreign workers were sent back and we could not replace them entirely.

“We are using the resources we have, but they are demanding higher daily wages.

“They used to get paid from around RM80 to RM90 but now they are demanding around RM150 to RM200 daily,” Troy, who oversees three projects, told The Malaysian Insight.

Troy said with inflation, material price hikes and strained economic conditions, contractors are not able to meet the demand of the workers.

“The demands are more than what most locals would earn daily. They demand this because they are skilled and they know we need them,” Troy said.

“There are also other issues industry players face but the shortage of workers has changed the game on the ground entirely.

“Since the demands are not met with supply, some are taking advantage by demanding higher daily wages, which we find unreasonable at present because most (companies) are recovering from Covid-19 losses,” he added.

Last week, Human Resources Minister M. Saravanan blamed the foreign worker shortage on his predecessor, M. Kula Segaran, who imposed a moratorium on the intake of Bangladeshi labourers in September 2018.

He said this was exacerbated by the closure of Malaysia’s international borders in March 2020 when the Covid-19 pandemic hit.

Malaysia signed a memorandum of understanding (MOU) with Bangladesh in June this year, while the MOU with Indonesia was signed in July. 

There are currently 1.2 million migrant workers in the country and a few thousand more are set to arrive within the next two months. 

Wilson, a site supervisor, shared his experience with the lack of workers, saying the situation has turned into a “bidding war” for existing labourers.

“They will leave if we don’t pay what they demand. It has become as simple as that,” Wilson, who works for a construction subcontractor, said.

Explaining the situation, Wilson said in most instances, companies are forced to match demands of the workers, which could reach up to RM180 per day. 

“Most foreign workers who work in this sector are supplied by manpower agencies, hence we as contractors don’t have employment contracts with them. 

“The situation is similar to the maid system in the country, where when a maid runs away we can’t do much but go back to the agency.

“So, here, when these workers get a better offer from other contractors, they would not hesitate to leave. 

“Some will negotiate with existing companies but most just leave when they get higher daily pay elsewhere,” he said. 

Wilson said the “baiting” of foreign workers has created a tough climate for contractors, citing the obvious lack of labourers in the country as the main reason. 

Among the challenges, he said, is to retain workers on his site. 

“It incurs additional cost to offer them higher daily wages, which in return increases company costs. 

“But if we lose workers, then the work will be halted, then that will also incur costs because we have to abide by certain clauses in this industry, which prevent delay of work,” he said. 

Expedite foreign labour intake

Master Builders Association Malaysia, on behalf of a group of construction associations, also acknowledged the situation. 

Its president Oliver H.C. Wee said without sufficient foreign labour in the sector, all industries are pinching from the same pool of workers who have unreasonable demands for higher pay.

“This leads to a situation of over-demand for such foreign workers, where daily rates increase, forming an adverse and unhealthy practice,” Wee said. 

Wee also added that time is money and any form of delay would be costly.

“There are many projects that were delayed… and contractors would most likely have to face the liability of late delivery under the contracts. As such, liquidated damages will be imposed and this will adversely affect contractors’ businesses and also cash flow.

“The current labourer numbers, which do not generate the optimum productivity as planned, would also incur higher operation costs,” he said. 

To address the issue, Wee said Malaysia should expedite its process of bringing in more foreign labour into the country to assist in the completion of projects.

He also said in the long-term, the industry should also look into the constructability of development projects, be it in terms of design, working methods, or building materials used. – October 12, 2022.