SMALL and medium enterprises (SMEs) will be the main target group for the implementation of the proposed progressive wage model (PWM), Economy Minister Rafizi Ramli said. 

He dismissed talk that the voluntary, incentive-based and productivity-linked policy will benefit big players and foreign companies. 

“It is only (for) Malaysians. No foreign talents. No multinational companies, no big companies.

“The focus is on groups that are now most disadvantaged in the current labour market.

“That is usually for businesses (that are paying) monthly salaries of between RM1,500 and RM5,000,” he told the media before tabling the PWM white paper in parliament today.

The white paper details the government’s plan for the policy, which is slated to take effect next year, with a focus on those earning less than RM5,000. 

A pilot run for the PWM will begin in June 2024, which will see 1,000 organisations with employees earning between RM1,500 and RM4,999 participating.

The economy minister said the impact of the pilot run will be evaluated in September, to ensure the efficacy of the policy before its implementation.

He also said major stakeholders, including Malaysian Employers Federation, support the plan by the government. 

Risk of ‘oversubscription’

Rafizi said the government has adopted a voluntary approach to the PWM, adding that the current economy does not permit for it to be mandatory. 

“It is out personal belief that at this moment, if we were to make it mandatory, our economy cannot absorb it because 97% of the companies are micro SMEs.

“So for the moment, it is a voluntary opt-in, with government incentives and with the commitment and structured upscaling for higher productivity on the part of the employees. Employers have so far lauded it well,” Rafizi said. 

This being a voluntary programme, Rafizi said he was worried of “oversubscription” of the PWM programme. 

“Because of a voluntary opt-in programme, there is a risk of oversubscription, where too many companies want to take part,” he said.

The minister said eligible companies would receive an incentive rate of a maximum of RM200 per month for 12 months for entry-level employees, and a maximum of RM300 for non-entry level employees. 

“This is provided that the company pays wages at the same rate or above the suggested annual wage increment guideline,” he added. 

Rafizi said implementation of the PWM programme is expected to cost an estimated RM2 billion. – November 30, 2023.