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Manufacturers express disappointment over jump in minimum wage

FMM In The News: THE EDGE MARKETS, KUALA LUMPUR, Sunday, March 20, 2022 - The Federation of Malaysian Manufacturers (FMM) is "deeply disappointed" its call for a progressive adjustment to the minimum wage under the current business conditions has been ignored, following the government's announcement of a RM300 increase to the minimum wage rate to RM1,500 per month from May 1.

In a statement, FMM president Tan Sri Soh Thian Lai said this represents an immediate increase of 25% on the basic salary, which will have a knock-on effect on the overall payroll cost and lead to a spiralling impact on business cost, which could potentially derail business and economic recovery.

Soh said the majority of respondents in the recent FMM-MIER Business Conditions Survey 2H2021, conducted from Jan 5 to Feb 10, opined that RM100 increase in minimum wage would be an acceptable rate in this current review, given the current economic conditions.

As such, the FMM had proposed to the government for the minimum wage adjustment to be implemented gradually, with a RM100 increase in the third quarter of 2022 and a subsequent adjustment in 2023/2024 to reach RM1,500.

He also said the survey noted other cost factors now at play that businesses had to contend with, including risks posed by the pandemic that continued to impact global supply chains and logistical connectivity, rise in raw material prices and impact of higher sea freight charges, cost pressure from rising commodity prices, and labour supply shortages.

In addition, he also noted that businesses are facing higher electricity cost with the electricity surcharge announced for February to June 2022, which has resulted in an increase in electricity charges in the range of 13.7% to 15.8% for low voltage industrial users that are mostly small and medium enterprises (SMEs), while medium and high voltage industries would experience an increase of 18.4%.

The FMM's statement came after Prime Minister Datuk Seri Ismail Sabri Yaakob said on Saturday that the new minimum wage would be implemented nationwide from May 1. For micro companies with few workers and low income, he said Human Resources Minister Datuk Seri M Saravanan would discuss with Entrepreneur Development and Cooperatives Minister Tan Sri Noh Omar to seek a postponement, as they might not have the ability to pay.

He said this when winding up the debate at the UMNO general assembly 2021. The minimum wage was last revised in February 2020, when it was raised by RM100 to RM1,200.

Soh said while micro enterprises that make up 78.6% of the 97.4% micro, small, and medium enterprises in the country will be exempted from this new minimum wage, the SMEs with employes up to 200 are not spared, so such a steep increase would have an undesirable impact on their business recovery.

"Within FMM's own membership, only less than 2% of our members would be exempted, thus impacting the majority of our members. Furthermore, given that foreign workers would also enjoy the increase in wages, it would lead to an additional outflow of close to RM2 billion annually (based on 1.6 million legal foreign workers), which will eventually rise to close to RM6 billion annually when the minimum wage reaches RM1,500," Soh said.

"In this regard, we appeal to the government to reconsider the decision to immediately increase the minimum wage to RM1,500 in May 2022 and instead take on a progressive increment approach as we have suggested. We strongly feel that a more gradual increase in the wage rate would still be able to address the increase in cost of living which is a result of the pandemic and the supply disruptions that have ensued. In addition, employers continue to plan for salary increments in 2022 and this would further address the cost of living pressures," he said.

"FMM strongly believes that with the necessary control on cost increases in place by the government as well as concerted efforts by the industry to defray cost increases internally, employers can continue to maintain employment and wage adjustments," he added.

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