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Minimum Wage

Following were FMM’s recommendation to the Ministry of Human Resources in the implementation of minimum wage:

  • Minimum wage quantum cannot be uniform across the country but instead should be differentiated by geographical location, between rural and urban areas and economic sub–sectors.

    As the cost of living differs from state to state, the minimum wage quantum should be differentiated by geographical location as well as between rural and urban areas.

    Wages should be for the job, not the person. The type of job and hence, wage structure also differ between economic sectors (manufacturing, agriculture, construction, services, etc); and even at sub–sector level (for eg, wage structure in the electrical & electronics industry is different from other industries.)

    A comprehensive nationwide study should be carried out first to map out these differences i.e. differences in the cost of living between states and rural–urban areas; and differences in wage and/or job structures between economic sub–sectors.

  • Any increase that would impact on the cost of doing business should be gradual and pre-announced. Employers should be given a two year grace period to adjust.
  • Minimum wage should commensurate with productivity gains, skills acquisition, training and multi-skilling and multi-tasking. There must be greater efforts to ensure that productivity levels are in tandem with higher wages. Apart from upgrading technology, productivity–linked wage systems (PLWS) should be implemented to help identify KPIs on performance delivery.

    Unions are against the PLWS, which includes revamping the collective agreement system to become incentive–based. Some employers are reluctant to share information with employees. In moving forward, FMM maintains that it would be useful to draw up clear guidelines on PLWS acceptable to both sides.

    There should be greater and concerted publicity on the exemption of incentive–based schemes from the computation of Ordinary Rate of Pay under Section 60I Employment Act 1955.

  • The components of minimum wage must be clearly defined and be equitable. The industry’s interpretation of an equitable minimum wage is basic wage and fixed allowances. It is inaccurate and incomplete to look at basic pay only. 
  • There should be a review mechanism to prevent indiscriminate increase in minimum wage. The review process should involve all relevant stakeholders i.e. employers, union and the Government and should take into account inflation and productivity growth when setting a new minimum wage.
  • Based on the FMM Economic Outlook for the Manufacturing Sector Survey conducted in April/May 2010, the mean basic salary (not including fixed allowances) for general workers was RM750 a month. The median is RM700.

    FMM proposes that the minimum wage level should use RM700 as the MEDIAN benchmark (scale), which is ADJUSTED according to DIFFERENCES in cost of living based on geographical location and rural–urban areas; and DIFFERENCES in economic sectors.

FMM submitted the above proposals to the Ministry of Human Resources on July 15, 2010

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