Tag Archives: Federation of Malaysian Manufacturers (FMM)

Minimum Wage Implementation – FMM Warns of Backlash

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By Sylvia Looi & James Gough

The Federation of Malaysian Manufacturers (FMM) Perak branch has warned of a backlash if minimum wage is implemented across the board and simultaneously in the country. Its chairman Dato’ Gan Tack Kong said if minimum wage was implemented, it would lead to a host of problems such as retrenchment, increased operating costs and may even affect investments in the country.

ipoh echo issue 143, cover story, Federation of Malaysian Manufacturers (FMM), sylvia looi, james gough
FMM Perak Branch Chairman, Dato’ Gan Tack Kong

“Give SMEs Three Years to Adjust” – Dato’ Gan

Citing a multi-national company, which pays between RM500 and RM600 for an unskilled worker prior to the introduction of minimum wage as an example, Gan said by increasing the salary of the worker to RM900, the company might end up retrenching the worker.

“This will lead to a black market for the workforce whereby hard pressed retrenched workers will be willing to return to work below the minimum wage,” he told Ipoh Echo, adding that among the sectors that would be deeply affected by the move are plantation and construction sectors, which are labour intensive sectors.

He added that to push for higher productivity to substantiate the higher wages, employers may be forced to increase their workers’ working hours.

“This may affect the morale of workers especially those in the rural areas, who tend to lead a more laid-back life.They may not take it kindly that they need to work longer hours thus may opt to stay at home instead,” he said.

FMM, noted Gan, had received complaints that the implementation of minimum wage would increase manufacturers’ production costs. Giving a manufacturing company in Teluk Intan as an example, Gan said with the introduction of minimum wage, the company estimated it would need to fork out an addition of RM400,000 monthly for their employees’ wages.

“One of the reasons companies chose least developed states to invest in was the low cost and abundance of workers but with minimum wage, these states will be less attractive,” he said.

Prime Minister Datuk Seri Najib Tun Razak had, on the eve of Labour Day celebrations recently, announced that employees in the peninsula would get RM900 monthly while workers in East Malaysia would get RM800. It covers employees in all economic sectors except those in the domestic service sector like maids and gardeners.

The move would take effect in six months from the date the Minimum Wage Order is gazetted.

For small-time employers or micro enterprises, the effective date had been extended by another six months to give them time to make preparations so their businesses would not be affected.

To avoid the negative effects of minimum wage, Gan suggested wages to be determined by market forces. “Unskilled workers should also receive constant training to ensure their skills are on par with the wages they receive,” he said.

SMEs, Gan added, should also be given three years to adjust to the move. “This is to allow them to plan ahead,” he said. He also said the implementation should be carried out according to zones. “Start with the more developed states first before moving to other areas,” he said.

ipoh echo issue 143, cover story, Federation of Malaysian Manufacturers (FMM), sylvia looi, james gough
Tony Khoo

Concurring with Gan, developer Tumbuh Merata Sdn. Bhd.’s director Tony Khoo said those without experience cannot expect to be paid a high salary. “While the move will ensure protection for those entering the workforce for the first time, it may lead to a slowdown in taking in new employees as employers will be reluctant to pay the minimum wage,” he said, adding that sectors like manufacturing and construction should be exempted from minimum wage.

Khoo, who felt the move was bulldozed through without consultation with all sectors, said if it is implemented, it will lead to a higher priced employment market.

Meanwhile, the Perak Branch Chairman of the Malaysian International Chamber of Commerce and Industry (MICCI), Mr Leong Hua Kooi, echoed similar sentiments as Gan and Khoo saying that “productivity should be the driving force for higher income where higher productivity will naturally lead to a higher income.”

ipoh echo issue 143, cover story, Federation of Malaysian Manufacturers (FMM), sylvia looi, james gough
MICCI Branch Chairman, Leong Hua Kooi

Leong feels that  the availability of foreign workers is keeping wages down. “Foreign workers are generally work orientated, flexible and have a higher productivity, hence we have to improve the productivity of our own people.”

“The education system too must be improved to produce skilled workers relevant to the market. Producing graduates who are unable to find jobs will not help. The Government must now look seriously at improving the overall productivity and competitiveness of our industries to be fair to the business community”.

The various industries, from hotels to manufacturing, have now provided suggestions on how to implement the minimum wage whether in cash or in kind such as fixed incentives or possibly commissions or accommodation and get it recognised as part of the minimum wage.

Overall MICCI members are waiting for a clearer definition of implementation guidelines.

Ipoh Barat MP M. Kulasegaran, who also sits on the parliamentary caucus on labour and migrant workers, meanwhile said the introduction of minimum wage was long overdue.

Although welcoming it, Kulasegaran felt the implementation was haphazard. “More consultation on the matter is needed with all stakeholders before it is announced,” he said, adding that the quantum of RM900 for peninsular and RM800 for East Malaysia was too low. “How do you sustain in big cities like Kuala Lumpur with RM900?” he questioned.

Kulasegaran agreed with Gan that the pitfall of having minimum wage is that it would strengthen the dependency on illegal foreign workers as employers would be hard pressed to go into black markets for cheap labour.

Meanwhile, the State Exco for Industry, Dato’ Hamidah Osman, when contacted, responded that as at the time of Ipoh Echo going to press, she had not heard of any feedback on this issue.

Acknowledging that the minimum wage of RM900 was “reasonable” she nevertheless noted that this policy “only affected the private sector” which has been offering a very low wage.

Hamidah also acknowledged that this policy “will burden industry but will nevertheless help the lower income earners”.

Hamidah added that currently government servants like drivers or Pegawai Am Rendah, enjoy an “all-in starting salary” of over RM1,000 which is higher than the minimum wage.

Reiterating that she still did not have the full scenario she nevertheless repeated that she would be sitting with the relevant NGOs to hear their views on this issue.