MCA welcomes the government's initiative to adjust the minimum wage which has the potential to boost domestic worker income, thereby propelling Malaysia towards becoming a high-income nation and decreasing our reliance on foreign labour.

However, the government must carefully consider several factors during this process, particularly the challenges faced by small and medium-sized enterprises (SMEs).

In this regard, MCA urges the government to prioritise the survival of local SMEs before reviewing and adjusting the minimum wage  this year. There is a dire need for sufficient support for businesses, particularly SMEs, when implementing adjustments to ensure a mutually beneficial outcome for both employers and employees.

SMEs would be hit the hardest if the minimum wage is adjusted this year as they are already struggling with rising prices, consumer boycotts, the recent implementation of E-Invoice and the increase in the Sales and Service Tax (SST).

For SMEs with limited financial resources, another minimum wage increase on top of these existing challenges would be a significant burden. Without adequate support, they may be forced to reduce their workforce, which will in turn affect productivity, leading to shrinking business sizes and eventually face closures due to a loss of competitiveness.

Ultimately, if businesses start shutting down or laying off employees, it would drive up unemployment, rendering the minimum wage adjustment ineffective at raising living standards.

To help SMEs navigate the potential minimum wage increase, the MCA Economic and SME Affairs Committee proposes several recommendations for government support:

1. Government support

The government could explore simpler and universally applicable solutions to address the direct costs of adjusting the minimum wage system. This might involve a reverse income tax or negative income tax, or simply by increasing the minimum wage in line with inflation.

2. Alternative support mechanisms

Provide lenient regulations and streamlined processes for businesses that adhere to the minimum wage order. Non-cash incentives, such as public recognition and awards similar to the eSPO certificate by the Malaysian Productivity Corporation (MPC) for organizations implementing the Productivity-Linked Wage System (PLWS), could also be considered.

3. Training and upskilling initiatives

Assist businesses in adopting new technologies and providing on-the-job training to improve employee skills. Link wage growth to skills upgrading, so that employees must continuously improve their skills to earn higher wages.

4. Expanded and clarified definition of wages

Include additional benefits provided by employers in the definition of "wages" under the National Wage Consultative Council Act 2011, allowing businesses to provide more comprehensive total compensation for employees without exceeding the minimum wage limit.

Furthermore, considering that Malaysia only implemented the RM1,500 minimum wage last July, the government should carefully evaluate the appropriateness of another increase within such a short timeframe, especially given the current economic challenges.

It is much more important for the government to prioritise solutions that address the country's economic problems, improve economic sustainability, stimulate growth, altogether expand the economic pie, and tackle inflation. This would create a more favourable environment for both businesses and employees to thrive.

Datuk Ir Lawrence Low Ah Keong
MCA Vice President
MCA Economic and SMEs Affairs Committee Chairman

8 May 2024

-MCA Comm-