The new minimum wage will remarkably lift the operating cost of local companies, making them less competitive.

KUALA LUMPUR: The Associated Chinese Chamber of Commerce and Industry Malaysia (ACCCIM) presents seven factors and urges the government to defer the implementation of RM1,500 minimum wage scheme to avoid negative chain reactions.

ACCCIM president Datuk Low Kian Chuan said the sudden announcement by the government had caught many employers by surprise, leading to many reacting against the announcement with anxiety.

Based on past experiences, minimum wage was implemented after many rounds of discussions with sufficient time for preparation.

Low, who is also the president of National Chamber of Commerce and Industry of Malaysia (NCCIM), said the ACCCIM hoped that the National Wage Consultative Council, as the consulting agency for three parties, to reset the minimum wage mechanism after the next review.

It should be based on the region/state/city and take into consideration the cost of living, purchasing power, business operating costs and other non-economic factors.

At the same time, it should also review the definition of minimum wage.

Low said the ACCCIM and NCCIM would be meeting the human resources minister to understand the latest minimum wage mechanism.

Prior to the implementation, he said the scheme should strike a balance between the workers’ welfare as well as the cost shouldered by the employers.

He said the five chambers under NCCIM would be convening an emergency meeting to discuss the latest announcement made by the government on the RM1,500 minimum wage.

ACCCIM urges the government to consider the current state of economy and business environment and the impact of a revised minimum wage on local businesses in terms of business cost and competitiveness.

The seven factors cited by ACCCIM to defer the implementation of RM1,500 minimum wage are:

1. Most businesses are still coping with the increase in costs in energy, logistics and raw material as well as disruption in long-term supply chain. The situation was aggravated by the invasion of Ukraine by Russia. The sharp rise of minimum wage to RM1,500 (25% to 36% of increase) is negative towards the competitiveness and costs which would hamper the pace of recovery.

2. The increase in minimum wage would lead to increase in remittance for Employees’ Provident Fund, Socso benefits and other employment insurances. As employers also include other benefits such as accommodation allowance, meal allowance, subsidy, merit incentive into the salary, these benefits would exceed the minimum wage once they are added together.

3. Minimum wage would increase costs and lead to the salary of workers under other categories to increase as well. This is because the new minimum wage would narrow the salary gap of those in various categories earning between RM1,200 and RM1,500 and those earning between RM1,500 and RM2,000.

4. Besides increasing the financial burden of businesses due to rise in costs, shortage of labour and the new minimum wage would affect the company’s cost, production and profit margin. Driven by market forces, many businesses in urban areas are hiring workers offering salaries higher than minimum wage.

5. As the labour market in the country is still recovering slowly, the proposed new minimum wage with 36% increase would force businesses in rural areas and less developed states to reduce the number of workers as they are unable to cope with the rising costs.

6. Businesses may not be able to absorb the rise in labour and operation costs. They may resort to transferring the costs to consumers and this will aggravate the inflation further and reduce purchasing power.

7. Salary in Malaysia (US$358) lacks competitive edge as it is higher than Indonesia (between US$126.86 and US$325,52), Vietnam (between US$132,67 and US$189.15), the Philippines (between US$147.68 and US$273.26) and Thailand (between US$244.66 and US$270.66), A competitive salary would still be one of the main factors considered by foreign investors.