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Malaysia – Small business struggling to pay the new minimum wage

22 September 2014

Employers across Malaysia who run small or micro businesses are struggling to pay their workers the new statutory minimum wage, which was implemented on 1 January 2014, reports The Malay Mail Online. Malaysia’s minimum monthly wage increased to MYR 900 (USD 278) from MYR 546 (USD 169).

As a result, the Malaysian Employers’ Federation (MEF) is calling for the National Wages Consultative Council to recommend that the scheme be reviewed.

Datuk Shamsuddin Bardan, Secretary of the MEF, commented: “There should be different level of wages depending on sectors, region and types of employment. It cannot be MYR 900 in all areas.

“If it is MYR 900 in remote and rural areas, then that is too much. There must be a different rate to be paid in different areas of the country. Bigger cities and towns can afford to pay more but smaller village businesses should be allowed to pay less,” he added.

He said employers who run micro-businesses faced problems paying the new minimum wage: “These employers would probably have five employees or less and they cannot simply pay the rate. These businesses could also be located at remote areas and some of these businesses do not even make MYR 900 a day.”

Mr Shamsuddin said this led to the possibility of such businesses shutting down: “Employers of small businesses have expressed there was a +60% increase on wages with the implementation of the scheme. Small organisations cannot afford it because their margin is small and by enforcing the scheme, this will be pushing the marginal employers to do the impossible.”

He stated that the Human Resources Ministry should have looked into this matter before implementing the scheme because employers who are unable to comply would be prosecuted.

“If the employers can pay, then they do not risk being prosecuted by the Labour Department but those who are unable to pay, are sent to jail. The authorities should have looked into this matter before implementing it but instead, the authorities thought otherwise.”

The issue of employers not paying out minimum wage has come to light with reports that about 10,000 employers in the private sector have yet to implement the scheme.

Deputy Human Resources Minister Datuk Seri Ismail Abd Muttalib said the number represented was only 5% of 200,000 employers registered with the Labour Department and the government viewed the matter seriously.

The Minister also said that employees have the right to lodge a complaint with the Labour Department and his ministry if their employers are unable to meet the policy. Three employers have been taken to court to-date.

According to the National Wages Consultative Council Act 2011, errant employers can be fined if found guilty, while repeat offenders face the possibility of jail time of not more than five years.

Mr Shamsuddin said this matter could be resolved if the ministry was practical about the whole implementation. He said the authorities needed to look at the reasons as to why the companies are unable to comply and provide assistance instead of prosecuting them.

Mr Shamsuddin added that there was also the possibility it would discourage entrepreneurship as individuals would be unwilling to have a small business start-up.