Employees' Benefits Cut After Minimum Wage Increase
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Several workers in Malaysia have claimed that their benefits have been or will be reduced as a result of the new RM1,500 minimum wage, which went into effect on May 1.
The effects of the new minimum wage
The Singaporean newspaper The Straits Times interviewed office despatch worker Mohamaed Afran, who earned RM1,280 per month for the past year and a half. His happiness over the RM1,500 new minimum wage rate was cut short after his employer informed an accompanying cut to his benefits.
He said his employer slashed his petrol subsidy by RM250. Furthermore, he said his leave had been decreased from 18 days to 14 days, and his medical benefits were fewer. He added that he was appalled but still needed the job.
Sales and marketing executive Maria Fernendez, whose base wage is RM3,500, said that the new RM1,500 minimum salary affects the entire organisation as her company is also reconsidering her benefits.
She stated that her employer is attempting to make employees work extra days and expected productivity levels to rise due to the "added cost".
Why companies are cutting benefits
According to Winston, a company representative, companies have little choice because the new RM1,500 rate impacts their overhead costs, which are expensive.
Some businesses are raising their prices to compensate for higher costs such as raw materials and other logistics. They cited SME Association of Malaysia president Ding Hong Sing, who claimed that the new RM1,500 minimum wage contributed to a 25% increase in monthly operating costs for businesses.
Recently, Malaysian Employers Federation (MEF) president Datuk Syed Hussain Syed Husman stated that the new RM1,500 rate would be a 25% to 35% increase over the present minimum wage rates of RM1,200 and RM1,100, depending on the area.
He had noted that such a sudden increase of 25% to 35% would inflict a lot of financial pressure on companies, especially since most of them are still struggling to rebuild after the effects of the Covid-19 outbreak and the major floods.
The MEF had suggested that the minimum wage be steadily increased, noting that the RM1,500 higher rate would raise the expenses of conducting business and that government involvement would be required to assure sustainability and stabilise the labour market.
Acknowledging that certain industries, such as hotels and tourism, are still hurting, MEF stated that applying RM1,500 across all sectors would be too costly and could force companies to close.
It said that the issue is not just the basic RM1,500 minimum wage cost and that companies had to cover several other issues such as levy, housing, EPF, food, insurance, and other benefits. According to MEF, the net cost of conducting business is much more than it looks.
'An act of betrayal'
The Malaysian Trades Union Congress (MTUC) criticised the reduced benefits by some companies as an "act of betrayal" of the government's effort to raise the B40 group's income.
MTUC said it had received complaints from workers that their employers have deducted allowances and other benefits, including cutting canteen food subsidy and transportation, to decrease costs due to the new minimum wage.
The new minimum wage rate
On March 19, Prime Minister Datuk Seri Ismail Sabri Yaakob announced that the new RM1,500 minimum wage would go into effect on May 1.
Before this new RM1,500 rate, the minimum wage was RM1,200 for areas under city or municipal councils and RM1,200 for regions not under city or municipal councils.
The RM1,500 minimum wage rate currently applies from May 1 to employers with five or more employees and employers who carry out professional activities classified under the Human Resources Ministry's Malaysia Standard Classification of Occupations (Masco), even if they have fewer than five employees.
The new RM1,500 minimum wage rate will only apply to businesses with fewer than five employees from January 1, 2023, with the RM1,100 or RM1,200 minimum wage rate continuing to apply presently, depending on their employment location.
Source: Malay Mail