KUALA LUMPUR (Aug 15): The Federation of Malaysian Manufacturers (FMM) said a gradual adjustment to minimum wages is more feasible and manageable for the industry, as it offers a balanced approach to improving workers’ well-being without imposing a steep financial burden on businesses.

FMM president Tan Sri Soh Thian Lai said a gradual adjustment would help avoid shock to businesses, particularly micro, small and medium enterprises (MSMEs), which may not have the financial flexibility to absorb a large increase in labour cost.

"It will also allow businesses to adapt gradually, making necessary adjustments to their cost structures, operations and productivity to handle increased wages. 

"Businesses will also be able to maintain sustainability without resorting to drastic measures like lay-offs or price increases to cope with the added costs," Soh said in a statement. 

In addition, he said, businesses could mitigate inflationary pressures with a gradual adjustment as an immediate steep wage hike could lead to inflationary pressures, and businesses might have to pass on the increased costs to consumers. 

According to the FMM, a sharp increase to RM2,000 proposed by many groups represents an immediate increase of 33% in the basic salary, which will have a spiralling knock-on effect on overall payroll cost.

Soh said the industry strongly feels that such a sharp increase would have an undesirable impact on the economy and business sustainability, with MSMEs accounting for 96.9% of overall establishments in Malaysia, according to data as of last year. 

At the same time, he noted that the economy would experience an immediate monthly outflow of nearly RM800 million due to the repatriation of funds by foreign workers (based on 1.6 million legal foreign workers), with no direct positive impact on the local economy.

However, Soh pointed out that the FMM is supportive of a review of minimum wages. 

"The FMM urges the government to take cognisance of the multiple cost increases that the industry continues to face this year, and adopt a more holistic approach in the review process of the minimum wage order, including having earnest engagement with stakeholders to understand the acceptable increase," he added.

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