KUALA LUMPUR — The proposed minimum wage hike from RM1,500 to RM1,700 next year under the Budget 2025 will burden small and medium enterprises (SMEs) whose cashflow and operational costs will be affected, leaders from the sector said.
Small and Medium Enterprises Association of Malaysia (Samenta) president Datuk William Ng said while he agreed wages in Malaysia are still low, the minimum wage hike to be effective February 1, comes at a time of “compressed margins” for SMEs.
SMEs in Sabah and Sarawak, especially, will face difficulties in implementing the new rate, and job losses can be expected as a result, Ng said in a statement to respond to the proposal in Budget 2025 tabled in Parliament yesterday.
“(Job losses) will greatly disadvantage the B40, many of whom are reliant on semi-skilled work, as these would be among the first jobs to be cut.
“(Therefore), we urge the government to refine the minimum wage to allow for lesser developed states to maintain the current minimum wage, or to do away with the minimum wage (hike) altogether,” he said.
Prime Minister Datuk Seri Anwar Ibrahim, who is also finance minister, said the minimum wage hike would be delayed for employers with less than five workers. They will have a grease period of six months to implement the new rate starting August 1, 2025.
Ng also said foreign workers will be the biggest beneficiaries of the revised minimum wage, while further wage compression would affect those in the middle-income strata (M40).
Meanwhile, Chin Chee Seong of the SME Association of Malaysia said SMEs in the Klang Valley would be less affected by the RM1,700 rate as employers here are already paying their workers higher.
However, the same cannot be said for companies located outside the Klang Valleys.
Chin said the higher minimum wage would also cause a “ripple effect” with other workers who would want a pay rise as well, causing further stress on SMEs.
Despite this, he expects most SMEs to be able to manage, as there is a window of time before the minimum wage come into force after the Budget is passed by Parliament.
“I think the government has learned from past experiences that you cannot simply and abruptly implement something right away, give us time to resolve the cash flow issue. So, I think (SMEs) will be affected, but in general, I think most SMEs can manage,” said Chin.
Chin also suggested the government except SME owners from the proposed 2% tax on dividend income of over RM100,000.
SME owners would receive the bulk of dividends, unlike listed companies who have investors, he said.
Chin also said many SME owners do not draw salaries due to tight cash flow in recent years after the pandemic, and taking them on on dividends from income that is already taxed, is tantamount to “double taxation”.
“Therefore, we (Samenta) urge the government to consider exempting SMEs from the 2% on dividend income.”
He also expressed caution over the Budget’s proposal to have foreign workers contribute to the Employees Provident Fund (EPF) as this would increase companies’ cost of doing business, especially those that use a lot of foreign labour.
Overall, Chin said incentives for SMEs under Budget 2025 are “not encouraging”.
“This is where we don’t see much incentive (for SMEs in the budget), but rather we are seeing more costs coming out (from the firms) moving forward.” – October 19, 2024