Malaysia is to introduce a Progressive Wage Model (PWM) next year, beginning with a pilot test in June. The PWM was tabled in the Lower House of Parliament by Economic Minister, Rafizi Ramli in Kuala Lumpur. Rafizi stressed that the incentive-driven voluntary opt-in progressive wage programme will prioritise workers in small and medium enterprises, Minister of Economy Rafizi Ramli said in Parliament today as he tabled the much-anticipated. The programme has generally drawn support from workers but employers remained sceptic.
In an immediate respond to the tabling of the PWM, the Small and Medium Enterprises Association, SAMENTA said SMEs were supportive of the Model by remains wary. SAMENTA National Chairman Datuk William Ng said SAMENTA drecognised that the Progressive Wage Model could be a viable option to raise the income of Malaysians but urged the government to engage with SMEs for inputs before implementing the trial run next year. “We would like to urge the Minister and Ministry to quickly bring the conversation to the SMEs, who may or may not be represented by the employer associations, and whose specific needs and challenges may not have been adequately represented in the policy discussion surrounding the Progressive Wage Model.” :The quantum of increment to be suggested by trade unions and groups representing large employers may not be reflective of the financial capability of SMEs. Further, any increment of productivity and profitability in any sector may not be reflective of the disparity in productivity gain between larger firms and SMEs.” “SAMENTA is supportive of any effort to raise the income of Malaysians. It is a deplorable state of affairs that more than half of all Malaysians are earning below subsistence wage. It is a common myth that SMEs do not want to pay more for talents with the right skills. In our recent survey in September, 2 out of 3 SMEs named talent shortage as their primary challenge. As such, no right-thinking SME owner would hold out on paying more to workers if their business margin permits it.” SAMENTA is the largest association of SMEs, with over 3,000 multi-sector members across the country.
In a related development, the Federation of Malaysian Manufacturers (FMM) has requested a reconsideration of the duration for the incentives payment under the proposed PWM, adding that the 12-month period could be too brief for companies to adjust to the wage increments and implement the anticipated productivity improvements resulting from the PWM. The FMM, in a statement on Friday, cited the example of Singapore, where the government initially co-funded the implementation of such a model for four years, while highlighting the importance of the appeal and completeness of the incentives to encourage companies to implement the PWM. “The industry welcomes the incentive approach taken by the government, which would be a further boost for small and medium-sized enterprises (SMEs) that may be keen to take up the PWM but are constrained by their resource limitations. “While the white paper has provided details on the quantum of incentives which would be provided based on entry level and non-entry level (jobs), it is unclear if these incentives would be sufficient and motivating enough for companies, as the quantum salary increments have yet to be determined,” said FMM president Tan Sri Datuk Soh Thian Lai. Nonetheless, the FMM expressed gratitude toward the government for introducing the PWM voluntarily, as it provides the flexibility of implementation based on the industries’ capability, profitability and competitiveness. The pilot implementation would test the model’s competency and could be finely-tuned to tackle any challenges or shortcomings, to ensure its acceptability and feasibility. The industry welcomed the government’s incentives approach, as it could assist SMEs interested in adopting the PWM but are hindered by resource limitations. The FMM pointed out that the implementation would focus on SMEs who could then compete in the marketplace against larger firms, which have the ability to offer more competitive wages. The FMM also suggested that the government consider implementing the PWM by sectors and skill categories, rather than a blanket implementation to bring about intended improvements and changes to the labour market scenario.
In tabling the PWM Friday, Rafizi said there were no plans to impose a mandatory RM1,500 minimum wage order following the adoption of a more progressive wage approach. He pointed out that the PWM would be a more balanced approach to cushion the impact on SMEs while allowing better salaries for entry-level graduates in the job market. He added that the PWM would be voluntary. Detailing the PWM, Rafizi said the Model would primarily be driven by cash incentives supplemented by tax money. He said that companies defined as “entry-level” that voluntarily opt in will be given up to RM200 per worker for the first 12 months, on the condition that they raise salaries yearly either by matching or paying more.
Companies at the “non-entry level” will receive RM300 per worker. For the first year of the policy, the proposal is to cap eligibility for workers earning between the minimum wage and RM5,000, the minister said. “This proposal takes into account that employers who receive a salary range of between RM1,500 and RM4,999 make up to 66.6 per cent or four million workers (from the total formal sector workforce),” the White Paper said. “The threshold should give wide coverage to private sector workers who could benefit from this initiative.” The rate of yearly increment will also have to be pegged to productivity, a condition set after considering concerns from employers, Rafizi said. This means employers who apply for the cash incentive will have to show proof that workers have been “upskilled” and productivity raised. Local SMEs will be the primary target for participation even if approval will be on a first-come first-served basis. Participating companies will then be rated through a “star system”, which Rafizi said is aimed at spurring competition that would encourage companies to offer “competitive” salaries.
In Putra Jaya, Human Resources Minister V. Sivakumar said his Ministry will lead various key functions including conducting joint negotiations with employers and labour unions on the PWM. He said that in addition to providing guidelines for employers and workers, monitoring, assessment, and development coordination would also be carried out. “For system development, KSM is involved in the registration, selection, and monitoring of companies. Regarding skills enhancement, KSM will undertake training verification, training quality inspection, supervision, auditing, and training coordination. “KSM will also provide guidance on annual salary increases through the preparation of proposals for such increases,” he said in a statement Saturday.
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