Minimum wage could ‘kill SMEs’
PETALING JAYA: Eighty per cent of small and medium-scale enterprises (SME) could be forced to shut down if the Government's proposed minimum wage policy of between RM800 to RM1,000 is implemented across the board.
The SMI Association of Malaysia said SMEs were mostly labour-intensive and based on the nature of their operations, they would not be in the position to absorb the cost spike.
The effects of such ruling would be harder on the SMEs if implemented on a blanket basis, national vice-president Michael Kang said at a joint conference by 16 manufacturing, retail and service sector associations yesterday.
“You see, most of the SMEs are labour-intensive; they don't have modern machines. An increase in salaries will have a tremendous effect on the manufacturing cost,” he said, “It could totally kill SMEs because for most of them, their net profit margin is only around 3% to 5% .”
The potential chain reaction could be grave as well, considering SMEs make up 99.2% of the Malaysian economy and accounted for 59% of the workforce.
Furthermore, Kang said SMEs played a vital supporting role in the manufacturing supply chain. “The majority of these SMEs are the supporting industry to many multi-national companies. So if manufacturing cost increase, they will be affected too.”
He added that the Malaysia Employers Federation's estimation that 200,000 SME businesses would suffer was realistic.
The Malaysian Plastics Manufacturers Association president Lim Kok Boon said industries with higher concentration of SMEs could face more severe impact.
He said that the plastics industry, about 75% to 80% were SMEs but listed companies, would also not be spared.
Lim also said that a clear definition of the minimum wage was needed as employers were still not sure if the policy covers allowances and benefits.
“Some trade unions are saying that the minimum wage is between RM800 and RM900, not including benefits and the benefits,” he said, adding that if Employees Provident Fund contribution, overtime claims, incentives and bonuses are calculated based on the higher wage, it would further aggravate the burden.
Source : The Star
Date : 7 March 2012
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