Smaller firms face uphill climb to RM3,000 minimum wage by 2030

KUALA LUMPUR: Malaysian businesses cannot keep digging deeper into their pockets to fund higher wages without a corresponding rise in productivity, particularly as smaller firms grapple with shrinking margins and rising operating costs.

Malaysian Employers Federation (MEF) adviser Datuk Shamsuddin Bardan said the road towards a RM3,000 minimum wage by 2030 would be especially challenging for micro, small and medium enterprises (MSMEs).

He said many MSMEs have little room left to absorb another jump in costs, with margins that once stood at around 15 per cent in some cases falling towards 10 per cent.

"If you can get 10 per cent margin, you're lucky," he said in an interview on TV3's Money Matters aired on Saturday.

Shamsuddin said simply expecting employers to shoulder higher wages without addressing productivity would be difficult.

"The ability to just absorb the cost without anything else can be very, very minimal, especially for the smaller industries," he said.

Malaysia's minimum wage currently stands at RM1,700 a month.

Under the 13th Malaysia Plan (13MP), the Human Resources Ministry is targeting a minimum monthly wage of RM3,000 by 2030 as part of broader labour reforms.

Shamsuddin said raising wages without putting businesses between a rock and a hard place would require improvements on both sides of the employment equation.

Workers, he said, would need to acquire new skills and become capable of taking on multiple roles, while companies must invest in automation, digitalisation and better work processes.

A more productive workforce could allow companies to do more with their existing headcount rather than continually adding workers.

"With the current workforce that they have, and they are more skilful, then they can do better jobs," he said.

But upgrading workers alone would not be enough.

Shamsuddin said companies, particularly smaller businesses, also need to replace outdated technology, something many struggle to afford.

He called for lower-cost financing and, where appropriate, grants to help them move up the technology ladder.

For many small businesses, he said, the challenge begins even before money enters the picture.

It is easy to tell a company to automate or digitalise, but a small operator may not have the expertise to determine what technology it actually needs.

"They need to be actually maybe guided on what to be done, really," he said.

CONSUMERS COULD END UP FOOTING THE BILL

Shamsuddin cautioned that failure to lift productivity could ultimately leave consumers picking up the tab.

Businesses facing higher wages, electricity bills and other costs may have little choice but to pass some of those increases on through higher prices.

That could set off a vicious cycle, he said, as consumers facing a higher cost of living may in turn require greater government assistance.

"The most important thing for us is to actually make sure that all the cost increases should not be passed on to the consumers," he said.

Productivity gains could provide the buffer businesses need to absorb a larger share of rising costs rather than passing them down the line.

But there is no silver bullet.

Higher productivity requires investment in technology, skills and new ways of working, with Shamsuddin saying agencies such as the Malaysia Productivity Corporation need realistic programmes to help smaller businesses make that transition.

The government's Progressive Wage Policy could form part of that bridge.

Shamsuddin said the voluntary scheme links better pay with worker training and productivity improvements, while participating employers receive wage incentives from the government.

But he emphasised that such assistance should not become a permanent crutch.

"We are not saying that this subsidy should go on forever. After some time, then of course, we should be able to be on our own," he said.

The aim, he added, should be a virtuous cycle in which better-trained workers become more productive, companies can afford higher wages and employers have a better chance of retaining skilled staff.

SMALL FIRMS NEED A HELPING HAND

The task becomes harder for traditional low-margin businesses, some of which may not even know where to begin their technological overhaul.

Shamsuddin said agencies including SME Corp Malaysia and ministries responsible for smaller businesses need to work with industry associations to provide more "hand-holding".

That includes helping businesses identify the technology, digitalisation and investment needed to move up the value chain.

Financing remains another stumbling block.

Smaller companies may lack the collateral required by banks or the resources to prepare the paperwork needed to secure funding.

Shamsuddin said administrative requirements should therefore be eased to give these businesses better access to cheaper financing.

The broader wage push, he said, cannot be separated from the productivity question.

Rather than relying solely on legislated wage increases, Shamsuddin said businesses should also have room to reward workers through performance-linked bonuses, allowances and incentives.

Such a model would allow earnings to move more closely in tandem with productivity.

"If employers and employees are given the flexibility to manage their income level, then I would say that that is a more sustainable way," he said.