Lend SMEs a hand, govt urged

The Star

23-07-2025

Groups: Incentives among ways to help them manage minimum wage hike impact
PETALING JAYA: While implementing the RM1,700 monthly minimum wage order is a commendable move by the government, experts and business groups are concerned whether the higher cost will be passed down to consumers.
They also said the government should assist struggling small and medium enterprises (SMEs) to cope with the minimum wage order, which takes effect on Aug 1.
Economist Dr Yeah Kim Leng said SMEs that are generating adequate revenue should be able to shoulder the wage increase, though some breathing space should be provided to industries to help them cope temporarily amid global uncertainties due to geopolitical conflicts.
'To retain productive workers, most enterprises are already paying above the minimum wage.
'For firms and businesses with a large workforce, the cost impact will be material and we may see the higher wage cost passed on to consumers,' said Yeah, who also argued that promoting Progres­sive Wage Policy (PWP) when companies are grappling with all-round cost increases is academic at this point.
The ultimate goal, he said, is to achieve the desired virtuous circle of high wage income leading to high consumption, creating in return demand for products and services provided by enterprises.
'Continuous engagement with industry players is crucial to ensure systemic negative effects are addressed quickly with targeted support and measures as well as safeguards against creating market distortions and dependencies,' he said.
Malay Businessmen and Indus­trialists Association of Malaysia president Mohd Azama­nizam Baharon said the minimum wage policy could boost living standards and economic growth.
'However, many micro and small businesses remain burdened by rising utility costs, raw material prices and ongoing economic uncertainties.
'To help MSMEs adapt, Perda­sama calls on the government to provide targeted incentives, accessible financing, automation and digitisation support, and enhanced supply chain development,' he said.
Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) secretary-­general Datuk Jeffery Tan said the government should assist businesses to cope with the increase in labour cost.
'In big cities, hiring local staff at the minimum wage is difficult.
'However, in states with more rural areas, this will definitely impact the cost of living.
'This is why ACCCIM had always asked that the government localise the minimum wage based on location. If we keep increasing the minimum wage while productivity lags behind, it will affect our competitiveness,' he said.
Tan hopes the government will provide more automation and digital grants to assist SMEs to further automate and digitalise.
'Thirdly, we also hope the government will postpone the implementation of the 2% EPF contribution for foreign workers, the petrol subsidy rationalisation, and the foreign worker multi-tier system,' said Tan, who is also president of the Klang Chinese Chamber of Commerce and Indus­­try.
SME Association president Chin Chee Seong echoed similar sentiments, saying that the slew of cost increases will pose as a challenge to businesses.
'With the SST, there is an increase in cost, on top of the increase in electricity tariffs. I do not foresee businesses being able to implement progressive wages in such a climate,' said Chin.
Federation of Chinese Asso­ciations Sarawak president Datuk Richard Wee said it is possible that many SMEs and micro businesses will shut down with the full enforcement of the new minimum wage.
'As for the expansion of SST, it will definitely affect businesses as a whole as it will have a cascading impact, given that products and the supply chain are closely connected to each other to the extent that even if the product may be exempted, the services related to the supply of the product are still subject to SST.
'The government should get over political considerations and re-implement GST as most countries have GST, which is considered a more efficient and progressive tax system,' said Wee.
Industries Unite MCO2.0 group coordinator Datuk Irwin Cheong said the government should relook at the different segments of industry rather than sweeping across the board as workforce in multinational firms are bigger than those in small enterprises.
'Wages should be based on the agreed upon measurements, improvement benefits, different level compensation plans, and may also outperform the basic minimum wage option.
'One of the larger block of smaller enterprises may have to fork out an even higher increment into their overall cost and expenses as they too hire local workers, TVET graduates and school leavers,' said Cheong.
On July 22, the Human Resour­ces Ministry announced that the Minimum Wage Order will take effect Aug 1 for all employers regardless of the number of their employees.
The ministry said the new rate announced in Budget 2025 has been in force since Feb 1 for employers with five or more employees, as well as for those conducting professional activities classified under the Malaysia Stan­­­dard Classification of Occu­pations 2020.