Minimum Wage Malaysia: Corporate perspective

For almost a year I've been participating in corporate board business meeting, I learn one thing. Business is to not only to gain profit but to also juggle the profit against cost. To big corporation, the ONLY goal is to MAXIMIZE PROFIT. The challenge of big corporation now is not only the ever increasing of raw material, transportation cost, etc but also payroll cost.

Let's take raw material cost as an example. Raw Materials cost will always be in a steady uptrend. This is true when the operating cost to produce the raw materials increases as well. I see it as a challenge to the business committee. Nonetheless, raw materials cost is always negotiable. The prices can be negotiate against years of contract. The longer your commitment to a producer, the lower a raw material cost you can get.

It is less of a headache than another cost which is non-negotiable cost; payroll cost. During COVID-19 Pandemic, many company resulted to staff retrenchment. This is true when demand is low and therefore, retrenching staff is seems appropriate thing to do. However, during healthy economic condition, most corporation face a steady uptrend of payroll cost with expected of 10% increment per year. 

Even though the production is expected to increase during healthy economy, the cost for operating also increases due to increase in payroll cost. Since minimum wage is set to RM 1,200.00, there will be shift of budgetary starting from RM 1,2000.00 and 10% increment per year for newly intake staff. And how does this cost to big corporation?

The corporation is either force to expand their business, explore other business opportunity or to lower down the payroll cost. Since payroll cost is non-negotiable, the corporation is forced to explore other business opportunity. Remain status quo is not an option. 

Another option by corporation is to outsource resources and this also means to outsource workers outside of minimum wage boundaries. As stipulated in Minimum Wages Order 2020, it stated that the minimum wage rate payable to an employee who works within the 16 city councils and 40 municipal councils will be RM 5.77 an hour or RM 1,200.00 monthly. 

And since, other countries do supply manpower outside the minimum wage boundaries, it seems logic for corporation to go towards that. That is why some corporation place their technical support team in other developing countries as they offer lower payroll cost.

Nonetheless, the decision of the ministry is indeed a necessity but what does it say to corporation and business strategy post minimum wage in year 2020? Whilst the corporation may outsource their manpower but to really be able to defeat this is to become a competent, agile, vigilant corporation. Expanding business and searching for other opportunity is really a way to go.

Zaza Zahidah