Singapore companies in Malaysia do not expect big hit from minimum wage hike
MALAYSIA'S 25 per cent hike of its minimum wage to RM1,500 (S$477), effective May 1, is not expected to have a significant impact on Singapore-based companies with operations there, as many workers are already paid above that threshold, bosses told The Business Times.
Singapore Exchange (SGX) mainboard-listed Enviro-Hub Holdings said the operating costs of its Malaysia glove-making business, Pastel Glove, are expected to increase by 2 per cent to 3 per cent after the implementation of the new minimum wage policy – much less than the 25 per cent hike itself.
“Before the adjustment of the minimum wage, we have always offered a salary which is higher than the minimum wage level to attract talent,” said Adrian Toh, chief investment officer of Enviro-Hub.
Under the National Wages Consultative Council Act 2011, Malaysia’s minimum wage for Malaysia workers is reviewed every 2 years. It was last raised in Feb 2020 to RM1,200, up from RM1,100 before.
OxPay Financial managing director Henry Tan, agreed that talented workers, especially in the technology industry, are already earning above the minimum wage rates set by Malaysia’s government.
Granted, the minimum wage increase has still affected Malaysia operating costs for the online-to-offline financial services technology provider. But Tan described the impact as minimal, with the cost increase being “less than 3 per cent”.
For Vividthree – an SGX Catalist-listed virtual reality, visual effects and computer-generated imagery production studio – managing director and founder Charles Yeo does not see any impact on their Malaysia operations, as all employees are earning over the minimum wage threshold.
Nevertheless, the group has been reviewing its manpower level and policies from time to time to ensure the company remains competitive, said Yeo.
Companies also noted that although the specific effect of the minimum wage hike might be small, it adds to existing cost pressures.
SGX-listed Malaysian property developer and glove manufacturer Aspen (Group) Holdings raised the concern that the increased minimum wage will add to higher inflation and will indirectly affect the company’s bottom line moving forward.
Murly Manokharan, founder and group chief executive of Aspen, said the quantum of the salary increase is insignificant – but if taken together with other costs that have been rising due to supply disruptions, such as energy and raw materials, the overall effect could hurt the company’s profitability in the future.
“It’s a risk to our operations in the immediate and mid term as we also don’t have the ability to pass on the cost to our buyers due to weak sentiment – thus it’s very likely we will have to deal with significant increase in cost of business operations and material costs,” he added.
Enviro-Hub’s Toh agreed that operating costs are expected to continue rising – especially the cost of hiring, as the company will need to offer more attractive salary packages to attract desired talent.
To mitigate this, Pastel Glove has been automating parts of its manufacturing process to reduce manpower needs.
Similarly, SGX mainboard-listed Riverstone Holdings has also shifted to automation for processes such as glove stripping and packing to increase productivity and reduce manpower.
The glove maker’s Malaysia manufacturing plant has about 3,000 workers, with the majority of them earning about RM1,400 to RM1,500 a month. With the minimum wage increase from May 1, the company has adjusted the salary for those who were earning below RM1,500.
“In addition, we need to increase the salary for workers that are already earning above RM1,500 to reflect the fair adjustment. All in all, our total cost is expected to increase by 5 per cent,” said a spokesperson from Riverstone.
