MEF Calls on Private Sector to Review Vendor Contracts Amid Increased Minimum Wage

The Malaysian Employers Federation (MEF) has urged the private sector to review their contracts with vendors to account for the higher costs imposed by the new minimum wage of RM1,700, as announced in Budget 2025.

MEF’s Call to Action

Datuk Dr Syed Hussain Syed Husman, MEF’s president, emphasized that all MNCs, GLCs, and GLICs should review their vendor contracts in good faith, as the new minimum wage set was beyond the control of vendors. He advised companies to sign new contracts with vendors or have separate agreements to account for the higher cost of wages faced by them, as it was not accounted for in their original supply contracts.

New Minimum Wage Policy

The new minimum wage policy, effective February 1, 2025, was announced by Prime Minister Datuk Seri Anwar Ibrahim during the tabling of Budget 2025 on October 18. The new minimum wage of RM1,700 will apply to employers with five or more staff, while micro-businesses with fewer than five employees will be given a six-month grace period until August 1, 2025.

Vendors Face Challenges

Syed Hussain noted that many vendors are finding it difficult to amend their contracts and get their rates reviewed based on the RM1,700 a month minimum wage. He explained that the contracts were determined based on the RM1,500 minimum wage that prevailed at the time when they were signed.

Review of Contracts

Syed Hussain emphasized that a review of the contracts to account for higher costs would enable vendors to fulfill their obligation to implement the new minimum wage. He stated that as responsible employers, MEF members are sincere in wanting to cooperate and honor the new minimum wage policy.

Cash Flow Issues

Syed Husman warned that employers must carry out prior planning when faced with policy changes that involve financial obligations to avoid cash flow issues. He urged companies to review salary structures and ensure that employees earning wages of less than RM1,700 have them adjusted to the new minimum wage. He emphasized that such matters cannot wait until new contracts are signed, as penalties will apply if non-compliance is not avoided.

Facing Challenges

Syed Hussain highlighted that vendors are experiencing challenges in meeting the new minimum wage, as their current contracts run beyond 2025, with some even beyond 2027. He stressed that employers must be better prepared and ensure fuller compliance with the new minimum wage order to avoid penalties.

Government’s Role

Syed Hussain called on the government to show compassion and understanding for business entities, especially micro-small and medium enterprises (MSMEs), when making policy changes. He emphasized that the government must do its best to meet the needs of all stakeholders and ensure policy changes are implemented with a heart, treating all quarters, including employers, with understanding of their challenges and issues.

Conclusion

In conclusion, the MEF’s call for private sector companies to review their contracts with vendors amidst the new minimum wage policy is a prudent move to ensure compliance and avoid potential penalties. By understanding the challenges faced by vendors, employers can work together to implement the new wage policy, promoting a more equitable and competitive environment for all stakeholders.

Frequently Asked Questions

**Q: What is the new minimum wage policy?

A: The new minimum wage policy is set at RM1,700, effective February 1, 2025, for employers with five or more staff, and August 1, 2025, for micro-businesses with fewer than five employees.

**Q: What should companies do to comply with the new minimum wage policy?

A: Companies should review their vendor contracts and salary structures to ensure compliance with the new minimum wage policy, and make adjustments as necessary to avoid penalties.

**Q: What is the MEF’s stance on the new minimum wage policy?

A: The MEF supports the new minimum wage policy and is urging private sector companies to work with vendors to ensure compliance, while also advocating for greater understanding and compassion from the government for business entities, especially MSMEs, when making policy changes.