Wednesday, 18 July 2012

What’s minimum wage in Malaysia?

I REFER to the Minimum Wages Order which the Human Resources Minister made by notification in the Gazette on July 16.

Although the said Order comes into operation on Jan 1, it is frustrating and appalling that it does not define what components can constitute “wages” to make up the minimum wage of RM900 for Peninsula Malaysia and RM800 for Sabah, Sarawak and the Federal Territory of Labuan.

Throughout the Order, the term “wages” is used repeatedly without denoting clearly and explicitly whether the term refers to merely basic pay and/or includes fixed and regular allowances paid to employees e.g. shift allowances, attendance allowances, meal allowances, overtime meal allowances, laundry allowances, competency allowances, etc.

To add to the ambiguity, the illustration in Section 4 of the Order, introduces yet another undefined term “current basic wage”.

Is this meant to suggest that only basic wage can be part of the minimum wage?
While I understand that it is only an illustration, this does not help for purposes of clarity.
The National Wages Consultative Council Act 2011, under which the said Order was made, defines wages as having the same meaning assigned to it in section 2 of the Employment Act 1955.

The definition of wages under the Employment Act 1955 is “wages refer to basic wages and all other payments in cash payable to an employee for work done in respect of his contract of service.”

It excludes five types of payments which are mostly clearly defined. The definition of wages in the Employment Act 1955 is by no means a clear science.

Debate rages in the Labour Court even now, some 50 plus years after the Act was made law, as to what amounts to wages or not.

If one refers to paragraph three of the First Schedule of the Employment Act 1955, it states: “For the purposes of this Schedule wages means wages as defined in section 2 but shall not include any payment by way of commission, subsistence allowance and overtime payment”.

This means that under section 2 of the Employment Act 1955, commissions are part of wages. And since “wages” in the said Order refers to the definition of wages in section 2 of the Employment Act 1955, it follows that commissions are part of wages to make up the minimum wage.

Say if I hire a salesman and pay him a basic of RM500. In some months, when sales are good, he earns commissions in excess of RM400, and therefore his wages are more than RM900.

In other months, when sales are bad, his commissions are below RM400 and thus his wages are below RM900. It follows then that for the months where sales are good, I as an employer have not flouted the said Order whereas in the other months, I am in breach of the said Order.

Am I as an employer expected to watch the commission trend of each of my salesmen?

Imagine a car dealer who has 50 dealerships each hiring 20 salesmen. How am I to track this?

I do not underestimate the complexity of the issue of what components should or should not be part of wages.

I will be the first to agree that it is not an easy subject. However, if we are inclined to come up with a minimum wage with such uncertainty revolving around the word “wages”, surely the fixing of a minimum wage is to put the proverbial cart before the horse.

Let me remind the learned folks at the Human Resources Ministry and the Attorney-General’s Chambers that all these ambiguities are not doing any good to the employers or the employees; neither is it going to assist in its smooth implementation.

Unless a holistic and precise approach is made to the question of what constitutes “wages”, this very attempt to introduce a new regulation on minimum wages appears to be hurried through for political expediency and far removed from the concept of a high income society.\

Kuala Lumpur

Related posts:
Malaysia's Minimum wage’s benefits and effects 
Malaysia's minimum wage, and its implications 
Are Malaysian Employment Laws Challenging?

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