Minimum wage – some suggestions


Been told about the problems employers are facing due to the minimum wage implementation. I will try to summarise a few with the hope that it will spark some ideas into you.

1) Consolidation as per s.6 Minimum Wages Order 2012 (MWO) – consolidation should be done as soon as possible. There is a need for consent from employees/trade unions therefore it makes sense to start negotiating from now to lump them all together to form a new clean wage.

Q: Is is necessary to obtain consent?

A: The law says Yes, otherwise it is a breach of contract and may also give rise to a claim for constructive dismissal.

***This is untested, it is a matter of opinion. If you would like to discuss this further, please contact me. 

In my opinion, an employee will succeed in proving constructive dismissal if he/she can prove that there was a fundamental breach of contract or the employer had evinced an intention not to bound by the terms and conditions of service. In this case, employers should argue that the intention of Parliament was to adjust the poverty level in Malaysia and to move one’s salary to RM900. The intention of Parliament was not to unjustly enrich individuals by implementing the minimum wage system. As such, my argument that so long the employee achieves RM900 (after consolidation without consent), it does not amount to a fundamental breach of contract. Please take note that this position can only be achieve is one is willing to take this to Court and set this as a precedent. If you do not want to be that person, you might as well obtain consent and move on with the consolidation or topping-up exercise.

My advise if you do not want to be the above company is to communicate now! Have a strong communication package to convince your employees that they will not be losing out in anything in the consolidation process. Once you obtain their consent to consolidate, the January dateline will not affect you. If however you chose to wait until January, employees will know that time is not on your side and may unnecessarily delay the process.

2) Probationers

Probationers are entitled to a 30% reduction from the minimum wage rate prescribed. This means that for employers in Peninsular Malaysia, you can hire someone and start them off at RM630. This is only possible for the first 6 months of employment.

As such, my suggestion is to place employees on RM630 with a probation period of 3 months, together with an option to extend it for a further period. During the probationary period, employers should set a target/KPI based on the RM900 standards because if the employee is not hitting the targets set by the end of the probationary period, employers have just and valid grounds for non-confirmation on the basis of poor performance. By using this method, employers can engage employees on a lower rate to test his suitability before being compelled to meet the RM900 requirement.

3) Employers, while adjusting wages to achieve the minimum wage must look into alternative options if cost is becoming a factor. Companies have prerogatives, for example, discretion to award bonuses and increments. Employers should take into account bonuses and increments to factor off losses, if any, while adjusting the wages of an employee. For those who are already on RM900 now and might feel uncomfortable because the other lower paid employees are catching up in terms of wages, the company might want to look into adjusting their increments come December, and use bonus as a retaining strategy. Please also be aware that if the company is unreasonable in it’s dealings, it may result in employees leaving the organisation to other companies that a properly complying with the law.

4) After what has been said above, I would also like to take this opportunity to inform you that this is actually the best time to fish for talents. The pool is wide open now therefore you should be grabbing talents from companies that are seeking deferral or looking to other alternative methods to avoid the minimum wage payment.