KUALA LUMPUR (Nov 30): The government released its Progressive Wage White Paper on Thursday, proposing to implement a pilot project between June and September next year that involves a selected number of companies that register to voluntary participate in it, with full implementation to be determined later.
The White Paper proposed that in the first year of implementation, a progressive wage system to involve those earning a monthly salary of between RM1,500 and RM4,999, covering some four million workers in formal sectors, will be limited only to Malaysian citizens.
Businesses, especially small and medium enterprises, are encouraged to participate, but multinational and government-linked companies (MNCs and GLCs) are exempted from the project, as they are deemed paying competitive wages already.
The White Paper also proposed that the government make an annual allocation for cash incentives to encourage higher reception from the business sector to participate in progressive wages voluntarily.
Employees covered under the system will be categorised in two groups, namely entry levels and non-entry levels, and a Progressive Wage Policy Implementation Executive Committee will be established and provide guidelines for annual salary increment.
The proposed annual increment — to be based on economic sectors and occupation categories according to the Malaysian Standard Classification of Occupations — will be made available next year, and be reviewed annually.
For entry-level posts, participating companies will be eligible to receive cash incentives of up to RM200 monthly for 12 months, while for non-entry-level posts, the incentive rate is proposed to be up to RM300 monthly for 12 months.
These cash incentives are proposed to be channelled to participating employers on a quarterly basis, within six months upon claim submissions.
The government allocation for cash incentives will be dependent on Putrajaya’s fiscal position, and progressive wage incentives will be paid out based on a first-come, first-served basis.
These cash incentives will be paid out after employers submit documents related to employees’ wages and their participation in skill-upgrading courses. The government will identify and certify the relevant training programmes.
Rolling out of the progressive wage system requires cross-ministerial collaboration, and the government will establish two new committees and four new working committees for implementation.
Apart from the Progressive Wage Policy Implementation Executive Committee, which will be co-chaired by secretary generals of the Ministry of Economy and Ministry of Human Resources, the government will also establish a special Cabinet committee, chaired by deputy prime minister II.
The special Cabinet committee will determine policy direction and implementation strategy, while the executive committee will ensure execution of these strategies, and make proposals for intervention if necessary.
The executive committee will be supported by the four working committees on policy development, system development, skills improvement, and annual wage increment respectively.
The White Paper laid out three possible scenarios upon implementation of the progressive wage system, involving an annual government allocation of RM2 billion, RM3.8 billion or RM5 billion.
Under these scenarios, the number of wage earners to be benefited is expected to come in at 1.05 million to 2.62 million, adding 0.22 percentage point (ppt) to 0.56 ppt to real gross domestic product growth, followed by additional contributions of RM790 million to RM1.98 billion to the Employees Provident Fund (EPF), and an increase in income tax revenue by RM1.8 billion to RM4.4 billion.
However, inflation is expected to increase between 0.24 ppt and 0.61 ppt under these scenarios, as consumption and purchasing power rise, but the White Paper noted that the positive impact of progressive wages will help balance higher prices over the longer-term period.
It is expected that the number of taxpayers will increase by between 37,529 and 84,719 people, while the unemployment rate will be reduced by between 0.14 ppt and 0.35 ppt, depending on how much the government can spare to incentivise adoption of progressive wages.
During the presentation of the White Paper in the Dewan Rakyat, Economy Minister Mohd Rafizi Ramli said the ministry would prepare salary guidelines to be approved by the Cabinet in the first quarter of 2024. Subsequently, interested companies could register before the pilot project commences in June.
"We have decided to start with a pilot project involving 1,000 companies, so that we can fine-tune the weaknesses of this pilot project, before expanding it to the whole sector and involving all employers," said Rafizi.
The minister also explained that the selection of companies would go through a process emphasising policy support, the level of sector needs, and equality.
He added that an impact assessment would be conducted to evaluate the effectiveness of the pilot project, and the report would be presented to the Cabinet before full-scale implementation, which is expected to take place after December 2024.