Home Civil Society Voices 2010 Civil society voices The circus around the Minimum Wage Act

The circus around the Minimum Wage Act

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Parti Sosialis Malaysia and Jerit are not amused by the continuous flip-flop and gymnastics surrounding the Minimum Wage Act and the proposed amendments to labour laws.

Over the years the Government has consistently implement anti-labour laws/pro-capitalist laws. It is common knowledge that previous trade Unions laws and Industrial Relations Acts were specifically designed to help foreign companies investing in Malaysia.

The stark reality is that the ruling government is not interested in implementing a retrenchment fund, a Minimum wage Act, automatic registration of trade unions and priority of wages and termination benefits over other Debts (to override the Companies Act).

What the ruling Government does is to curb workers rights and union rights, in perpetuity. Today this government unabashedly continues to propose new amendments to please foreign investors and perpetuate the neo-liberal regime.

The failure of the market

PSM is pleased to hear that the Minister has finally realised the failure of market forces. PSM had over the years cautioned and condemned the Government for relying on market forces to determine the well being of the workers, who happen to be the greater majority of the people.

We have all the while called for state intervention in resolving the woes of the workers. The government until now has been telling the world that it cannot implement a Minimum Wage Act because of its strong adherence to the market philosophy as duly noted by the former Human Resources Minister Fong Chan Onn: The government will not adopt the minimum wage policy but instead allow market forces to determine the salary level. That was the government’s basic philosophy.’

Now the government has to eat its own words as the current Human Resources Minister Dr S Subramaniam said that a National Employment Return study in 2009 stressed the need for wages to be increased, especially after the ministry discovered that it was difficult to rely on market forces alone.

Human Resource Minister’s failure

Although Subramaniam has recognised the low wages earned by workers and the importance of a minimum wage, he is not taking any concrete efforts to address the matter. It has been two years and yet the Human Resource Minister fails to bring any positive changes for the betterment of the workers. For example, the withdrawal of the implementation of a minimum wage for security guards – which should have been implemented on 1 July 2010. Recently, the Minister was also pessimistic about the Indonesian government’s proposal to introduce a minimum wage of RM600 for maids. The Ministry also seemed to be lacking in seriousness when they conducted a survey on minimum wage through the Ministry’s blog. The Deputy Human Resource Minister announced in Parliament that minimum wage can’t be implemented due to poor response by the workers. When we met the Minister on 1 July this year, the Minister kept mentioning that the Government had to safeguard the interest of
the investors; as such, it is difficult to implement minimum wage. It shows that the Minister has failed to exercise his political will to safeguard the interests of the workers. Now the Minister talks about more time to study the proposals.

Income disparity – the rich and the poor

A study by the Human Resources Ministry on wages in the country revealed that almost 34 per cent or about 1.3 million workers earned less than RM700 a month, a level below the poverty line of RM720 per month. The Minister also cited a World Bank study which discovered that the wage trend in Malaysia had only recorded 2.6 per cent growth annually during the past 10 years compared with the increasing cost of living during the same period.

READ MORE:  Ensure Sabah and Sarawak labour ordinances are tabled in October

The richest 10 per cent in Malaysia control 38.4 per cent of the country’s economy whilst the poorest 10 per cent control 1.7 per cent.

These alarming statistics demand that the government take drastic action to narrow the gap between the rich and the poor. One way is to introduce a Minimum Wage Act or by subsidising the lower income group.

But right now the modus operandi of the government of the day is:

– to implement a GST (Goods and Services Tax), burdening further the poor who will have to pay higher taxes while the rich will be given further deductions of their income and corporate taxes. The fact that only 15 per cent of the population is paying income tax shows that the majority of Malaysian are in the low-income category.

– the private sector as the engine of growth in the Tenth Malaysia Plan, thus lessening the government’s role and enlarging the role of private sector. This move will definitely lead to more neo-liberal policies to the detriment of the poor.

– the reduction and lowering of subsidies will result in the relative and absolute escalation of prices with the drop of purchasing power, and, subsequently, the fall or crashing of the standard of living. The total government expenditure on subsidies is RM158 billion yearly, of which RM 74 billion is for subsidies enjoyed by all people and RM84 billion is for subsidies meant for the corporate rich and businesses. The current government subsidy cuts are targeted at the RM74 billion  which are enjoyed by all. But the subsidies for the rich remain unchanged, thus blatantly helping the rich but not the poor.

– increasing FDI (Foreign Direct Investment), which will depress wages and result in tighter labour control and laws to protect foreign investors

It’s the corporate agenda that is driving the amendments to the labour laws, not the needs or welfare of workers.

The affected labour laws:

– Employment Act 1955/Akta Kerja 1955

– Industrial Relations Act 1967/Akta Perhubungan Perusahaan 1967

– Trade Unions Act 1959/Akta Kesatuan Sekerja 1959

Employment Act amendments

This has been tabled for first sitting without the support of labour groups such as the MTUC and Jerit. Overall, the amendments focus upon the increase in “labour flexibility” and to better define “sexual harassment” in the work-place.

Labour flexibility

As for labour flexibility, the biggest ploy will be the issue of the contractualisation of labour.

The proposed  amendment recognises a new category of contractor – that is, the contractor of labour, whose job is merely to supply labour. Previously, a “contractor” was also part and parcel of the work of the principal.

Now this amendment recognises the contractor of labour as the “Employer” rather than subservient or responsible to the principal. These changes will surely make it easier to summarily lay off workers. In short, the Principal can escape from paying benefits because these wage earners are not his workers. Also if EPF and Socso are not paid properly, the contractor can say that he is not the actual employer – that he is not responsible. In summary, the workers are short changed in this “catch-22” drama.

READ MORE:  Ensure Sabah and Sarawak labour ordinances are tabled in October

Section 12 – Notice of termination of contract

To standardise the notice period for the termination of contract for employees to four weeks irrespective of the years of service. With this amendment, long-serving workers get much lesser time to prepare for termination and hence will be compensated less.

Section 19 – Time of payment of wage

To allow employers to delay payment of overtime work for as long as 30 days. Currently it must be paid within seven days. Most Malaysia workers rely on overtime to make ends meet. With this amendment, they will be only paid their rightful dues three weeks later

Below are safeguard provisions which were placed to safeguard workers’ interest. The government amendments plans to do away with these safeguard. Among the safeguards are:

Section 25A – Payment of wages through bank

The current provision requires employers to acquire the consent of workers to change the mode of payment of salaries. If the only mode of payment is going to be banks, than it is going to bring further hardship, inconvenience and also further cost to the workers. And in Section 28 – Restriction on places at which wages may be paid, the amendment can mean that the employer can give wages to workers in brothels, pubs and toddy shops.

Also currently under Section 34 –  Prohibition of night work, there is a provision for the DG to allow for this on a case to case basis. With the removal of these provision, it would mean workers especially female workers can be called in at odd hours, without much rest, to do work.

Section 44 and Section 61 require a register of allowances paid and workers details to be kept, and this can be checked upon request. Under the new amendment, the employer can keep soft copies in computers which can be subject to abuse

Section 60A – Hours of Work. The provision allows employers to set unreasonable working hours; the employer can even set work to start as early as 5.00am.

Sexual harassment at the work place

We welcome this provision in the Employment Act as it will address the problems of sexual harassment. Coverage is for all employees irrespective of their wages or occupations. While the amendment is welcomed, there is a need to enact a comprehensive law on sexual harassment because the offence does not occur at the workplace alone.

Industrial Relations Act 1967

The  IR Act was amended not too long ago in 2007 (during Fong Chan Onn’s tenure) and it has chiped away some rights of the workers.

The table below shows some of the amendments made:

Previous amendments

– Apart from limiting back wages to 24 months, the courts are now mandated to take into account post-termination gainful employment and contributory conduct.

– However, the amendments did not mandate the courts to impose punitive damages in cases where in all fairness there must be another provision for the court to take into account the pain and suffering of workers when dismissed. Nor are there provisions for punitive damages where employers acted wantonly in dismissing workers whose only misconduct may be to promote or participate in a trade union in the workplace.

– To limit back wages for probationers to one year. Probationers could have left secure jobs to take up new employment (on probation). 

READ MORE:  Ensure Sabah and Sarawak labour ordinances are tabled in October

The current Minister is proposing the following amendments which will further undermine the rights of workers. The amendments are as follow:

Section 20 – Representations on dismissals


  • Employees with less than one year of service (probationers) are excluded from seeking reinstatement via section 20 of the IRA;

  • Employees earning a basic salary of RM10,000 or more are excluded from seeking reinstatement via section 20 of IRA;

  • Employees with fixed-term contracts are excluded from seeking reinstatement via section 20 of IRA if termination is as per contract terms.

This would mean more workers will be excluded from protection under Section 20

Other Amendments

– Mandatory conciliation at the Industrial Relations Department (IRD); dismissal cases would not be referred to the Industrial Court under certain circumstances such as:

Employee has accepted a mutual separation package;
Expiry of a fixed term contract;
Termination of an employee beyond the mandatory retirement age of the company;
Where the employee rejects reinstatement;
Cases of amicable settlement, and employee has accepted settlement.

– To allow HR specialists/consultants to represent parties in conciliation proceedings and hearings in the Industrial Court

– To enable the Industrial Court to strike out frivolous or vexatious cases

– To allow for direct appeal to the High Court pursuant to an Industrial Court Award on dismissals by way of rehearing instead of judicial review currently. This gives unfair advantage to employers given their financial resources. Unions and workers with limited or no resources cannot afford to engage lawyers to represent them at the High Court.

Besides the amendment to the Employment Act and IRA, there seems to be further plans to curb trade union activities.

Under Section 5(2)(B), Executive and Security categories are now prohibited from being members of trade unions; besides that, there are plans to empower the DGIR to review the status of a union which has been given recognition, upon request after a minimum period of five years. The proposed amendment will enable employers to perpetually deny workers collective bargaining rights.

PSM and Jerit demand:

1. Immediate steps must be introduced to narrow the gap between the rich and the poor and call for the need to;

– Introduce a Minimum Wage Act;
– Reduce subsidies to industries and businesses but maintain subsidies for the poor;
– Stop all measures to implement the GST and to maintain or increase the corporate tax

2. Stop tabling anti-labour legislation

–  Stop all amendments to labour laws
–  Introduce laws such as a retrenchment fund, a Minimum wage Act, the automatic registration of trade Unions and  priority of wages and termination benefits over other debts (to over-ride the Companies Act)

3. It is time the government reviews its fundamental philosophy. The Tenth Malaysia Plan calls for a major role to be played by the private sector. It is proven that it is the social and political responsibility of the State to ensure the well being of its workers and the rakyat. We call for the government to safeguard key public sectors such as:

– public hospitals and the public health care system
– a free and affordable public education system
– affordable and decent homes
– efficient and cheap public transport

Parti Sosialis Malaysia &  Jaringan Rakyat Tertindas (Jerit)

The views expressed in Aliran's media statements and the NGO statements we have endorsed reflect Aliran's official stand. Views and opinions expressed in other pieces published here do not necessarily reflect Aliran's official position.

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2 Feb 2011 5.55pm

Its best the minister resign for good

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