issues and challenges facing the plastics industry roadshow 2013 gov issues.pdf · issues and...

Issues and Challenges Facing

the Plastics Industry

Contents Minimum Wage Issues

MITI Dialogue 2013

Bank Negara Dialogue 2012

1

Chronology of Events on

Minimum Wage Dates Description

Aug – Sep 2011 Survey on the min wage paid by MPMA members was conducted

Dec 2011 Proposal on min wage was submitted to the National Wages

Consultative Council (NWCC) through MEF but it was rejected

MPMA’s proposal

Min wage of RM600 for less economically developed areas like

Kedah, Kelantan, etc and East Malaysia

Min wage of RM650 for economically developed areas like KL,

Selangor, Penang and Johor

9 Feb 2012 MPMA met with MEF and submitted a revised proposal. MPMA’s

proposal was again rejected by NWCC

MPMA’s revised proposal

Min wage of RM700 for less economically developed areas

Min wage of RM750 for economically developed areas

2



17 Feb 2012 MPMA was concerned when the Government announced that a min

wage level of between RM800 and RM1,000 would be submitted for

Cabinet’s approval early March

27 Feb 2012 MPMA initiated a meeting with trade organisations

6 Mac 2012 A Joint Press Conference was held with 16 trade associations and 36

representatives from 21 media companies. 43 articles and 12

mentions on television and radio were published/aired

Highlights of the Joint Press Conference

A sudden and substantial increase in wages will result in closure of

at least 30% of the small and medium sized plastics companies

10,000-20,000 job losses due to company closures and companies

adjusting to the high wage bill from the national min wage

Urged the Government to consider introducing the min wage policy

in phases over a period of time to give companies and businesses

time to adjust

3



12 Mac 2012 MPMA sent a letter to the Prime Minister following the Press

Conference, proposing the following:

The definition of Min Wage should be based on Take

Home Pay which includes Basic Salary + Overtime +

Incentives + Allowances + Bonus

An increase in wages must commensurate with an

increase in productivity

The implementation of min wages should be staggered as

sufficient time is required to upgrade the skills of the workers

to improve their productivity

Min wage quantum should be differentiated by

geographical locations as well as between rural and urban

areas

4

Updates on


27 Mac 2012 MPMA received a reply from the Secretary-General, MoHR

stating the following:

The Government had taken note of MPMA’s proposals

The Government would consider all or part of the cash

allowances be included into the min wage

30 Apr 2012 Prime Minister announced that a min wage of RM900 would

be implemented for Peninsular and RM800 for East Malaysia.

14 Jun 2012 Government announced that the National Min Wage Act

would be gazetted on 1 July 2012.

5

Updates on Minimum Wage Dates Description

6 Aug 2012 Meeting with the Secretariat of the National Wages Consultative

Council (NWCC) and submitted a written proposal on 17 August

2012 based on the following:

With the current unemployment rate of 3.1%, it is extremely

difficult to employ local workers (LW). As such, the industry is

heavily dependent on foreign workers (FW)

Employers have to pay additional RM293-343 per month for

employing every FW, as the costs of levy, amenities and

insurances have to be borne by the employer

LWs do not enjoy such benefits, and are therefore discriminated

Huge outflow of cash being remitted overseas – RM 14.4 billion

Min wage policy would have a severe impact on manufacturing

cost, if the basic pay of FW increases to RM900

Closure of companies means that LWs shall be rendered jobless

6

Updates on


6 Aug 2012 MPMA’s appeals

1.The costs of levy, amenities and insurances to be

borne by FW

2.The existing contracts with FW should be allowed to

continue until the expiry date, the min wage for FW should

be phased in over two years

3.Shift allowance and attendance allowance be allowed to

be computed as part of min wage but the quantum shall not

be fixed

4.Transport allowance and housing allowance be part of

the computation of min wage

5.Meal allowance should be included in the computation of

min wage

6.Different regions within Peninsular Malaysia and

Sabah/Sarawak be accorded a lower min wage

7

Updates on


13 Aug 2012 Sent Circular No. 33e/2012

Template which members can use to request for deferral of

the implementation of min wage

15 Aug 2012 MPMA invited various trade associations to brief them on the

outcome of the meeting between MPMA and the NWCC .

Provided them with soft copy of application for them to also

submit to the Govt. Several of which were submitted.

21 Sep 2012 Submitted an appeal to NWCC for a blanket approval to defer

the implementation of min wage for all the 800+ members for

a period of one year from 1 January 2013

25 Sep 2012 NWCC issued the Guidelines on min wage implementation in

early September.

Briefing by Labour Officer on min wages Implementation at

MPMA Head Office.

8

Updates on


10 Nov 2012 Attended a meeting with NWCC, explained the rationale for

the one year deferral

20 Dec 2012 Received notification from NWCC, informing MPMA’s appeal

for the one year deferral had been rejected

31 Dec 2012 MPMA issued a press release, expressed its concerns on the

impact of min wage:

Direct labour cost would increase by 30% to 40%

Appealed for a grace period of at least one year for the

implementation of min wage

30 Jan 2013 Cabinet announced that the levy would be borne by the FWs.

However, the new policy would apply to new FWs or when

the existing FWs renew their work permits

9


4 Feb 2013 MPMA participated in a dialogue session between the Ministry of

Human Resources (MOHR) and coordinated by the Malaysian

Employers Federation (MEF), together with the SMI Association,

Furniture Association and a few other associations.

Employer associations expressed their concerns on the impact

of min wages on businesses

Pointed out that there is growing discontentment by LWs –

increase of only 3-6% vs 60-70% for FWs. Strikes and protests,

with expectation that there could be more protests after CNY

Requested for the deferral of min wage implementation

Requested that the cost of levy, amenities and insurance for

FWs in included as part of the min wage, or borne by FWs

12 Feb 2013 MPMA sent a proposal comprising the following to NWCC on

steps and measures to be taken by the Government to assist

companies adversely affected by the implementation of min

wage: 10

Updates on


12 Feb 2013 Levy - The Government to consider absorbing the levy

cost for FWs that are currently paid by the employer before

the renewal of the permit, in the following manner:

a)For companies with a low profit margin of less than 3%, the

Government to absorb the FW levy cost in the form of a

direct payment to SMEs

b) For companies with a profit margin of more than 3%, the

Government to absorb the FW levy cost in the form of a

corporate tax relief

11


12 Feb 2013 The Government to consider providing a tax relief for costs

incurred on overtime, accommodation and transportation

for FWs

HRDF and SOCSO - The Government to consider suspension

of HRDF contributions and that SOCSO contribution be paid

for by the Govt.

Transport and accommodation - The government to assist

the industry by requiring that the FWs bear the cost of

transport and accommodation. To assist the renegotiation of

this provision, it would be necessary to first nullify the existing

contract and be replaced by new work contract. Proposal is to

revoke the work permit with the arrangement that a new work

permit be issued upon a new work contract being signed by

the FWs. The new work contract would set out the min wage

and that the FWs would bear the cost of levy, transport and

accommodation

12

Updates on


15 Feb 2013 MPMA attended a meeting coordinated by MEF for

selected industry associations

After the meeting, MEF submitted recommendations based

on inputs from MPMA and other associations to the

Government on strategies to assist companies to mitigate

the high cost of doing business arising from the

implementation of min wages. The following is a summary

of the joint recommendations:

1) Defer the implementation of national min wages by 12

months for all employers to allow more time and flexibility

for employers to plan and restructure their businesses,

which is necessary given that the current global economic

situation is challenging.

13

Updates on


15 Feb 2013 2) Government to allow employers to recover the cost of levy

that have already been paid by deducting the salaries of the

foreign workers beginning on 30 January 2013. The term

“levy” be replaced by some other appropriate and neutral

term, such as “public facilities fees” or “utilities fees”

3) Employers should be allowed to charge a fee for providing

amenities such as accommodation, transport, airfare,

insurance provided to FWs which can be recovered

through the deduction of wages

4) Contributions to HRDF and SOCSO be suspended for a

minimum period of three years

5) Enforcement of min wages by Labour Department be

deferred for 24 months beginning January 2013 14

Updates on


20 Feb 2013 Cabinet announced measures to assist employers to mitigate

the impact of minimum wages:

A.For employers which have not implemented minimum

wages for FWs:

(i)Employers can submit their application for deferment for

FWs to NWCC Secretariat through association or individually;

(ii) Evaluation based on individual company basis and if

need be, officers from JTK (Labour Dept.) would be required to

verify documents, and interview unions/workers, at workplace;

15

Updates on


20 Feb 2013 (iii) Employers applying deferment cannot make deduction

from wages for levy or accommodation;

(iv) Min wage must be implemented for LWs beginning

1 January 2013

B. For employers already implementing min wages for FWs:

(i) Employers can apply to JTK for deduction of levy and

cost of accommodation for FWs (appropriate amount

to be determined by JTK); and

(ii) No further deferment for employers already implementing

min wage

16

Updates on


22 Feb 2013 MPMA attended a briefing by MOHR on the new measures.

MOHR further informed that the Ministry is working with

relevant Ministries on other incentives package such as:

Grants

Double tax deduction for extra cost of labour

MPMA expressed our views as follows:

(i)It is unfair for those employers already implementing min

wage be prohibited to apply deferral;

(ii)The deferral, which means only some employers would be

granted, would create issues including strikes, job hopping and

unhappiness amongst the FWs and LWs;

(iii)Grants are not suitable as past results had shown that very

few applicants were successful; proposed for the extension

Reinvestment Allowance instead;

(iv)Appealed for a deferment across the board for one year.

17

Updates on


27 Feb 2013 MPMA and about 20 representatives from various trade

associations were invited for a meeting with the NWCC to

discuss the implementation of min wage.

During the discussion, some NWCC members requested trade

associations to accept the latest decision made by the Cabinet

on 20 Feb 2013. However, associations were of the view that

the deferment must be across the board for all employers.

NWCC emphasized that the above had been made into a law

by the Cabinet, employers must accept it. Trade associations

felt that since there is no further room for discussion, they

decided not to participate the meeting.

Association representatives had a post-discussion amongst

themselves and decided that the last option is to write an

appeal letter to the Prime Minister to express the difficulties for

SMEs to implement min wage for foreign workers. 18

Updates on


28 Feb 2013 The Minimum Wage Implementation Steering Committee

of SMI Association prepared a joint letter to the Prime

Minster requesting for a review on the implementation of

Minimum Wage Policy on Foreign Workers in Malaysia

to lessen the burden on the small and medium sized

companies. The Steering Committee was looking

towards collecting 10,000 or more signatures from both

associations and individual companies for support.

MPMA had circulated the letter to all members, about

110 companies had signed the joint letter.

19

20

8 March 2013 - Meeting with MITI Minister

21

8 March 2013 - Meeting with Health Minister

MITI Dialogue, 7 Jan 2013 Issue MPMA’s Proposal

1. National

Minimum

wages

1) The costs of levy, amenities and insurances to be borne

by FW

2) The existing contracts with FW should be allowed to

continue until the expiry date, the min wage for FW

should be phased in over two years

MPMA attended the Annual Industry Dialogue with MITI on 7

January 2013 together with 5 other associations from the

chemical and petrochemicals industry. MPMA was the only

association which raised the issue on min wage

Immediately after the dialogue, the MITI Minister called a press

conference and announced that MITI would assist the

employers to reduce the burden arising from the

implementation of min wages, by proposing to the Ministry

of Labour to allow the levy for foreign workers be

included into min wage 22

MITI Dialogue, 7 Jan 2013 Issue MPMA’s Proposal

2. Reinvest-

ment

Allowance

The Government to relax the RA claimable period by

allowing manufacturing companies to claim on RA on their

reinvestment expenditure with no time limit

3. Electricity

Tariff

1) TNB should extend its off-peak rates to all the plastics

manufacturing companies which are low-voltage users.

MPMA proposed that a 40% discount to be given for off-

peak rate under Tariff D (low-voltage)

2) Off-peak electricity tariff be extended to cover all day ( ie

including day time) of Saturdays and Sundays for all

categories of TNB users, both in the Tariff D and Tariff E

4. EU’s GSP Effective 1 January 2014, Malaysia will no longer be a

beneficiary under the European Commission (EC)’s

Generalised Scheme of Preferences (GSP). MPMA suggested

that MITI expedites the Malaysia-EU FTA negotiation process

in order for Malaysia to become competitive in the EU market. 23

Bank Negara Industry Dialogue,

14 June 2012 Issue MPMA’s Proposal

1. Min Wage Briefed BNM on the various proposals submitted by MPMA

to the Government on min wage issues

Re-emphasised MPMA’s stand on min wage issues as per

the letter sent to the PM on 12 March 2012

Explained the possible impact of min wage on SMEs and

businesses

Expressed MPMA’s concerns on the impact of the min wage

2. Reinvest-

ment

Allowance

The Government to relax the RA claimable period by

allowing manufacturing companies to claim on RA on their

reinvestment expenditure with no time limit

3. MPMA’s

TDP

Briefed BNM on MPMA’s Talent Development Programme

(TDP), as a long term strategy to increase the productivity of

the workers and hence less dependent on FWs

24

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