PETALING JAYA: The Malaysian Employers Federation (MEF) has called on the private sector to amend their contracts with vendors to account for the higher costs forced upon them by the new minimum wage of RM1,700 as announced in Budget 2025.
Its president Datuk Dr Syed Hussain Syed Husman said all MNCs, GLCs and GLICs should review their vendor contracts in good faith as the new minimum wage set was beyond the control of vendors.
“Companies can sign new contracts with vendors or have separate agreements to account for the higher cost of wages faced by them as it was not accounted for in their original supply contracts.”
In tabling Budget 2025 on Oct 18, Prime Minister Datuk Seri Anwar Ibrahim said the new RM1,700 minimum wage, which rose from the original RM1,500, would be effective on Feb 1 for employers having five or more staff.
He said micro-businesses with fewer than five employees would be given a six-month grace period until Aug 1 to comply with the new minimum wage.
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Syed Hussain said many vendors are finding it difficult to amend their contracts and get their rates reviewed based on the RM1,700 a month minimum wage.
He said the contracts were determined based on the RM1,500 minimum wage that prevailed at the time when they were signed.
He added that a review of the contracts to account for higher costs would enable vendors to fulfil their obligation to implement the new minimum wage.
He said as responsible employers, MEF members are sincere in wanting to cooperate and honour the new minimum wage policy.
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“However, although there was some prior discussion with stakeholders about revising the minimum wage, our members did not have enough time to account for the higher costs before signing new contracts.
“Employers need more time to be better prepared and ensure fuller compliance with the new minimum wage order, thus avoiding penalties as a result of non-compliance.”
He said vendors are experiencing challenges in meeting the new minimum wage as their current contracts run beyond 2025, with some even beyond 2027.
He added that employers must carry out prior planning when faced with policy changes that involve financial obligations to avoid cash flow issues.
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“Employers need to review salary structures and ensure that employees earning wages of less than RM 1,700 have it adjusted to the new minimum wage. All these take time.
“Such matters cannot wait until new contracts are signed, otherwise penalties will apply, which is why we are seeking the cooperation and understanding of companies in reviewing current vendor contracts.”
Syed Hussain called on the government to show compassion and understanding for business entities, especially MSMEs, when making policy changes.
“The government must do its best to meet the needs of all stakeholders and ensure policy changes are implemented with a heart so that all quarters, including employers, are treated humanely with an understanding of their challenges and issues. The principles of respect, caring and understanding are well documented in the Malaysia Madani framework.”
