Global Business and Management Research: An International Journal

Vol. 11, No. 2 (2019, Special Issue)

The Implications of National Minimum Wage Policy

on the Electrical and Electronics Industry in
Malaysia
Eng Poh Hwa
Graduate School of Business, Segi University, 47810, Selangor, Malaysia

Stanley Yap Peng Lok *

Email: stanleyypl@segi.edu.my
Dean, Graduate School of Business, SEGi University, Selangor, Malaysia

Syaiful Rizal Hamid

Faculty of Technology and Technopreneurship, UTEM, 76100, Melaka, Malaysia

Chew Boon Cheong

Faculty of Technology and Technopreneurship, UTEM, 76100, Melaka, Malaysia

* Corresponding Author

Abstract
Purpose: The National Minimum Wage Policy is introduced at Malaysia since 2010 to protect
the welfare of low-income working group at Malaysia. The implementation of National
Minimum Wage Policy creates a number of impacts to many of the manufacturers in Malaysia.
The research aims to identify the implications of the National Minimum Wage Policy on the
Electrical and Electronics (E&E) industry in Malaysia.
Design/methodology/approach: The research applies the data collection method, semi-
structured interviews in collecting data to study the implications of National Minimum Wage
Policy on the Electrical and Electronics (E&E) Industry in Malaysia. In addition, the research
applies the research strategy (multiple case studies) and performs cross-case analysis to
indicate the different implications of National Minimum Wage Policy among the different
manufacturers in the E&E industry in Malaysia.
Findings: The Electrical and Electronics (E&E) companies are affected in the different
perspectives: increased in labour costs, decreased in profits, lower competitiveness in locally
and globally, changes in the current business operation of the firms, shortage of local workers
and increased labour turnover.
Research limitations/implications: The research is only conducted within the Electrical and
Electronics industry in Malaysia.
Practical implications: This research can be served as a guideline for the manufacturers in the
E&E industry in Malaysia to accommodate their implementations of the National Minimum
Wage Policy accordingly.
Originality/value: The research is original and has not been done by other researchers.

Keywords: Minimum Wage Policy, Electrical and Electronics, Labour Costs, Labour
Turnover, Competitiveness

220
 Global Business and Management Research: An International Journal
Vol. 11, No. 2 (2019, Special Issue)

Introduction
National Minimum Wage Policy was implemented in Malaysia to both local workers and
foreign workers since 2010. It was introduced by Malaysia Prime Minister on 15 October 2010.
The aim of the policy is to enable the employees to have basic financial ability to meet their
basic needs (Seman, 2014). The minimum salary was raised to RM1000 from RM900 in
Peninsular Malaysia, and to RM920 from RM800 in Sabah, Sarawak and Labuan in July 2016
(Surendra, 2017). However, according to the Prime Minister's Department, Malaysia will have
a uniformed minimum wage of RM 1050 per month or RM 5.05 per hour effective starting Jan
1, 2019 as recommended by the National Wage Consultative Council (MPGN) (Kumar, 2018).
Minimum wages is concern about a 'legal floor wage' which forms the basis of all other
statutory payments such as social security contributions, provident fund payments and overtime
work payments. Employees shall not be legally paid lower than the minimum wage rate.
Minimum wages aim to secure employees with reasonable basic standard of living as well as
to protect the low-skilled employees against the exploitation by the employers. Minimum
wages is one the initiatives of the Government to reduce poverty and inequality in the labour
market in respect of wage distribution (Seman, 2014).
A study has been conducted to identify the implications of minimum wage policy on the
implementation of Minimum Wage Policy in Malaysia. For this purpose, the research has
included eight companies which are electrical and electronics (E&E) companies in Malaysia to
involve in the multiple case studies. In other words, the research aims to identify the
implications of minimum wage policy in the E&E industry in Malaysia.

Literature Review
Minimum wage is the lowest rate in which employers need to pay to employees (Eng et al.,
2013). It can be calculated in terms of hour, day or month (Elangkovan, 2013). The concept of
minimum wage was originated in 1894 in New Zealand and subsequently spread to United
Kingdom in 1909. Minimum wage is implemented in various forms in more than 90% of the
countries in the world. Malaysia joined the league of the nations in implementing minimum
wage in 2013 (Seman, 2014).
Minimum wages under the National Minimum Wages Consultative Act 2011 is defined as the
basic wages detemined under Section 23 of the Act. A series of allowances is within the
definition as wages under Section 2 of the Employment Act 1955 as decided by court, namely:
Overtime Meal Allowance, Shift Allowance, Night Shift Meal Allowance, Vehicle Wash
Allowance and Acting Allowance. Apart from that, employers are permitted to include some
allowances or fixed cash payments to calculate the minimum wage which is beneficial to
employers and to ease their burden (Eng et al., 2013; Malaysian Employers Federation, 2012).
Minimum wage is preferred to be paid per month instead of paid per hour for the reasons of
workers' welfare. There could be exploitation of workers' rights when they are paid by hour
rate, because paid leave and paid lunch breaks might be neglected. As a result, workers are
willing to earn less than they should earn and they have to work extra hard to secure their jobs
and at the expense of their health and social lives. When workers are paid by hour, they
normally are forced to work even if they are unwell, sick or recovering from sickness (CPPS,
2011; Eng et al., 2013).
The ultimate goal of the New Economic Model (2010) is about the Quality of Life of People
(targets for high income, sustainability and inclusiveness) (Yap et al., 2017a). Malaysians may
have insufficient wealth (Yap et al., 2017b). Malaysian is able to plan and apply the financial
knowledge and accumulate wealth more effectively if being a financial literate person (Yap et
al., 2017c). People who are classified as “planners” are likely to have greater financial literacy
compared to those who are classified as “non-planners” (Yap, 2017d; Yap et al., 2017e).

221
 Global Business and Management Research: An International Journal
Vol. 11, No. 2 (2019, Special Issue)

Research Method
The research adopts qualitative method in which it involves non-numerical data. The research
adopts multiple case studies to explore the research topic within its context. The judgmental
sampling is adopted for the research in which the participants are selected based on their
expertise relevant to the implementation of National Minimum Wage Policy. The research
conducts semi-structured face-to-face interviews with 8 participants (human resource
personals) from the 8 Electrical & Electronics companies in Malaysia. The participants in the
research interviews are represented as A, B, C, D, E, F, G, H. The interviews are semi-
structured interviews in which the researcher has a list of themes and key questions to be
covered (Saunders, 2012). The research performs cross-case analysis to indicate the different
implications of National Minimum Wage Policy among the different manufacturers in the E&E
industry in Malaysia.

Findings
Table 4.1. Key Findings for the Impacts of Minimum Wage Policy at present and future
Research Area Present Evident Future Evident
4.1.1 The Shift the additional A, D, F To compensate for the B
impact of labour cost to the increased in labour cost:
additional customers. Increment in - Manpower will be
labour cost to the price of company’s reduced and substituted
the firms products. by semi-automation and
automation machines.
- Operational costs will C
be reduced by:
 Improving the
working environment
 Minimising the usage
of manpower and
electricity
 Improving the quality
of our products by
reducing the rejection
rate of our products.
- Production efficiency F
will be improved and
production costs will be
reduced.
- Productivity will be E, H, G
improved through realign
on manpower planning,
machines utilization and
projects.
4.1.2 The - The firms are shortage A, B, C, - The unemployment rate
impact of of local workers. Foreign E, will increase because F
minimum workers are employed as there are some companies
wage towards a substitution. might close down
unemployment following the
among the implementation of the
electronics policy.
firms in - Workers still quit and F -Unemployment will H
Malaysia leave the company even occur in the long run

222
 Global Business and Management Research: An International Journal
Vol. 11, No. 2 (2019, Special Issue)

with the implementation when Small and Medium

of the policy. Enterprises cannot sustain
their businesses and
retrench their workers.
- It should be able to help G
on minimising the
unemployment, with
conditions of workers are
willing to accept the job
offer.
4.1.3 Wage - The labour turnover
Policy between the firms D, F, G,
contribute to increased because every H
the labour firm is applying the same
turnover rate of minimum wage.
among the Workers will quit and
electronics join another company
firm in with better working
Malaysia environment.
- The labour turnover B
between the firms among
the local workers and
foreign workers might be
higher when different
firms apply the policy at
different time. Workers
will quit and join another
company with better
working environment.
4.1.4 Agree to - Employers are allowed A, B, C,
implement to deduct on monthly D, E, F,
minimum basis for levy (RM104) G, H
wage policy and accommodation
among the (RM 50) from each
foreign foreign workers
workers employed.
4.1.5 The - The firms are shortage A, B, F - The firm need to H
employment of manpower; They need improve the production
of low-skilled manpower even if they system to substitute for
workers and are low-skilled and the reduction of low-
foreign foreign workers. skilled and foreign
workers with workers:
the  Firstly, the firm need
implementatio to review the current

223
 Global Business and Management Research: An International Journal
Vol. 11, No. 2 (2019, Special Issue)

n of the - There is no replacement C job descriptions of the

Minimum if there is a resignation of workers.
Wage Policy foreign worker. This is  Secondly, the firm
compensated by: need to combine
 eExtending the certain tasks into one
working hours of the task to increase
current workers production efficiency
 iImproving the by providing on-the-
performance of job training.
workers  Thirdly, the firm need
 iImproving the to increase the
production application of
procedures of the automation and
company technology in the
production system.

4.1.6 - The wage structure of B - The firm need to reduce B

Minimum the firm is changed the manpower by
Wage Policy modifying the current
change the assembly automated
current machines.
business
- The firms need to C, E
operation of
improve the operation
the firms
standard in terms of
quality, material usage,
electricity usage and
manpower usage to
increase the labour
productivity.
- The firm needs to F
improve the production
efficiency, reduce the
overtime working hours
of the workers, reduce the
transportation costs and
reduce the medical
expenses.
4.1.7 - The firms strive for
Minimum higher labour productivity
Wage Policy using the same number of C, E, G
contributes to workers, the same
the labour standard of quality and
productivity more utilisation of
machines in the
production.

Discussion
The research conducts face-to-face interviews with 8 Electrical and Electronics companies in
Malaysia to investigate the implications of National Minimum Wage Policy on the Electrical
and Electronics Industry in Malaysia. There are 8 companies participated in the research
interviews conducted. The 8 companies are Company A, B, C, D, E, F, G and H. The following

224
 Global Business and Management Research: An International Journal
Vol. 11, No. 2 (2019, Special Issue)

are the characteristics of the interviewed companies. 62.5% are subsidiary companies of
multinational corporations. 37.5% are locally owned companies. 87.5% are private limited
companies and 12.5% are public limited company. 37.5% are companies headquartered in
Japan, 25% are companies headquartered in United States and 12.5% are companies
headquartered in Germany and 25% are companies headquartered in Malaysia. All of the
companies are manufacturing companies.
There are 75% of the companies implement the Minimum Wage Policy on time and there are
25% of the companies defer the implementation of the Minimum Wage Policy.

General Impacts of Minimum Wage Policy towards the interviewed companies

There are 37.5% of the companies shift the additional labour cost to their customers. There are
50% of the companies do not shift the additional labour costs to their customers. Instead of
doing this, these companies choose to improve the labour productivity and production
efficiency through realign on manpower planning, machines utilization, improvement in
working environment and reduction in products rejection. There are 12.5% of the companies
are not sure about this issue. The implementation of Minimum Wage Policy causes higher loss
to 50% of the firms due to the higher labour cost; causes slimmer profit to 37.5% of the firms
due to the higher labour cost. 12.5% of the firms are not sure about this issue.
The implementation of the Minimum Wage Policy affects the competitiveness of the firms
locally and globally. 50% of the companies are affected locally and 12.5% of the companies
are not affected locally. 25% of the companies are affected globally and 12.5% of the
companies are not affected globally. For the companies which are affected locally in terms of
competitiveness, the firms encounter loss due to the increase in the labour cost and increase in
the price of petrol. In addition, employment of foreign workers also increase the labour cost of
the firms. However, it is very competitive to employ workers due to the same rate of minimum
wage across the different industries. The companies are not affected locally in terms of
competitiveness due to other firms are implementing the same rate of minimum wage.
For the companies which are affected globally in terms of competitiveness, the firms are
competing with other manufacturing plants in the world in terms of production costs. The
products of the manufacturing plants in the overseas are lower-priced due to the lower impact
of Minimum Wage Policy on its labour cost. The companies are not affected globally in terms
of competitiveness because there are many manufacturers around the world (such as Thailand,
Philippines, Indonesia) also increase the wages of their workers due to the implementation of
Minimum Wage Policy.
The implementation of the Minimum Wage Policy contributes to the unemployment among
12.5% of the firms. This will occur in the long run when Small and Medium Enterprises (SME)
cannot sustain their businesses and retrench their workers. However, majority of the firms
(87.5%) are not affected in terms of unemployment following the implementation of the
Minimum Wage Policy. The firms are shortage and difficult to employ local workers. The firms
need to employ foreign workers as a substitution. The labour turnover among the local workers
is high due their poor working attitude. The foreign workers are more loyal to their employers.
However, some firms are controlling the employment of foreign workers because it is more
costly to import foreign workers from overseas. The implementation of the Minimum Wage
Policy contributes to the labour turnover among the local workers and foreign workers in 12.5%
of the firms. It is because other firms are applying the same minimum wage rate. In addition,
the working environment of some firms is not favourable (not air-conditioned) or workers
having issues with the superiors of their companies. The policy also contributes to higher labour
turnover when different firms apply the policy at different time.
Majority of the firms are not affected in terms of labour turnover among the local workers and
foreign workers following the implementation of the Minimum Wage Policy. The labour

225
 Global Business and Management Research: An International Journal
Vol. 11, No. 2 (2019, Special Issue)

turnover rate among the senior workers is getting very low because their wages has increased
more than the minimum wage rate. However, the labour turnover is high even without the
minimum wage because the local workers are not ready to work; they easily quit and leave a
company due to the high demand for local workers.
On the other hand, the implementation of the Minimum Wage Policy affects the current
workers and foreign workers in psychologically. The junior workers are very happy with the
policy due to the increased wages. In addition, the workers are having better quality life as their
incomes increase. This can help to boost the country economy indirectly as consumption
purchasing power is increasing too. However, the senior workers are not satisfied with the
policy due to junior workers are earning the same wage rate as theirs. Some employers offer
wages adjustment and remuneration benefits to their senior staffs to compensate for their long-
service.
Majority of the firms (75%) agree to implement the Minimum Wage Policy amongst the
foreign workers. It is a standard law set by the ILO (International Labour Organization). In
addition, employers are allowed to deduct levy and accommodation from the monthly pay of
foreign workers. Foreign workers are more diligent as compared to the local workers, they
should be treated equally. However, they normally work for long hours of overtime which
increases the labour cost of employers. Employers are allowed to deduct on monthly basis for
levy (RM104) and accommodation (RM 50) from each foreign workers employed.
However, there are 25% of the firms are not agree to implement the Minimum Wage Policy
amongst the foreign workers. The policy should be applied to local workers only, because
foreign workers send more money back to their hometown and might cause depreciation of
Malaysian Ringgit. The policy also increases the labour cost of employers.
There are 25% of the firms reduce the employment of low-skilled workers and foreign workers
with the implementation of the Minimum Wage Policy. The firms need to do so to maintain or
to reduce its labour cost. The firms needs to improve its production system by reviewing the
current job descriptions of the workers, by combining certain tasks into one task to increase
production efficiency and need to increase the application of automation and technology in the
production system to substitute for the reduction of low-skilled and foreign workers. In
addition, the firms compensate for the reduction of low-skilled and foreign workers by
extending the working hours of the current workers, by improving the performance of the
workers and by improving the production procedures of the company.
On the other hand, majority of the firms (75%) do not reduce the employment of low-skilled
workers and foreign workers with the implementation of the Minimum Wage Policy. Some
firms are shortage of manpower; the firms need workers in the production line even if these
workers are low-skilled and foreign workers. The implementation of the Minimum Wage
Policy changes the current business operation of majority of the firms (62.5%). Wage structure
of the firms is changed. Some firms need to reduce the manpower by modifying the current
assembly automated machines. Some firms need to improve the operation standard in terms of
quality, material usage, electricity usage and manpower usage to increase the labour
productivity. Some firms need to improve production efficiency and reduce operational costs
of the firms. There are 37.5% of the firms are not affected in terms of current business operation
following the implementation of the Minimum Wage Policy. However, the labour cost of the
firms is increased.
The implementation of the Minimum Wage Policy contributes to the labour productivity for
37.5% of the firms. In addition, the firms need to improve working skills of the workers and
adjust machine utilisation in the company for higher labour productivity. However, 50% of the
firms are not affected in terms labour productivity following the implementation of the
Minimum Wage Policy. It is because all workers are the paid at the same rate of minimum
wages. Additional incentives are needed to stimulate higher labour productivity among the

226
 Global Business and Management Research: An International Journal
Vol. 11, No. 2 (2019, Special Issue)

workers. Some companies offer bonus based on individual performance to encourage workers
to produce more. There is no formal procedure state that workers must increase their labour
productivity due to the payment of minimum wage. 12.5% of the firms are not sure about this
issue.

Discussion on the Key Findings for the Impacts of Minimum Wage Policy at Present and
Future
4.1.1 The implications of the implementation of the Minimum Wage Policy towards the
interviewed companies on present and future are discussed in respect to the different research
issues. The companies shift the additional labour cost to their customers and cause the
increment in the prices of products at present. In the future, manpower will be reduced and
substituted by semi-automation and automation machines to compensate for the increased in
labour cost. Operational costs will be reduced by improving working environment, minimising
the usage of manpower and electricity and improving the quality of our products by reducing
the rejection rate of our products. In addition, production efficiency will be improved and
production costs will be reduced. Productivity will be improved through realign on manpower
planning, machines utilization and projects.

4.1.2 At present, the firms are shortage of local workers. Foreign workers are employed as a
substitution. Workers still quit and leave the company even with the implementation of the
policy. In the future, the unemployment rate will increase because there are some companies
might close down following the implementation of the policy. Unemployment will occur in the
long run when Small and Medium Enterprises cannot sustain their businesses and retrench their
workers. The implementation of the Minimum Wage Policy should be able to help on minimise
the unemployment, with conditions of workers are willing to accept the job offer.

4.1.3 At present, the labour turnover between the firms increased because every firm is
applying the same rate of minimum wage. Workers will quit and join another company with
better working environment. The labour turnover between the firms among the local workers
and foreign workers might be higher when different firms apply the policy at different time.
Workers will quit and join another company with better working environment.

4.1.4 In all the companies interviewed, employers are allowed to deduct on monthly basis for
levy (RM104) and accommodation (RM 50) from each foreign workers employed.

4.1.5 At present, the firms are shortage of manpower; they need manpower even if they are
low-skilled and foreign workers. There is no replacement if there is a resignation of foreign
worker. This is compensated by: extending the working hours of the current workers,
improving the performance of workers and improving the production procedures of the
company. In the future, the firms need to improve the production system to substitute for the
reduction of low-skilled and foreign workers: Firstly, the firms need to review the current job
descriptions of the workers. Secondly, the firms need to combine certain tasks into one task to
increase production efficiency by providing on-the-job training. Thirdly, the firms need to
increase the application of automation and technology in the production system.

4.1.6 At present, the wage structure of the firms is changed. In the future, the firms need to
reduce the manpower by modifying the current assembly automated machines. The firms need
to improve the operation standard in terms of quality, material usage, electricity usage and
manpower usage to increase the labour productivity. The firm need to improve the production

227
 Global Business and Management Research: An International Journal
Vol. 11, No. 2 (2019, Special Issue)

efficiency, reduce the overtime working hours of the workers, reduce the transportation costs
and reduce the medical expenses. The firms need to improve the working skills of the workers.

4.1.7 In addition, the implementation of the Minimum Wage Policy is projected to generate
some positive implications to the firms interviewed in the future. Labour productivity will be
increased. The firms strive for higher labour productivity using the same number of workers,
the same standard of quality and more utilisation of machines in the production.

Conclusion
There are different implications to the Electrical and Electronics (E&E) companies in Malaysia
upon the implementation of National Minimum Wage Policy in Malaysia. The E&E companies
are affected in the different perspectives: increased in labour costs, decreased in profits, lower
competitiveness in locally and globally, changes in the current business operation of the firms,
shortage of local workers and increased labour turnover.
In conjunction with this, there are adjustments to be made by the E&E companies to
accommodate with the implementation of National Minimum Wage Policy. For instance,
manpower will be reduced and substituted by semi-automation and automation machines to
compensate for the increased in labour cost. Productivity will be improved through realign on
manpower planning, machines utilization and projects. The firms need to improve the
production system to substitute for the reduction of low-skilled and foreign workers.
The findings obtained in the research enables readers to find out more about the implications
of National Minimum Wage Policy on the Electrical and Electronics (E&E) companies in
Malaysia. In addition, the research investigates how these companies overcome the negative
implications following the implementation of the National Minimum Wage Policy in Malaysia.

References
CPPS. (2011). Factsheet on minimum wage. Retrieved from
http://www.cpps.org.my/Policy_Areas-@-CPPS_Policy_Factsheets.aspx.
Elangkovan, K. (2013). “A New Solution To Increasing Rate of Unemployment : Introduction
Of Minimum Wage Laws in Malaysia.” In 3rd International Conference on
Management, Economics and Social Sciences (ICMESS 2013), 98–102.
Eng, P.H, Hamid S.R., and Tahir M.N. (2013). “Historical Review of Minimum Wage Policy
in the Developed Countries : Implementation of National Minimum Wage Policy in.”
International Journal of Business and Technopreneurship 3 (3): 387–411.
Kumar, M. (2018). PM Dept: Minimum wage will be RM1,050 from Jan 1. Retrieved
January 1, 2018, from https://www.thestar.com.my/news/nation/2018/09/05/minimum-
wage-set-to-be-uniform/
Saunders, M., Philip L., and Adrian T. (2012). Research Methods for Business Students. Sixth
Edit. Pearson Education Limited.
Seman, Z. R. (2014). “Malaysia Implements Mininum Wages.” The Star Online.
https://www.thestar.com.my/news/nation/2014/01/09/malaysia-implements-mininum-
wages/.
Surendra, E. (2017). “Minimum Wage Conundrum: Should It Be Raised to RM1,500?”
iMoney.my. https://www.imoney.my/articles/minimum-wage.
Yap, S., Chong, W. Y., Cheok, M. Y., & Leow, H. W. (2018b). A Real Case of less than Half
a Million Net Worth: An Approach for Financial Planning. Medwell Journals, 13(4),
883–890.
Yap, S., Chong, W. Y., & Leow, H. W. (2017a). A Framework For Retirement Planning Based
On Financial Literacy And Wealth Accumulation. In 6th Business & Management
Conference, Geneva (pp. 117–126).

228
 Global Business and Management Research: An International Journal
Vol. 11, No. 2 (2019, Special Issue)

Yap, S., Chong, W. Y., Leow, H. W., & Chok, N. V. (2017c). The Importance of Financial
Literacy on the Malaysian Household Retirement Planning. International Business
Management, 11(7), 1457–1461.
Yap, S. (2017d). Retirement Planning Behavior for Financial Independence in Malaysia.
Aspirare, 4(9), 9–14.
Yap, S., Chong, W. Y., Leow, H. W. (2017e). Financial Literacy: Literature Review and
Research Directions. The International Institute of Social and Economic Sciences, Vol 1,
pp 237-244.

229