PETALING JAYA: The recent minimum wage increase, combined with the planned implementation of Employees Provident Fund (EPF) contributions for foreign workers, poses a significant financial burden for businesses, says the Federation of Malaysian Manufacturers.

FMM president Tan Sri Soh Thian Lai expressed concerns that these measures could severely affect operating costs, particularly for companies heavily reliant on foreign labour.

Soh warned that rising labour expenses could threaten the sustainability of many businesses, especially small and medium-sized enterprises (SMEs).

He urged the government to delay the EPF contribution scheme for foreign workers, citing the financial strain it would impose.

Soh stated that matching the contribution rate to that of local workers would be too high and could stress employers.

"Imposing EPF contributions of 12%-13% for foreign workers would place an enormous financial burden on employers, especially in industries heavily reliant on foreign labour," he stated on Monday (Oct 21).

Soh highlighted that, with 2.5 million foreign workers in the country, the EPF contribution alone would amount to RM1,700 per worker annually, multiplied by 13%, adding RM6.6bil to employers' payroll costs.

Combined with the impending minimum wage increase, which will add RM10.8bil to total payroll expenses, businesses could face an additional annual financial burden of RM17.4bil.

He cautioned that these escalating costs could jeopardise the survival of many companies, particularly SMEs.

Soh called on the government to provide clear details on the scheme, including contribution rates, coverage, and phased implementation timeline.

He emphasised that the lack of clarity has caused significant concern within the business community, which is already grappling with rising labour costs and upcoming regulatory changes.

Soh also pointed out that mandatory EPF contributions, together with other labour-related expenses like the minimum wage hike and multi-tier levy mechanism, could compromise the sustainability of SMEs.

"This new financial burden comes at a challenging time for businesses, and the uncertainty only adds to their struggles," he said.

The FMM president urged immediate engagement with stakeholders to address these concerns and ensure that the policy is practical and sustainable for businesses.

https://www.thestar.com.my/news/nation/2024/10/21/budget-2025-wage-hike-and-epf-a-burden-say-manufacturers