KUALA LUMPUR: Local manufacturers want the government to extend the Wage Subsidy Programme (WSP) to all employees irrespective of wage level, according to a survey conducted by the Federation of Malaysian Manufacturers (FMM) from April 6-10.
The 419 respondents, comprising 89.5% of manufacturing and manufacturing-related and support services companies, urged the government to remove sales/revenue reduction conditions and extend the wage subsidy to at least six months.
FMM president Tan Sri Soh Thian Lai, in a statement, said manufacturers were facing a tremendous strain on their revenue and ability to sustain business amidst the Covid-19 pandemic and Movement Control Order (MCO).
“More than 50% of the respondents said revenue had dropped by more than 50%. This has led to the inability of businesses to sustain their operations beyond three months if the MCO continues to be extended and conditions do not improve.
“Some 44% of the respondents indicated that they would only be able to sustain their business with their current workforce for three months while 34.1%, for only one month,” he said.
He said the government acknowledged the severe constraints faced by employers, leading it to announce on April 6 that it would allow employers and employees to negotiate on the terms of employment, including cost-cutting measures such as pay cuts and unpaid leave.
“However, it must be recognised that this negotiation process with employees or employee representatives would not be an easy task for most employers,” said Soh.
According to the survey, 74% of the respondents said the wage subsidy was inadequate to retain employees in the next three to six months without any pay cuts or retrenchment.
“About 74% replied that the wage subsidy should cover all employees irrespective of wage level with some suggesting that the ceiling be set at RM8,000 instead of the RM4,000 currently,” said Soh.
He said 57% of the respondents wanted the subsidy to be more than 50% of wages, while 51% felt the wage subsidy period was too short and should be for at least six months, to enable employers to survive the impact and aftermath of Covid-19 and the MCO.
“Given the inability of businesses to sustain with the current workforce, some of the likely cost-cutting measures that employers would undertake in the next three to six months in order to preserve employment include freezing headcount (67%) and instituting unpaid leave (59%),” he said.
Also, 59% might undertake the removal of some non-contractual allowances and benefits, forced annual leave (59%), reduction of working days per week (39%), reduction in some benefits agreed in the collective agreement for the unionised companies (34%), and reduction in working hours per day (29%).
The survey also found that 62% of unionised companies were unable to negotiate and implement cost-cutting measures such as reduction of working days or hours to save jobs, resulting in 48% having to resort to retrenchments or layoffs.
“Sixty-three per cent indicated that they may have to resort to cost-cutting measures with 47% having to do so within the next three to six months.
“A majority (78.7%) of companies would have to lay off/retrench up to 30% of employees with 27% indicating that they would have to lay off 21%-30% of employees followed by 22% having to lay off 11%-20% of employees,” said Soh.
He said the respondents asked the government to consider allowing factories, including in non-essential products to resume operations albeit under strict MCO guidelines with a minimal or at least 50% workforce to cater not only for local demand but the export market as well.
The respondents expect a complete exemption or reduction of the Employees Provident Fund (EPF) contribution from April to December and a waiver of income tax for Year of Assessment 2020 for all corporations irrespective of size.
They suggested that personal income tax be fixed at 10% maximum; monthly tax deduction be suspended for six months; and full suspension of foreign workers levy for one year.
On financial assistance, the respondents preferred that banks not compound interest but rather waive or reduce the interest during the moratorium period and proposed a special soft loan scheme of RM5 bil with a 2% interest rate.
The soft loan would presumably allow affected companies to cover fixed capital payments such as rents and utilities, as well as administrative payments, including salaries.
On overhead costs involving utility bills, the respondents recommend that industrial power users irrespective of kilowatt usage/month be given at least a 15% discount for the next six months.
In addition, they suggested that the maximum demand charge be removed for medium and high-voltage industrial customers such as those in the cement, iron and steel, and petroleum and chemicals processing industries.
The respondents also favoured a reduction of 35% in natural gas tariffs until end of 2020 and removal of the “Take or Pay” penalty clause imposed on customers, given the current impact on businesses, as well as the overall drop in oil prices. – April 20, 2020, Bernama
