ACCCIM says 40% of local Chinese businesses may consider retrenchment due to rising labour cost

KUALA LUMPUR: About 40% of Chinese businesses may consider retrenchment due to the rising labour cost, according to the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) survey report on economic situation of Malaysia for the second half of 2017 (2H17).
“However, it should be noted that varying the reliance on staff in certain areas of activities is a norm as businesses strive to remain competitive,” the report said.
For businesses that are considering reducing their staff strength, some 25% have indicated that they were “unsure” of the percentage of staff strength to be reduced, thus indicating that such businesses are merely worried that they may have to entertain thoughts of retrenchment in the future based on their business performance.
Most respondents (29%) opined that if there is a retrenchment, the estimated percentage of employees to be retrenched will be less than 5%.
The issue on retrenchment is part of the survey topics pertaining to the Employment Insurance System (EIS) that was incorporated in conjunction with the new policies implemented by the government.
EIS is a social safety net for retrenched workers who have not been compensated by employers by providing them temporary income relief. It applies to all organisations and companies with one or more employees. All employers and employees need to make the required contribution. The required contribution rate is 0.2% each by employer and employee and it is limited to a monthly salary of RM4,000.
ACCCIM president Tan Sri Ter Leong Yap said findings of the survey showed that most members were aware of the government’s need to implement EIS on Jan 1, 2018. Some 50% of respondents are taking the necessary registration procedures but some 17% are unaware of the objectives and benefits of the scheme.
Meanwhile, government policies, increase in operating costs and prices of raw materials, increase in domestic competition and manpower shortage were the four major factors that affected the business performances in 2H17.
However, 73% of Chinese businesses said their sales performances for 2H17 were either "good" or "satisfactory", compared with 70% in 1H17, reflecting that majority of businesses have been able to sustain their sales performances during the period. Correspondingly, the percentage of Chinese businesses reporting poor sales fell in 2H17 to 27%, from 30% in 1H17.
Ter said the survey showed that the business sector is increasingly optimistic, with 55% of respondents claiming that they were “optimistic” or “somewhat optimistic” about the Malaysian economy in 2018. The outlook for the coming years is also encouraging, with this percentage increasing to 63% and 71% for 2019 and 2020 respectively.
The survey gathered the feedback of 390 Chinese businessmen across all sectors and industries.