The Minimum Wage Order gazetted by the Malaysian government provides that the minimum monthly wage of employees is increased from RM1,200 to RM1,500 effective 1 May 2022. The implementation of this order towards organizations with fewer than five employees is only effective 1 January 2023.
When announced, this mandate sent shockwaves through the market as it represents a 25% increase in labor costs at a time when businesses were still grappling with the after-effects of the Covid-19 pandemic, stresses in global supply chains and spiraling inflation. Unsurprisingly, the market reacted in a kneejerk reaction that encompassed reducing operation costs, hire freezes, compensation cuts, and raising the prices of goods and services when the higher costs can’t be offset by an increase in revenue.
However, employers who view the minimum wage order purely from a cost lens risk missing several key points and would instead benefit from viewing this conundrum from a different perspective.
The Minimum Wage Order levels the field for talent sourcing
Higher wages make a job more desirable, creating a larger pool of skilled applicants when vacancies occur. It also means that underperforming employees may have more to lose, which will in turn lead to the most significant impact of introducing higher wages - productivity.
Higher wages have been shown to boost employee motivation and spur productivity; a study by the Harvard Business Review of Amazon’s pay hike above the minimum wage connected pay hikes with elevated workplace productivity and an improved bottom line.[1] As employees become more invested in delivering better outcomes, this will in turn improve employees’ organizational citizenship and potentially reduce the cost of hiring and training.
Enabling a purpose-driven culture with employee experience (EX)
A more complex question is how to retain productivity. While there is no one-size-fits-all solution, investing in enhancing employee experience has been proven effective in enabling a purpose-driven culture for employees.
Employee experience is defined as an employee's perception of the relationship with their organization. This not only encapsulates their time as an employee, but also from touchpoints along their journey from pre-employment to post-employment including onboarding, culture, physical environment and more.
Creating personalized employee experiences will help drive the right behaviors, and subsequently result in delivering exceptional customer experience, influence positive customer behavior, and ultimately, achieve desired business outcomes.
[1] How Amazon’s Higher Wages Could Increase Productivity, Harvard Business Review
