PETALING JAYA – The voluntary Progressive Wage Policy (PWP) aimed at raising wages in tandem with productivity and skill has led to a conundrum of sorts between bosses and workers.
Employers point to what they call an “expectation gap” between both sides, with them preferring productivity to be raised first before any salary adjustment, with workers wanting increased salaries right away.
Associated Chinese Chambers of Commerce and Industry of Malaysia secretary-general Datuk Jeffery Tan, who highlighted the issue, said this scenario was mainly apparent in small and medium-scale enterprises (SMEs).
He said rightfully, employers would expect workers to improve their productivity first before a salary increment is approved.
“But there are situations where the employee expects an increase in salary even before putting in extra effort, as is the case in SMEs.”
He spoke of the risks in granting increments first.
“If a company raises salaries first, can productivity be sustained in the long run?” he asked.
Tan said a company stood to lose out in cost competitiveness if salary increments were not matched with a productivity rise.
Other employers agreed that the challenge of the PWP was ensuring its sustainability.
Without stronger links between wages and productivity or sector-specific incentives, they said the scheme might struggle to gain traction.
Federation of Malaysian Manufacturers president Tan Sri Soh Thian Lai said most companies viewed their participation as a long-term strategy consideration, to ensure sustainability and corresponding increases in productivity.
He noted increasing interest in the scheme with participation being voluntary at this stage, and that it could apply to selected employees instead of across the board.
“Employers are, however, taking a cautious approach to its implementation, given the global and trade environment alongside domestic cost and economic challenges faced,” he said.
Soh said SMEs faced challenges in the PWP such as financial capacity, upskilling and training, as well as worker retention.
“Companies may worry about investing in training and higher wages only to see workers move to larger firms offering better packages,” he said.
He said the PWP must complement and not duplicate existing mechanisms, and urged a review of existing wage guidelines to reflect differences in wage levels across sectors and sub-sectors.
He called on the government to extend incentive support by sector, with longer assistance for industries that needed more adjustment time.
Malaysian Employers Federation president Datuk Dr Syed Hussain Syed Husman said while bosses recognised how the PWP encourages workers to upskill and improve competencies, there were concerns over the link between training and productivity gains.
“In many cases, the impact between training and measurable productivity gains is gradual and depends heavily on the nature of business, industry requirements and whether the new skills are directly applicable to day-to-day operations,” he said.
Syed Hussain said feedback indicated that while some training programmes were valuable, others might not fully align with the actual skill gaps of the company and industry.
“Employers have stressed the need for customised, industry-specific training modules that can show more tangible results,” he added.
He said there were also workers who perceived training as mainly a prerequisite for wage increments rather than it being a long-term career investment.
“This creates challenges in ensuring sustained productivity improvements beyond the initial training,” he said.
Syed Hussain said the PWP’s success depended on training being relevant, industry-driven and able to produce measurable productivity gains to justify wage increases.
He, however, acknowledged that the PWP was a well-intentioned policy to promote fairer wage growth and strengthen Malaysia’s human capital.
“Some members have noted modest improvements in work quality, efficiency, and employee engagement after training.
“While there have been pockets of positive outcomes, employers have not observed a marked and consistent increase in productivity across the board among employees who have undergone training,” he added.
Human Resources Minister Steven Sim said last October that the implementation of the PWP was a new measure to reform the labour market, with various upskilling training programmes for workers carried out to ensure wage rates increased in accordance with their skills and performance.
He also said that for the first time, the ministry will also publish starting salary guidelines for all employment sectors based on the Malaysia Standard Classification of Occupations.
These guidelines will serve as a reference for both workers and employers in determining appropriate starting salary rates for specific jobs.
During the Budget 2025 announcement, Prime Minister Datuk Seri Anwar Ibrahim said following the pilot PWP programme, the scheme will be fully implemented this year with a RM200mil budget to benefit 50,000 workers.
Asia News Network. (2025, September 17). Employers cautious over Malaysia’s new wage policy. Asia News Network. https://asianews.network/employers-cautious-over-malaysias-new-wage-policy/?utm_source=chatgpt.com
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