Malaysia Productivity Corporation (MPC) is looking to introduce a wage system based on mutual wealth sharing between employers and employees. The wage system is expected to boost productivity and is regarded as the long-term solution to fair wages and higher compensation of employees (CE).
Higher CE is critical towards elevating Malaysians’ living standards. The Twelfth Malaysia Plan (12MP) has identified a low share of CE as a challenge for Malaysia to gain high-income nation status.
In 2019, the contribution of CE to the Gross Domestic Product (GDP) in Malaysia is low at 35.9 per cent. The percentage was small compared with Singapore at 40.2 per cent in the same year. Malaysia needed to catch up in CE, compared with developed economies such as Germany (59.4%), the United Kingdom (55.5%), and the United States of America (53.7%).
In 12MP, the Government targets increasing the CE share to 40 per cent of GDP by 2025. The Government expects that the increase will provide Malaysians with better quality of life. A concerted effort between the public and private sectors is imperative in realising this target. Among the initiatives proposed by the 12MP are a mandatory profit-sharing model and Productivity Linked Wage System (PLWS) implementation.
MPC Director General, Dato’ Abdul Latif bin Haji Abu Seman said, “MPC believes that increasing productivity is the long-term solution to reasonable wages and CE. In boosting business productivity, employers are urged to implement wage systems based on profit sharing and mutual wealth creation. This is expected to contribute to 12MP’s targets of achieving 3.6 per cent productivity growth and 40% CE.”
“MPC plans to introduce a new model for wage determination based on profit sharing. MPC has been engaging with relevant government bodies and industry representatives to gather input in developing the said model.”
“CE includes salaries and wages, allowances, bonuses and commissions, in-kind payment to employees, free medical attention, free accommodation, free meals etc., and social contribution.”
“MPC introduced e-Shared Prosperity Organisation (eSPO) Acknowledgement Certificate in 2020 to recognise businesses that implement elements of profit sharing wage system through PLWS.”
“To date, 43,975 companies have received the eSPO Acknowledgement Certificate. The services sector registered the most companies at 31,418. This year, MPC aims to recognise 20,000 organisations through eSPO Acknowledgement Certificate.”
“Through eSPO, certified organisations gain a competitive advantage as employers of choice. The certificate is recognised by MPC, the Ministry of International Trade and Industry and the Ministry of Human Resources. Since last year, MPC has included the Environmental, Social and Governance (ESG) principles in eSPO. This adds value to certified companies to be known as organisations that embed sustainable practices in their operation.” said Dato’ Abdul Latif.
Applications for the eSPO Certificate of Acknowledgement can be made at https://www.mpc.gov.my/espo/.
