KOTA KINABALU: Small and Medium Enterprises Association of Sabah (SME Sabah) founding president Foo Ngee Kee has urged the Ministry of Human Resource to allow employers to negotiate salary reduction with staff to ease the financial burden of SMEs and prevent them from closure.
For tourism related businesses and many manufacturing and service businesses, he said staff expenses collectively can be from 50 per cent to 80 per cent of SMEs’ total fixed costs.
He said the economic stimulus packages announced by the federal and state governments were insufficient to mitigate the impact of the novel coronavirus (Covid-19) on SMEs.
“Bank Negara Malaysia (BNM) has allowed a six-month deferment on loan installments, which is better than none, to ease SMEs’ cash flow constraints.
“Businesses are also offered financing facility at a low interest rate as low as two per cent by government agency, but we still have to pay the interests in the future,” he said.
Besides, Foo said SMEs facing difficulty in sustaining their business might not borrow, or only opt to take out small loan, from financial institutions, which would not achieve the desired impact.
Based on a 50-staff force at average salary of RM2,000 for Sabah, he said employers would have to fork out RM100,000 per month for staff expenses.
“With zero income for a month during the Movement Control Order (MCO) period from March 18 to April 14, which may be extended for another month or two, how can SMEs bear the losses?”
He said SME’s business was also affected with other trading nations having a bigger Covid-19 problem and their continued lockdown even after Sabah’s MCO was lifted.
“How long can businesses stay in business with such high monthly losses?”
Foo said employers needed to provide for their family as well.
Instead of sustaining a money-losing business, Foo said employers might decide to close shop and be relieved of their financial obligations.
He said if SMEs were to take the drastic action to close shop, employees would lose their jobs and salary.
“They will have difficulty looking for another job with the economic recession and as many other SMEs are also struggling to stay alive,” he said.
As such, Foo proposed to the government to help SMEs to stay in business with the reduction of the high staff expenses by allowing negotiated salary reduction with staff depending on their salary scale. These include off setting annual leave, and reduction of work days and/or hours for employees.
He said any incentives given out to staff as an individual by Federal Government and Sabah Government should be taken as part of the staff’s month salary and offer a reduction to employer on a dollar for dollar basis of the staff’s salary.
“That is, staff should not be getting full salary plus incentives from government as a bonus.”
For certain businesses like tourism, where scale of operations is certainly lowered for the next 12 months, he said the government could send the excess staff for training and upskilling with a training allowance by the government.
“The employer must re-hire their excess staff should there be a need to add staff when their business recovers.
“These surplus staff can always seek alternative employment to avoid a reduction in their pay.”