Price revision and staff cuts: Restaurant group warns of flipside of raising minimum wage

While the recent news of an increase in minimum wage to RM1,700 a month from February 2025 onwards may come as a welcome announcement to workers, a restaurant association fears it will also mean a wave of retrenchments as well as a surge in prices as owners struggle to keep their businesses alive.

Nik Hassan Zain, chairman of the Kelantan Restaurant Owners Association, said employers would have little choice but to trim their staff numbers and raise prices in order to stay afloat.

But Nik Hassan, whose organisation represents more than 200 restaurant owners in the state, told MalaysiaNow that this would be a difficult step for him as his current prices were already considered high.

"We depend on daily sales," he said. "Prices have been going up for a long time but we can't raise ours any further."

Adding that his profit margin had long been on the decline, he said some restaurant owners had stopped taking a salary as they could not afford to do so.
 
The increase in minimum wage was announced by Prime Minister Anwar Ibrahim last week. Anwar, who also holds the finance portfolio, said employers with fewer than five employees would be given a six-month grace period until August 2025.

Nik Hassan dismissed talk of employers being reluctant to pay their workers the stipulated amount, saying not all of them were able to meet the target in question.

He said this appeared to be the case particularly in Kelantan, where he said business was not as brisk as it used to be.

"Some operators still make a high profit," he said. "But many are in what we could describe as a danger zone."

Yazid Md Noor, who owns a barbeque restaurant in Gombak, Selangor, said he was going over the buffet food prices for the year ahead.

Currently, his restaurant charges adults RM35 per head. But the amount is likely to increase in order to cover the cost of raising salaries for his 11 workers.

"Our partners have suggested reducing the number of permanent workers and just getting part-time staff for weekends," he said.

His rough estimates indicate that buffet prices at his outlet will have to increase by RM14 or RM15 to about RM50 per head if he is to pay his workers the new minimum wage.

"But that's so expensive," he added. "We are still calculating and have yet to make a decision.

"We have to look into many matters including whether to reduce our use of meat or seafood, for example, in order to cut costs.

"We will try our best not to raise prices too much. But if we have no choice, we must do it or suffer a loss."

The Malaysian Employers Federation (MEF) on the other hand welcomed the new minimum wage level, describing it as a good starting point.

"Most employers pay above the minimum wage," MEF president Syed Hussain Syed Husman said.

"MEF urges employers who can afford higher salaries to pay above the minimum wage. No one should use the minimum wage as an excuse to pay based on the minimum wage.

"It is only ethical and good practice for employers to remunerate their employees based on their performance and that of the business."

Price controls

Nik Hassan however said that many restaurant owners had yet to reach even the current minimum wage level of RM1,500, citing a decline in purchasing power due to the cost of goods and economic uncertainty.

He said the government should impose price controls before setting a new minimum wage level.

"But it doesn't look like it can," he added.

Syed Hussain agreed, saying the government should control the price of goods as well as the cost of living.

"Otherwise, no amount of increase will benefit them," he said.