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Showing posts with label Minimum wage. Show all posts
Showing posts with label Minimum wage. Show all posts

Saturday, August 5, 2023

Is progressive wage model the solution?

 



Malaysia is set to announce a progressive wage model. What will this mean for the future of employee wages in the country?

Dissecting the practicality of the progressive wage model and its potential impact on Malaysian's welfare


AS the Unity Government continues apace on its attempt to uplift the livelihood of Malaysians, as announced at the launch of the Madani Economy by Prime Minister Datuk Seri Anwar Ibrahim last week, the debate on the best wage structure for the country rages on.

Especially pertinent after a number of announcements by Economy Minister Rafizi Ramli regarding the government’s consideration and proposed implementation of the Progressive Wage Model (PWM), which could be modelled after neighbouring Singapore’s version, wage experts and economists are offering varying opinions on the subject.

To be clear, Singapore unveiled its own PWM since 2012, and according to its National Trades Union Congress, the PWM is based on the key objectives of helping Singaporean workers climb the four ladders of skills upgrading, productivity improvement, career advancement and wage progression, on top of helping companies make better use of and retain their workforce.

Notably, the island nation does not have an official blanket minimum wage structure, except for two sectors, namely for cleaners, where the minimum wage is S$1,000 (RM3,390) per month; and for security guards, who are required by law to be paid S$1,100 (RM3,729) monthly.

However, its Manpower Ministry has outlined the progressive wages (PWS) Singaporean workers are to be paid in a number of sectors, including the landscaping, food services and retail industries.

For example, a local Singaporean working as a cashier has to be paid a minimum of S$1,850 (RM6,277) monthly from Sept 1, 2022, which would increase to S$1,975 (RM6,701) from Sept 1 this year; while a landscape worker would be required to be paid S$1,650 (RM5,599) per month.

Singapore also has a Local Qualifying Salary (LQS) – S$1,400 (RM4,746) – which its Manpower Ministry describes as a determinant for the number of local employees who can be used to calculate a firm’s work permit and S Pass quota entitlement.

Since September last year, firms employing foreign workers who require work permits, S Passes or employment pass holders are mandated to pay PW salaries to local workers covered by the relevant Sectoral or Occupational PWS in the aforementioned cleaning, security, landscape maintenance, and retail sectors as well as in-house workers covered by the PWM, while also remunerating at least the LQS to all other local workers.

Can the PWM be successful here? 

The discussion naturally hinges on whether what Singapore is doing can be implemented here, and what are the benefits of a blanket minimum wage structure as compared to a PWM.

Aside from that, the (business) man on the street could also be concerned as to whether the government has set its sights on making the PWM a mandatory initiative, or would this be optional, perhaps at its nascent stage at least.

As argued by Socio-economic Research Centre (SERC) executive director and economist Lee Heng Guie, the PWM offers more of a winwin solution for both employees and employers, if compared to a blanket minimum wage structure.

By looking deeper into the numbers since Malaysia’s Minimum Wage Order (MWO) was first enforced in 2013, he observes that 2022 marks the fifth time of implementation as the minimum wage rate was reviewed at least once every two years.

“The new minimum wage of RM1,500 per month was fully enforced on July 1, an increase of between 25% and 36.3% compared to the RM1,100 to RM1,200 monthly wage in 2019.

“Over the period from 2013 to 2023, minimum wage has increased by 5.8% per annum from RM900 per month for Peninsular Malaysia and 6.5% per annum from RM800 per month for Sabah and Sarawak on Jan 1, 2013, respectively. However, overall labour productivity increased by only 2.3% per annum for the same period,” he reveals.

As such, Lee says the government is looking into the appropriateness of other wage models to benefit both employees and employers, and he believes the PWM may be an appropriate and feasible substitute wage model to improve the income of low-skilled workers to have a living wage.

Theoretically, a living wage differs from a minimum wage because the former refers not just to the existence of a minimum level of remuneration, but also to a minimum acceptable standard of living, according to the International Labour Organisation.

Therefore, living wage rates are usually higher than the minimum wage rate, especially when the latter has been less frequently updated in line with living cost increases.

While concurring that employees should be compensated according to their skillset, efficiency and education levels, Juwai IQI global chief economist Shan Saeed says the issue of increasing wages and productivity would be best based on a market-driven approach.

He tells Starbizweek this would be best achieved if all stakeholders were to get involved to enhance workers’ productivity to ultimately buttress economic outcomes at the macro level.

“Workers’ efficiency, solid skills and education are major variables in influencing economic growth. In turn, economic expansion and innovation have a direct correlation with strong deliverable outcomes benefiting the masses in improving their living standards and purchasing power,” he points out.

Citing the late Gary Becker, former professor at the University of Chicago Booth School and Nobel Laureate, he says Becker believed that investment in an individual’s education and training is like a business investing into equipment, being the epitome of applying economic analysis to human behaviour.

In addition, he says higher wages allow firms to attract and retain better employees – assuming competitors don’t follow suit and raise their wages as well.

“But there is an important – and often overlooked – second effect. Paying wages that are above the market rate, known within economics as efficiency wages, can also be an important motivating force for a company’s existing employee base.

“The intuition is straightforward: higher wages make a job more desirable. This leads to a larger applicant pool waiting to take over when openings occur and makes it easier to replace another employee. Malaysian companies can follow the similar footprints to achieve desirable outcomes,” says Shan.

Handling a chronic situation

While one can understand the perspective of the SERC when it compares the PWM with the MWO, there are parties who are arguing for the benefits of the MWO before embarking on any “progressive” initiatives.

Even Rafizi has reiterated this week that it is his “job”, through government policy, to prioritise increasing the wages of Malaysians, for them to better cope with rising living expenses.

He emphasised that instead of embarking on new billion-ringgit projects, the unity government has fixed its focus on improving the incomes of Malaysians, echoing Anwar’s warning that the country has been caught in a vicious cycle of high costs, low wages and low profits.

In fact, the argument can be made by looking at Malaysia’s gross domestic product (GDP) per capita over the past 50 years, especially against economies that were considered inferior to it but have since made significant progress, advancing beyond Malaysia’s growth. Two good examples of this, of course, are Singapore itself and South Korea.

For starters, the GDP per capita breaks down a country’s economic output per person, calculated by dividing the GDP of a nation by its population. It is a metric often used by economists to analyse the overall prosperity of a country based on its economic growth.

In an article for Taiwan’s The New Lens, Singaporean writer Roy Ngerng observes: “Up until the late-1970s, Malaysia’s total wages per capita were actually higher than South Korea, and were in fact over three times higher in the early-1970s.

“Today, however, the tables have turned and South Korea’s total wages per capita are about four times higher than Malaysia. The total wages per capita of Czechia and Estonia were also similar to Malaysia’s at one point, but have grown to be about 3.5 times that of Malaysia, while Poland is twice as high.”

On top of that, up until the mid 1980s, Malaysia’s GDP per capita – in US dollar terms – was higher or on par with South Korea, while in the early-1990s, Malaysia’s GDP per capita was also similar to that of the Eastern European countries like Czechia, Estonia and Poland.

“In other words, Malaysia’s economy used to be larger than those countries. However, while the economies of those countries have since expanded rapidly, Malaysia’s GDP per capita stagnated in contrast. Today, South Korea’s economy has grown to three times larger than Malaysia,” says Ngerng.

He says the reason is because Malaysia’s wages have stagnated relative to these other countries, and consequently it has hurt the growth of domestic consumption.

In contrast to many economists, Ngerng believes it is not necessary at this point in time for Malaysia to adopt Singapore’s PWM, but rather it should focus on increasing minimum wage more rapidly.

Wages at other levels in Malaysia are not growing faster because Malaysia’s minimum wage is rising too slowly, and with wage increase at other levels being dependent on the growth rate of minimum wage, the stagnant minimum wage therefore prevents wages from rising across the board.

As a result of Malaysia’s wages stagnating, this has resulted in its economy stagnating as well, he says.

A cursory look at the GDP per capita numbers taken in December 2022 on CEIC Data sees Malaysia posting a figure of US$12,472 (RM56,828). In comparison, Singapore is way ahead at US$82,794 (RM377,000), with South Korea also almost three times ahead of Malaysia at US$32,236 (RM146,883).

Notably, Czechia registered a GDP per capita of US$27,566 (RM126,000), while Estonia and Poland both posted respective figures of US$28,568 (RM130.165) and US$18,222 (RM83,000).

Is a Pwm-tiered subsidy the way to begin?

Perhaps a move that could also be given some thought would be to make the PWM optional to businesses, with the government at the ready-to-subsidise progressive and productivity-linked wage increases, tied in with certain key performance indicators that could be seen to contribute to the country’s GDP growth, of course.

Again, Singapore has put in place a similar structure, a fiveyear plan to subsidise wage increases, so as to provide support for businesses to pay higher wages.

Malaysia could copy such a programme where the government subsidies wage increases but on an annually decreasing scale, so that as companies grow more financially sound, they would be taken off the subsidy programme after a number of years to manage their own wage growth measures.

Sunway University professor of economics Dr Yeah Kim Leng is striking a more balanced view when he says the PWM is definitely worth experimenting here – given the decades-old problem of depressed skilled and unskilled wages, with the exception of chief executives and senior management.

“To be sustainable, wages need to be linked to increases in efficiency, productivity and competitiveness.

“Where there are wage rigidities and labour market failures due to weak bargaining power of employees, inefficient labour market information systems and lack of skills recognition and certification, the government has strong grounds to adopt more interventionist policies such as minimum wage regulations and progressive wage models,” he tells Starbizweek.

Suggesting a way for implementation, Yeah says the government would need to bring industry players together with workers’ unions or representatives to determine basic wages, skills grading or levels and wage ranges for each skill level.

The wage ladders for each industry will enable employees to upgrade their skills and earn correspondingly higher wages along with greater responsibilities, says Yeah, with the other challenge being to link higher skills with higher productivity that enables the company to be more productive and generate better profits for the sustainability of wage growth.

He opines: “A minimum wage will ensure that no worker is paid below a decent living wage thereby enabling the country to eradicate hardcore poverty, while a progressive wage model has the advantage of ensuring that workers are paid productivity-linked wages and to earn progressively higher wages that commensurate with ‘middle-class’ status.

“A well-designed PWM will contribute eventually towards achieving what we see in advanced economies where blue collar workers earn as much or higher than white collar workers.”

Cultural attitudes: A road block to growth?

However, there also exists the viewpoint where Malaysians on average are culturally less inclined to acquire knowledge and new skills or upgrade themselves, something perhaps anyone with recruiting experience would understand well.

If such is the case, how would the government go about justifying increasing the minimum wage more quickly in this catch22 situation?

This has led Joey Gan, market lead for Singapore-based regional corporate consultancy firm Precious Communications Pte Ltd, to remark that even for the citystate, one of the primary challenges in implementing PWM is that many training programmes require a certain level of literacy, basic education, or even certifications, but unfortunately, a significant proportion of workers do not meet these requirements.

“I believe Malaysia may also face a similar challenge, on top of the obvious cost factor for many companies. Moreover, the readiness of workers to upskill and adapt to new opportunities is also a key obstacle.

“Personal development through training largely depends on an individual’s internal motivation. Therefore, for this initiative to succeed, employees would need to undergo a radical change in attitude towards training for upward social mobility,” she says.

While a beneficial step would be to prioritise employees’ welfare by implementing some form of PWM, she believes that replicating Singapore’s approach might not be feasible without comparable government incentives – such as subsidies for training and wage increments – especially for Malaysian businesses already burdened with rising operational costs.

Ergo, Gan says employers might prefer the reverse income tax model, while employees may appreciate a reasonable wage increase that keeps pace with inflation.

Resonating with SERC’S Lee, she notes: “The PWM is a more holistic approach to help our low-wage earners enhance their skills and, in turn, their productivity, so increased wages are the ultimate result of this progression.

“While PWM is not without its challenges, it offers employers better productivity from their workforce, considering the cost, and employees benefit from developing and evolving skill sets over time. In the end, it’s a win-win situation where both employers and employees gain from this approach.”

More crucially, however, she points out that the high productivity and standards in Singapore are a result of both the young and the elderly realising that there is no guaranteed help or support as they age.

This awareness, says Gan, is the major reason that has motivated Singaporeans to work harder and longer to secure a better future, despite the role that the PWM may have played.

“It is essential for our entire workforce, regardless of our wage band, to embrace a growth mindset. Increasing wages goes hand in hand with continuous learning, skill development and improvement.

“To facilitate this growth, it is essential for the government and companies to collaborate and propose people-centric policies that support the development of a highly skilled workforce,” she says.

The Star - StarBiz
By keith Hiew keith.hsk@thestar.com.my

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Tuesday, January 1, 2019

Hike in daycare & childcare centre fees in 2019


MONTHLY fees at majority of daycare centres in Perak are expected to increase between 15% and 20% in 2019.

Fees between RM300 and RM350 for a child could be increased to RM400.

Perak Daycare Association president Noor Shalina Sahari said the increase was due to the implementation of the minimum wage policy for workers set by the Government.

The minimum wage will be streamlined at RM1,100 nationwide starting Jan 1.

Noor Shalina said the increase at the respective daycare centres would differ from one another, depending on the number of employees and the locality.

“The ratio at a daycare centre is three employees to one child.

“The centre would require five staff to handle children aged one to three while 10 workers are needed for those aged three and above,” she said during a grant presentation ceremony at the Urban Transformation Centre in Ipoh.

“To be honest, the rate in Perak is still considered low.

“Currently, our rates are between RM300 and RM350. Next year, it could be between RM350 and RM400,” she added.

Noor Shalina said the increase would also be based on the respective areas.

“If the daycare is located in an area where majority of its residents are from the low income group, the increase would be minimal.

“It would also depend on the respective daycare operators,” she said, adding that the association has 120 members.

“There will be no drastic increase, it will not benefit us also as we are also competing with those that are home-based and not registered with the Government,” she added.

Source: The Star by Ivan Loh


Childcare centres to hike fees in 2019 - Rates to rise by 10% to 30% to cover costs 

'Childcare providers are now required to have at least a diploma in early education'. - Norsheila Abdullah

PETALING JAYA: Taska (childcare centres) are expected to charge between 10% and 30% more next year to keep up with the minimum wage and to cover costs.

Association of Registered Childcare Pro­viders Malaysia president Norsheila Abdullah said this is unavoidable as the minimum wage for childcare providers has been fixed at RM1,100 and that they are increasingly becoming more qualified.

She expects the fee hike to affect all states as the minimum wage has been streamlined to RM1,100 nationwide starting Jan 1.

“I think the price increase is appropriate because they are receiving very low salary, between RM800 and RM900, and they deserve the minimum wage.

“Besides the minimum wage, other reasons for the increase include hidden costs such as childcare providers’ qualifications and overhead costs such as rental, electricity and water bills.

“Childcare providers are now required to have at least a diploma in early education and to be certified with the Permata Early Childhood Education Programme (KAP), a government-run course that costs RM900, and first aid training,” she said.

Currently in Kuala Lumpur, the fee per child in taska is typically no less than RM450 per month, said Norsheila.

The increase of taska fees would however vary according to the operating costs in the particular location, said Norsheila.

It is likely that only centres charging lower fees will increase them by 30%.

“How much the increase will be depends on the taska. If they are charging between RM200 and RM250, then maybe they will increase by 30% because they need to keep up,” she said.

Norsheila suggests that parents sending children to registered centres be given rebates by the government and taska which adhere to all the regulations be allowed tax exemption.

Selangor Taska Association president Mahanom Basri said taska operators should not haphazardly increase fees without matching it with quality service.

“We don’t actually want to increase the price without any reason. Most of the childcare providers have either a diploma or a degree and sometimes work more than 10 hours per day but they are lowly paid. So we hope the parents will understand and not be angry with us.

“If childcare providers are paid accordingly, they will take care of the children well and both parties will be satisfied,” she said.

While there are over 1,500 taska in Selangor, Mahanom gave assurance that there would be no standardisation of fees among the operators because they are still bound by the Competition Act 2010.

She said the Selangor state government has been assisting parents in need via incentives such as the Sikembar programme, whereby they subsidise RM100 for every child sent to a taska registered under the Community Welfare Department.

Mahanom added that there are also alternatives to the fee increase.

“Currently, I know of some taska operators who don’t want to charge the parents too much so they work out a compromise whereby the parents, as partners in education, would contribute items like rice and vegetables monthly to the taska so that it takes away a a bit of the operating cost burden,” she said.


The  Star by fatimah zainal

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 Childcare centre fees set to go up

 

Malaysian Minimum Wage Order forcing establishments to close due to unsustainable fees

  

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Parents opt for daycare centres with no live-in maids now


Hike in daycare & childcare centre fees in 2019


MONTHLY fees at majority of daycare centres in Perak are expected to increase between 15% and 20% in 2019.

Fees between RM300 and RM350 for a child could be increased to RM400.

Perak Daycare Association president Noor Shalina Sahari said the increase was due to the implementation of the minimum wage policy for workers set by the Government.

The minimum wage will be streamlined at RM1,100 nationwide starting Jan 1.

Noor Shalina said the increase at the respective daycare centres would differ from one another, depending on the number of employees and the locality.

“The ratio at a daycare centre is three employees to one child.

“The centre would require five staff to handle children aged one to three while 10 workers are needed for those aged three and above,” she said during a grant presentation ceremony at the Urban Transformation Centre in Ipoh.

“To be honest, the rate in Perak is still considered low.

“Currently, our rates are between RM300 and RM350. Next year, it could be between RM350 and RM400,” she added.

Noor Shalina said the increase would also be based on the respective areas.

“If the daycare is located in an area where majority of its residents are from the low income group, the increase would be minimal.

“It would also depend on the respective daycare operators,” she said, adding that the association has 120 members.

“There will be no drastic increase, it will not benefit us also as we are also competing with those that are home-based and not registered with the Government,” she added.

Source: The Star by Ivan Loh


Childcare centres to hike fees in 2019 - Rates to rise by 10% to 30% to cover costs 

'Childcare providers are now required to have at least a diploma in early education'. - Norsheila Abdullah

PETALING JAYA: Taska (childcare centres) are expected to charge between 10% and 30% more next year to keep up with the minimum wage and to cover costs.

Association of Registered Childcare Pro­viders Malaysia president Norsheila Abdullah said this is unavoidable as the minimum wage for childcare providers has been fixed at RM1,100 and that they are increasingly becoming more qualified.

She expects the fee hike to affect all states as the minimum wage has been streamlined to RM1,100 nationwide starting Jan 1.

“I think the price increase is appropriate because they are receiving very low salary, between RM800 and RM900, and they deserve the minimum wage.

“Besides the minimum wage, other reasons for the increase include hidden costs such as childcare providers’ qualifications and overhead costs such as rental, electricity and water bills.

“Childcare providers are now required to have at least a diploma in early education and to be certified with the Permata Early Childhood Education Programme (KAP), a government-run course that costs RM900, and first aid training,” she said.

Currently in Kuala Lumpur, the fee per child in taska is typically no less than RM450 per month, said Norsheila.

The increase of taska fees would however vary according to the operating costs in the particular location, said Norsheila.

It is likely that only centres charging lower fees will increase them by 30%.

“How much the increase will be depends on the taska. If they are charging between RM200 and RM250, then maybe they will increase by 30% because they need to keep up,” she said.

Norsheila suggests that parents sending children to registered centres be given rebates by the government and taska which adhere to all the regulations be allowed tax exemption.

Selangor Taska Association president Mahanom Basri said taska operators should not haphazardly increase fees without matching it with quality service.

“We don’t actually want to increase the price without any reason. Most of the childcare providers have either a diploma or a degree and sometimes work more than 10 hours per day but they are lowly paid. So we hope the parents will understand and not be angry with us.

“If childcare providers are paid accordingly, they will take care of the children well and both parties will be satisfied,” she said.

While there are over 1,500 taska in Selangor, Mahanom gave assurance that there would be no standardisation of fees among the operators because they are still bound by the Competition Act 2010.

She said the Selangor state government has been assisting parents in need via incentives such as the Sikembar programme, whereby they subsidise RM100 for every child sent to a taska registered under the Community Welfare Department.

Mahanom added that there are also alternatives to the fee increase.

“Currently, I know of some taska operators who don’t want to charge the parents too much so they work out a compromise whereby the parents, as partners in education, would contribute items like rice and vegetables monthly to the taska so that it takes away a a bit of the operating cost burden,” she said.


The  Star by fatimah zainal

Related posts:

Malaysia needs more childcare & daycare centres


 Childcare centre fees set to go up

 

Malaysian Minimum Wage Order forcing establishments to close due to unsustainable fees

  

Government refusal to recognize the UEC due to 'national sovereignty', Kamalanthan said


Parents opt for daycare centres with no live-in maids now

 


Saturday, December 24, 2016

Childcare centre fees set to go up

Child care centre fees will likely increase by 10 per cent next year. — Picture by Zuraneeza Zulkifli

Operators expect 10% hike next year


SUNGAI BULOH: The fees for childcare centres across the country are expected to increase by at least 10% next year, says the Association of Childcare Centres Selangor.

This was due to the revised minimum wage, said association president Mahanom Basri.

“The increase depends on the management of the centre. If the rent, salaries and other expenditures have gone up, it will increase by between 5% and 10%.

“It won’t be a lot, but there will definitely be an increase,” she said here yesterday.

For example, Mahanom said a 10% increase from the RM300 fee per child would result in a new fee of RM330.

Besides the minimum wage, she said childcare centre operators also had to install CCTVs for extra security.

“Quality facilities require money so I hope parents are ready to pay for them,” she added.

The Government introduced the minimum wage policy in 2013.

On July 1, the monthly minimum wage was increased from RM900 to RM1,000 for peninsular Malaysia and from RM800 to RM920 for Sabah, Sarawak and Labuan.

Mahanom, together with more than 300 childcare centre operators, attended a dialogue session with Deputy Women, Family and Community Minister Datin Paduka Chew Mei Fun yesterday.

One of the issues raised during the two-hour closed-door dialogue was the licensing fees charged by local councils.

“We have proposed to the local councils that they could treat childcare centres as community service instead of commercial business.

“By doing so, they can reduce the licensing fees,” Chew said.

She said the ministry was also looking into easing some regulations.

“We will be looking at the ratio; such as how many children should be cared by one minder without compromising on safety.

“Childcare service is important and the demand is big. Many families have both parents working so we need to have a strong childcare service,” she added.

By Nurbaiti Hamdan The Star/Asia News Network

Related posts:

May 24, 2016 ... “After all, parents are looking for a safe and good daycare centre ... That is a chunk of money that could be used for education or even holidays.



Sep 11, 2016 ... A childcare centre in a single storey terrace corner lot is allowed to house a ... themselves to ensure our children get quality care and education.

 


My home, my school  

Childcare centre fees set to go up

Child care centre fees will likely increase by 10 per cent next year. — Picture by Zuraneeza Zulkifli

Operators expect 10% hike next year


SUNGAI BULOH: The fees for childcare centres across the country are expected to increase by at least 10% next year, says the Association of Childcare Centres Selangor.

This was due to the revised minimum wage, said association president Mahanom Basri.

“The increase depends on the management of the centre. If the rent, salaries and other expenditures have gone up, it will increase by between 5% and 10%.

“It won’t be a lot, but there will definitely be an increase,” she said here yesterday.

For example, Mahanom said a 10% increase from the RM300 fee per child would result in a new fee of RM330.

Besides the minimum wage, she said childcare centre operators also had to install CCTVs for extra security.

“Quality facilities require money so I hope parents are ready to pay for them,” she added.

The Government introduced the minimum wage policy in 2013.

On July 1, the monthly minimum wage was increased from RM900 to RM1,000 for peninsular Malaysia and from RM800 to RM920 for Sabah, Sarawak and Labuan.

Mahanom, together with more than 300 childcare centre operators, attended a dialogue session with Deputy Women, Family and Community Minister Datin Paduka Chew Mei Fun yesterday.

One of the issues raised during the two-hour closed-door dialogue was the licensing fees charged by local councils.

“We have proposed to the local councils that they could treat childcare centres as community service instead of commercial business.

“By doing so, they can reduce the licensing fees,” Chew said.

She said the ministry was also looking into easing some regulations.

“We will be looking at the ratio; such as how many children should be cared by one minder without compromising on safety.

“Childcare service is important and the demand is big. Many families have both parents working so we need to have a strong childcare service,” she added.

By Nurbaiti Hamdan The Star/Asia News Network

Related posts:

May 24, 2016 ... “After all, parents are looking for a safe and good daycare centre ... That is a chunk of money that could be used for education or even holidays.



Sep 11, 2016 ... A childcare centre in a single storey terrace corner lot is allowed to house a ... themselves to ensure our children get quality care and education.

 


My home, my school  

Sunday, September 11, 2016

Malaysian Minimum Wage Order forcing establishments to close due to unsustainable fees


PETALING JAYA: Childcare centres could be on their way out by the end of the year, with between 80% and 95% of the 5,421 registered centres likely to close down – no thanks to the rise in minimum wage.

Most of those charging below RM300 are likely to fold by December.

A survey of childcare centres in Terengganu, Pahang, Kedah, Perak, Negri Sembilan and Sarawak showed that almost all of those catering to the low- and middle-income families, are either preparing to close shop or have already folded in the past six months, said Association of Regis­tered Childcare Providers Malaysia president P.H. Wong.

The Minimum Wage Order 2016 was implemented in July.

On average, operators charge between RM250 and RM350 per child. But, to be sustainable, they have to charge at least RM450, Wong told Sunday Star.

A childcare centre in a single storey terrace corner lot is allowed to house a maximum of 20 children. If they charge RM300 per child, the total income is only RM6,000 per month.

“At the very least, you’ll need four personnel. With minimum wage of RM1,000, that’s RM4,000 without EPF contributions. What about other operating costs?” asked Wong.

Under the minimum wage rule, workers in the peninsula are entitled to not less than RM1,000 a month while it will be RM920 for those in Sabah and Sarawak.

Those who flout it will be liable to a fine and a jail term.

“Preliminary results indicate a worrying trend. It’s the same everywhere.

“Those that managed to stay open have adopted ‘creative ways’ to survive,” said Wong, adding that in Malacca, operators had resorted to hiring contract staff and part-timers or cutting back on the work hours, to avoid paying minimum wage.

Some make their staff take on more responsibilities or conduct evening classes to earn more.

“Others only accept older children as they require less attention but the demand is for centres that accept babies,” she said.

Unlike other businesses, a centre’s income was limited by the number of children they were able to take, she said.

She said operators could not raise their fees because parents would move their children to cheaper unlicensed centres or babysitters, putting the chlidren’s safety at risk.

Women, Family and Community Development Ministry Deputy Minister Datin Paduka Chew Mei Fun said the Government was aware of the issues faced by the operators.

“A paper on the minimum wage impact is being prepared. It’s a concern and we’re addressing it holistically,” Chew, who leads a taskforce on early childhood care and education, said.

She said an intensive three-day lab would be held this month to look into making quality childcare accessible and safe.

A report would be submitted to Women, Family and Community Development Minister Datuk Seri Rohani Abdul Karim soon, she said. - Christina Chin The Star

Doing Better for our kids



Faced with mounting challenges, childcare centre operators are looking to the Government, employers and parents themselves to ensure our children get quality care and education.

NATIONWIDE, there’s a critical shortage of registered childcare centres, or taska, that provide affordable services.

Malaysia’s population, as of July 1 this year, is 30,751,602. More than 40% of the population are children aged below 18 years. And of this group, children aged between zero and four years are the majority.

With an annual population growth of about 3%, there’s a growing demand for childcare centres, says Association of Registered Childcare Providers Malaysia president P.H. Wong.

Wong is also a member of the Ramping Up Early Childhood Care and Education (ECCE) task force under the Women, Family and Community Development Ministry, and a Positive Parenting management committee member. Positive Parenting is an expert educational programme for parents initiated by the Malaysian Paediatric Association and various non-governmental organisations.

In almost all states – especially in the rural and semi-rural districts – there are not enough registered centres, says Wong.

Few operators want to run centres in low income communities where parents cannot afford the fees. And existing ones are struggling to meet rising operating costs, especially with the minimum wage ruling effective July this year.

Wong, however, stresses that the minimum wage ruling is long overdue. The problem isn’t that operators don’t want to pay – it’s that they cannot afford to.

“Operation costs are already high because of the strict space and staff ratios, compulsory CCTV and exorbitant local council licensing fees. Minimum wage just makes it worse. It’s tough to break even, what more make a profit,” she says.

And access to financing and difficulties with getting regulatory approvals are big challenges, she laments.

The problem is compounded by the perception parents have of childcare centres and early childhood development. They think it’s the same as sending the child to a babysitter who will, most likely, simply offer custodial care; early childhood development care, on the other hand, has activities for the holistic development of children aged zero to four years.

Parents, Wong feels, are unwilling to pay a fair price for licensed childcare because they think “the-aunty-next-door” does as good a job for much less.

“About 70% of centres nationwide charge below RM350 for 20 days of full-day care. This works out to RM1.75 per hour. It doesn’t reflect the importance of having a qualified professional look after your child,” she says.

There’s a lack of trained care providers and operators as salaries are still very low even after the minimum wage ruling. And, very few youngsters are interested in early childhood care and education because there’s no career pathway.

“Currently, childcare providers only need to finish the SPM and Permata Basic Childcare Course – a compulsory certification under the Social Welfare Department. But as long as qualifications remain at certificate level only, the quality of service remains a challenge and the importance of investing in the first four years of brain development is severely undermined,” Wong says, adding that out of 18,769 childcare providers in the country, only 1,551 are degree holders.

Quality early childhood care and education allows mothers to contribute to the workforce and is a social equaliser, she believes. It provides children with a level playing field to have a head start in life.

The majority of school dropouts and juvenile delinquents come from economically and socially deprived families. They grow up without the benefit of quality early childhood care and education, she shares.

Quoting economist James Heckman, a Nobel laureate at the University of Chicago, Wong says it makes financial sense to invest in early childhood education because it will lead to increased productivity and better outcomes for children in health, nutrition and cognitive development later on.

“Since the inequality begins before or at birth, Heckman believes that the best time to address those issues are during early childhood.

“If investments are not made in the early years, lower earnings, unemployment, healthcare costs and even increased crime will be the consequences for society to bear when the child grows up,” she says, pointing to how we have one of the lowest early childhood and education enrolment rates in the region.

With just 5,421 licensed childcare centres catering for 53,497 children, it’s clear that almost 90% of our children are being looked after by stay-at-home mums or illegal centres and babysitters – which puts the children at high risk of maltreatment and neglect, she sighs.

Many women in low and middle income communities don’t seek employment as childcare expenditure would negate their salaries, she observes.

“The prevalence of single income households increases incidences of poverty and further reduces access to childcare.

“In Singapore, public funding for early childhood and education covers 75% to 85% of childcare costs. But here, even lower income families must bear most of the costs, which can range from RM300 to RM2,000 in the Klang Valley,” she says.

Malaysians, she notes, are already having fewer children because they want to provide the family with a higher quality of life. If childcare service is not made affordable, fertility rates will drop even further, she says. - Christina Chin The Star

But it’s a necessity


CHILDCARE services are a necessity, no longer a luxury.

Regulated childcare centres are a must because, unlike before, both parents are forced to work nowadays to make ends meet, says Federation of Malaysian Consumers Associations secretary-general Datuk Paul Selvaraj.

Childcare is a critical service, he feels. And taking care of kids isn’t easy. Minders must be skilled and competent. Leaving kids at unlicensed and unregulated centres is dangerous because a child’s future is at risk, he stresses.

“The Government has to help families cope by ensuring that we have access to affordable childcare services. It’s a basic right. At the same time, operators have to make a profit,” he says, adding that parents cannot expect operators to continue a loss-making business.

Datuk Dr Raj Karim reminds parents that times have changed. She is president of the Malaysian Council for Child Welfare, an umbrella body comprising more than 30 non-governmental organisations that works with the United Nations Children’s Fund to create awareness in Malaysia about child injury and accidents.

Leaving your young child with the neighbour is risky, she insists. Unsupervised care have led to many cases of neglect, abuse and maltreatment.

It’s not like those days when babysitters were sincere in wanting to help. Now, it’s all about the money, she says.

“I was a working mother and a makcik helped look after my family but she was loyal and close to us. These days, most people don’t even know their next door neighbours.

“Is your babysitter mentally sound? Does she have family members who could potentially harm your child? What about accidents at home?” she says.

Urging the Government to regulate childcare fees, Dr Raj says some centres’ fees are exorbitant. If fees are regulated, the Government can subsidise households that don’t earn enough for childcare. Only with accessible quality childcare can a mother return to the workforce, she stresses.

“Quality care during early childhood is an essential, basic right. That’s when emotional, mental and character development, takes place,” she adds. - The Star

It’s a no...


IT’S tough for bosses to help.

Most employers won’t be able to help their staff with childcare benefits, Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan says.

Very few employers can afford childcare subsidies as there are no incentive for them to do so, he says.

Under current tax laws, childcare allowance of up to RM250 per month is not taxable, but this only applies to employees. Companies don’t get such breaks, he says.

That’s why, he says, they are not keen on giving childcare subsidies. The Government, he says, should give tax incentives like double tax deductions to encourage companies to give childcare subsidies.

There are 5.18 million working women and about 500,000 babies born yearly. So, based on these numbers, he estimates that there are about three million children aged six and below in need of care.

Of the three million children, 14% are sent to childcare centres, 24% are cared for by maids and 27% are looked after by their grandparents, he says. (The MEF does not have details accounting to the remaining 35%.)

Private companies are reluctant to provide childcare centres at the workplace because of cumbersome bureaucratic procedures in getting approval from the relevant authorities.

The “building cost” tax incentive, he feels, is also not attractive for private companies as it is spread over a 10-year period. Assuming the cost of establishing a childcare centre is RM1mil, an employer can only claim a tax allowance of RM100,000 yearly over a decade, he explains.

“Only 24 private companies have childcare centres for their staff. It’s more common in government-linked companies,” he says.

Cheaper alternatives must be looked at, as high fees charged by registered childcare centres make it tough for working women to send their children there, he feels.

He suggests setting up community childcare centres in residential areas where such facilities can be shared by staff living in the vicinity.

“Community childcare shouldn’t be profit-orientated and the quality standards must be set by the Government.”

Is your childcare centre legal?


To locate licensed childcare centres, report incidents/abuse, join local community-building events and source for early childhood care/ education information, go to asuhan.my. The newly launched central directory and resource platform set up by the Association of Registered Childcare Providers Malaysia and the National Child Development Research Centre is aimed at keeping kids safe.

Holistic solution soon


THE Government is coming up with holistic measures to make quality childcare affordable and accessible.

A multi-pronged solution is in the works, assures Women, Family and Community Development Ministry Deputy Minister Datin Paduka Chew Mei Fun.

Chew, who leads a task force on early childhood care and education, says there are various factors effecting the industry so there is no single silver bullet solution.

“We’re monitoring the industry from a macro and micro level to address all issues comprehensively,” she says.

She says the ministry is working closely with the Association of Registered Childcare Providers Malaysia to improve the service. The ministry has been gathering data in the last two years and is in the midst of compiling everything.

“We need to address this from several aspects, including amending existing regulations. For example, a new rule to allow the setting up of centres on the third to fifth floors will be implemented soon. Currently, childcare centres are only allowed on the first and second floors where rent is high, so the new rule will help lower cost for the operators,” she explains.

The ministry is also looking into online training for care providers so that they can undergo practical on-the-job training while studying. This, she says, will further reduce the operators’ costs.

The problem is that many caregivers treat this as temporary job while waiting to continue their studies or until something better comes along. So operators are reluctant to invest in their training. That’s why we must promote, upgrade and make child-caring a recognised profession, she says.

Urging parents to change their mindset, she says the perception that centres are like traditional nannies must change. Traditionally, a nanny just feeds, accompanies and looks after a child. But a trained care provider has knowledge and skill. They do more, she adds, like provide a safe environment and prepare nutritious and hygienic food for their charges.

“Send your kids to a registered centre because it means that the care providers are trained and the operators must comply with density ratios. It’s also easier for the authorities to monitor and make sure that the centre is up to mark,” she says.

Operators too must learn to balance their accounts by accepting more older kids.

The care provider to child ratio is:

> Infants 0-1: 1 staff : 3 infants

> 1-2 years: 1 staff : 5 children

> 3-4 years: 1 staff :10 children

So centres can accept more older kids if they’re suffering losses, Chew points out. If you want to cover your costs, you should take more of those aged three to four, she says.

“On the other hand, it’s a problem too when centres refuse to take babies because of the costs involved. That’s why the Government has introduced various programmes that allow women to take time off to care for their newborns before returning to the workforce,” Chew says.

Encouraging the corporate sector to set up centres, she says the request for subsidies is being studied. Employers, she says, must realise that looking after their staff's families will result in higher productivity because parents who have peace of mind will focus better on their jobs.

The Government, she adds, is also engaging with all relevant quarters, including the Real Estate and Housing Developers Association Malaysia and local councils, to ease the burden of operators.

“We’re lobbying local councils to treat childcare centres as social service providers rather than a business because this will lead to lower costs for them.

“And, we’re requesting that developers include childcare centres when planning townships. If a corner lot can be designated and approved by the local council as a residence/childcare centre, an operator can move in and start the business immediately without having to get the consent of neighbours or applying to change the building’s usage,” says Chew.

This, she feels, would be a win-win situation because the local council will study the traffic flow and safety aspects at no additional cost.

The developer may even get a higher price for that unit because of the dual usage status.

While the Government provides some childcare subsidy to civil servants and those who qualify, operators must improve their service so that they can justify higher charges.

She says monthly childcare fees can range from RM200 to RM2,000 per child but most centres only charge between RM250 and RM400.

“Operators must give good, quality service. And parents must pay more if they can afford it,” she adds.

Cheaper fees, please


QUALITY childcare is expensive.

Zuhainy Zulkiffli, 33, sends her kids to an unregistered childcare centre in George Town because it’s what the family can afford.

Registered centres charge more than RM400 per child, which she feels is too much.

The unregistered centre her four-month-old son, Izz Zaryl Zaharin, and three-year-old daughter, Zandra Zahara, go to only charges between RM300 and RM350.

The working mother was heartbroken when she found out that Zandra had been abused at a previous centre.

However, she disagrees with a fee hike. She thinks it’s unfair to parents.

“One care provider can take care of a few kids. Don’t tell me the operators cannot make a profit. Many of my friends were forced to quit their jobs because centres are charging too much as it is,” she argues.

A father who wants to go only by Tan, 40, sent his newborn to a babysitter until the boy was two. He paid RM1,000 per month to the aunty next door. From age two to four, his son was left at a childcare centre in Cheras, Kuala Lumpur.

“For RM650, they look after my son from 8am to 7pm. It’s reasonable. I’m not sure if the centre is legal but it’s very popular,” he shrugs.

Like Tan, Jennifer Kong, 40, sends her daughter to a babysitter because it’s convenient and cheap.

Besides the monthly RM700 fee, the aunty gets 14 days of leave, a Chinese New Year ang pow, and a yearly bonus.

“I buy the ingredients for aunty to cook so I’m not worried about what she’s feeding my daughter. Aunty has been caring for her since she was three months old. She’s four now,” she says.

There’s a big difference when your child goes to a good, registered centre, says Koh Chee Khian, 45.

The RM3,000-plus he pays per semester is “not cheap” but he feels it’s worth it because his son gets the best food – like churros – and attention.

The main reason for sending his first born to a centre is so that the child learns to socialise and share.

“My boy started going to the centre in Bangsar (KL) when he was 16 months. He’s there eight hours a day, twice a week.

“This centre is among the best and the environment is really different from the cheaper ones where there are just too many kids,” he says.

But despite coming from a dual-income household, Koh says he will have to look for somewhere less pricey as he’s planning to send his son for full-day care next year.

“No doubt the current centre is very good. My son is disciplined, can colour, sing and dance at such a young age. I would never trust an illegal centre to care for him,” he says. - The Star

Operators' dilemma 


CENTRES still in business have no choice but to up their fees.

Zubaidah Husin, who runs four centres, has raised her fees from RM350 to RM450.

“The profit is not much but most of us continue because of passion. We do this to help working mothers so we charge only what they can afford to pay.

“Since the RM900 minimum wage ruling was introduced, we’ve had problems coping. Now that it’s RM1,000, how can we cope without upping our fees?” she says

Zubaidah, who is also the Association of Childcare Providers Pahang president, has been in the business for 14 years.

Before the minimum wage ruling, RM700 was the maximum operators in Pahang paid their staff so they were able to charge RM350 per child. Most staff, though, were paid an average salary of RM450 but with food and lodging provided.

“Now almost 70% of the operators are not paying their staff a minimum wage because they can’t afford to. If there is a crackdown by the authorities, these centres will be forced to close,” she says.

She does sympathise with parents, and she believes that many – especially those with two or three kids – are already struggling to make ends meet.

Association of Childcare Providers Terengganu president Wan Najmyah Wan Yussof, who has been running her centre since 2009, agrees.

She charges RM400 for babies and RM350 for children one year and above.

The situation is critical, she insists. Many of the 160-odd operators in Terengganu are at their wits end.

“Most who are still in business are using income from elsewhere to keep their centres from going under because they love kids.

“Personally, I’m using profits from my kindergarten to help keep my childcare centre running,” she says.

She says the association has appealed to the state government to subsidise training and salary costs.

A childcare guidebook on quality standards is also in the pipeline. This, she says, will ensure a minimum standard for all centres and help standardise the fees.

Operators want to increase their fees but they are afraid the parents will take their kids home. Previously when operators tried to raise their fees slightly, that’s what happened, she says.

“The problem is, we don’t know whether parents really cannot afford to pay more or they just refuse to,” she says, adding that most families there have two kids.

More centres needed


The Government aims to have a workforce comprising at least 59% of women by 2020. To do that, we must have more registered childcare centres to cater to these women’s children, Women, Family and Community Development Minister Datuk Seri Rohani Abdul Karim said. On Aug 14, Sunday Star reported that Malaysia is far from its target of having 13,200 registered childcare centres by 2020. Currently, there are not enough centres to cater to 3.2 million children under the age of four whose parents are in need of these services.

Number of registered childcare centres nationwide:

5,421

Number of children:

53,497

Number of educators:

17,954

Source: National Child Development Research Centre

Is your childcare centre legal?

To locate licensed childcare centres, report incidents/abuse, join local community-building events and source for early childhood care/ education information, go to asuhan.my. The newly launched central directory and resource platform set up by the Association of Registered Childcare Providers Malaysia and the National Child Development Research Centre is aimed at keeping kids safe.

IN THE RED

Perak

Total private centres surveyed: 14

Income:

RM1,840 to RM9,150

Expenditure:

RM2,740 to RM9,630

Pahang

Total private centres surveyed: 203

Forced to close after paying minimum wage:

36 or 17.8%

Not paying minimum wage:

142 or 69%

Paid minimum wage and either made a small profit or loss:

25 or 12.3%

Terengganu

Total private centres surveyed: 36

Forced to close to avoid fine for failing to pay minimum wage: 95%

Babies and children affected: 2,515

Childcare staff made jobless: 736

Income:

RM1,540 to RM11,000

Expenditure:

RM2,260 to RM17,615

Kedah

Total private centres surveyed: 58

Fee range (babies to age four):

RM220 to RM300

Home

Total income:

RM2,850

Total costs (ie, salary, EPF, Perkeso, food, rental, utilities and telephone bills, Internet bill, cleaning/household items, learning tools, stationery, activities, celebrations, emergency fund, income tax, GST):

RM3,830

Losses: RM980

Institution

Total income:

RM7,800 to RM25,200 (depending on location)

Total costs (ie: salary, EPF, Perkeso, food, rental, utilities and telephone bills, Internet bill, cleaning/household items, learning tools, stationery, activities, celebrations, emergency fund, income tax, GST):

RM15,723.10 to RM27,184.05 (depending on location)

Losses: RM1,984.05 to RM14,059.10 (depending on location)

Note: All survey participants are registered childcare centres.

Source: Association of Registered Childcare Providers Malaysia.

Related:

New minimum wage policy to take effect July 1 The Star


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