Gig economy’s minimum wage should be raised to RM1,500

It’s a critical source of employment for people in certain categories such as the youth, fresh graduates, unemployed and seniors


THE minimum wage for gig economy workers needs to be increased from RM1,200 to RM1,500, but the implementation should not be made mandatory until 2023 or when the economy is on a stable footing.

EMIR Research head of social, law and human rights Jason Loh Seong Wei said when the current minimum wage was implemented on Jan 1, 2020, it was to cover 57 city councils.

Under the Minimum Wage Order 2020, rates payable for those outside the listed areas will be RM5.29 an hour or RM1,100 per month, with the rates payable for a four-, five- and six-workday week being RM63.46, RM50.77 and RM42.31 respectively.

“Those who don’t receive basic wages but are paid based on ‘piece rate, tonnage, task, trip or commission’ can’t be paid less than the respective stated minimum wages.

“While the move from RM1,200 to RM1,500 represents a big jump for employers, it should be affordable when the economy further recovers and makes more gains than currently,” he told The Malaysian Reserve.

The minimum wage was last revised on Feb 1, 2020, by RM100 to RM1,200.

Loh said to help ensure that the minimum wage is affordable for employers of micro, small and medium enterprises (MSMEs), the government could implement a wage credit scheme to businesses based on a turnover threshold, for example.

“The government could subsidise 30% of the wages of the qualifying MSMEs when the time comes for mandatory implementation for a period of up to two-three years,” he added.

However, minimum wage subsidy currently does not apply to gig economy workers since the group is not defined as employees under the Labour Act 1955 (Act 265), Sabah Labour Ordinance and Sarawak Labour Ordinance.

Last week, Deputy Human Resources Minister Datuk Awang Hashim said the government is in the middle of amending the Employment Act 1955, so that e-hailing drivers will be recognised as workers.

Among the proposed amendments was to change the definition of employers and employees.

“The proposed amendment is a clear effort by the government to clarify the employee-employer relations in the gig economy,” he told the Dewan Rakyat.

Machang MP Datuk Ahmad Jazlan Yaakub had enquired about the government’s steps to address the problem of lack of social security for e-hailing riders.

Loh said the natural growth of the gig economy is to be expected and encouraged — as part of the wider “transitioning” and “transformation” and “restructuring” of the economy towards, for example, a low-touch culture where there is minimal contact between the seller and end-user or consumer compared to before.

“Of course, we don’t expect the gig economy to predominate in the sense of being the main driver of growth and development. But it’s a critical source of employment for people in certain categories such as the youth, fresh graduates, unemployed and seniors,” he said.

According to a venture capital firm Monk Hill Ventures, 26% of Malaysia’s labour force is equivalent to four million freelancers and form part of the growing gig economy.

Based on a study by Zurich Insurance, 38% of full-time Malaysian employees had already considered venturing into the gig economy, which was higher than the global average of 20%.

Loh said over the years, since its debut in the economy, gig employment has increased in tandem with the rise of unemployment and underemployment, and is expected to rise further.

“But if we become too dependent on the gig economy as a permanent feature or means to increase our personal disposable income, then this becomes a problem for us as a nation to achieve our ambition to be high-income. The nature of the gig economy is such that for most jobs, they don’t require high skills or high qualifications.

“We, therefore, shouldn’t overly depend on the gig economy as the one definitive solution to the problem of structural unemployment and underemployment. In fact, we should be reducing the number of people engaged in the gig economy over time,” he explained.