Losing out, big time

Losing out, big time

WITH Malaysia’s first private sector minimum wage gazetted on July 1, the Malaysian Association of Cleaning Contractors (MACC) has begun to cry foul despite most employers given until January 2013 to comply with the controversial plan. According to MACC, there are some 7,000 registered cleaning contractors in Malaysia with 4,000 active players in the market.

It was reported that a minimum monthly wage of RM900 was set for private sector employees in the peninsula while those in Sabah and Sarawak will earn at least RM800 a month. The Human Resource Ministry said it will use the capacity of its enforcement officers to monitor and enforce the Minimum Wage Order.

MACC says that minimum wage is not feasible for the cleaning industry as clients are still reviewing contracts based on the number of workers allocated for a project and the latter’s refusal to increase budget allocation for the contractor.

“With the implementation of minimum wage, the cost of employing a local worker goes up by 39% to RM1,467 but we are unable to increase our quotation to clients,” said MACC president Noruddin Idris who is also the founder of Q-Services Sdn. Bhd, a cleaning company that has been in business for 21 years.

“Even the government sector has not increased its contract value as they are still paying less than RM1,000 for a worker a month,” he added.

Noruddin added that cleaning contractors in the east coast would incur greater losses compared to their counterparts in major cities as cleaners are only paid between RM600 and RM750 a month.

“The cleaning industry is a labour-intensive industry with 80% of our investment in human capital. For cleaning companies outside of major cities, a 50% increase in wages would increase the value of a contract by 35% and with a profit margin fixed at 15%, these companies would incur huge losses.

“In other words, if a contract is worth RM50,000 a month, the cleaning contractor will incur RM10,000 in losses monthly,” said Noruddin. However this is not a unique problem in the region.

Noruddin, who started his company with an initial investment of RM30,000 said the price war between new players and established contractors is unhealthy for the industry.

“Some say we want to monopolise the market but with low barriers of entry, those without adequate experience quote ridiculous prices for a contract.

“They are comfortable with a high volume of sale and not profit,” he added.

The other side of the fence

According to a food-manufacturing factory that employs professional cleaners, an increase in the cleaning contract fee would result in an increase in overheads, thus creating a domino effect that will eventually be borne by the end user.

“Our contracts are well calculated and it is based on industry norms. It would be unfair to us if cleaning contractors use minimum wage as an excuse to increase their price,” said the general manager who spoke under the condition of anonymity.

He added that most companies sign long-term contracts (more than three years) with cleaning contractors as a long-term relationship will mutually benefit both parties and the terms and condition of a contract should be respected.

“It is unfair to say that we are not willing to negotiate an increase in contract value, however there needs to be a check and balance. An increase in fee should result in an increase of workforce and cleaning companies have yet to prove that performance-based evaluation are applicable,” he said.

Overseas markets

Hong Kong and Singapore also faced similar issues when minimum wage was introduced but have managed to work their way around it to ensure the growth of the industry.

In Hong Kong, salaries are paid above minimum wage on account of demand and supply (minimum wage in Hong Kong is HK$28 (RM11.50 per hour) but foreign workers are not allowed into the industry. Companies provide training for locals and subsidies for special courses to enable staff retention.

The island city also grades their buildings to ensure the right type of cleaning contractor is hired. For Grade A buildings (Grades represent type of tenants, finishing and level of hygiene), contractors must have an extensive track record and a higher level of expertise to maintain the value and prestige of the building. This indirectly regulates the industry as new players are required to prove themselves before pitching for bigger projects.

Meanwhile in Singapore, a progressive wage system has been introduced last month to gradually scale up wages for 10,000 cleaners to earn at least S$1,000 (RM2,513) a month within three years.

According to the Environmental Association Management of Singapore (EMAS), there are 69,000 cleaners in the city-state, most of whom earn less than S$1,000 (RM2,500).

The union plans to meet this target by subsidising operating costs for higher productivity which would include the purchase of more efficient cleaning equipment under its Inclusive Growth Programme (IGP) to enhance productivity.

Noruddin asserted that Malaysia could tailor make a model similar to Hong Kong and Singapore to help the cleaning industry to flourish.

Education programme

The poor image of the industry with low skilled workers, low level of professionalism and lack of motivation discourage local workers from entering the industry.

To curb this issue, the association is working with the Human Resource Ministry and the Domestic Trade and Consumer Affairs Ministry to come up with suitable syllabus to elevate the skills of cleaners.

One of it being the Malaysian Skills Certificate issued by the Human Resources Ministry in recognition of a worker achieving the required level of competency in their respective field.

Said Noruddin: “If clients continue to go by the number of workers working on a particular project rather than work performed to determine a contract’s value than employers will not be encouraged to develop skilled labour.”

Success story

Malaysian Cleaning Services Sdn Bhd (MCS) echoed Noruddin’s comments. Its founder M. Karunanidhi said his organisation is finding it difficult to source for workers.

“We are willing to hire locals but most of them do not want to be part of this industry as it is unglamorous,” said Karunanidhi, who started MCS in 1982 and currently has a monthly turnover of RM1.5mil.

“There are success stories in the industry but we all started fromscratch. I started at the age of 17 with one polishing machine and I was going from door to door on my bicycle offering my services,” he added.

MCS currently has more than 30 projects across the peninsula that ranges from RM60,000 to RM100,000 a month. Under a subsidiary company MCS Raaga Sdn Bhd, Karunanidhi has also has started selling sanitising products imported from Australia to clients in Malaysia and will be venturing into the Indonesian market soon.

Lack of human capital, unfair expectation of workers from clients and high levy payments are some of the other nagging problems that have not been resolved for decades.

 

Source : The Star

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