Employers looking at cutting staff as GST starts to bite businesses

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(June 4): Faced with falling sales and high operating costs, some Malaysian companies are considering cutting staff either through retrenchment or voluntary separation schemes, said an employers’ federation.

Malaysian Employers Federation executive director Datuk Shamsuddin Bardan said about 20% of its members were looking into such options and they cut across all economic sectors from retail to hospitality to manufacturing.

These companies have approached the MEF for advice and the federation’s consultants were currently working with them on how to best cut costs and whether or not to lay off staff, said Shamsuddin.

Companies were finding it harder to meet overheads because of lower demand and consumption, especially after the 6% goods and services tax (GST) was introduced in April, he said.

“For some members, business is almost 30% down these past few months. So they are looking at either retrenchment or voluntary separation exercises,” Shamsuddin told The Malaysian Insider.

About 5,000 individual companies and 22 trade associations are members of the federation.

A May 2 StarBiz report quoted several associations and analysts who said they were seeing a slowdown of between 20% and 50% in business for retailers in the months after the GST.

Retail Group Malaysia (RGM), a consulting firm in the retail sector, expected sales to slow down for six months after April, the StarBiz report said.

Retail spending was expected to return to normal by year-end, the RGM was quoted as saying.

The Malaysian Trades Union Congress (MTUC), which represents blue collar private sector workers, however, disputed the reasons for laying off workers.

“According to a Bank Negara report, SMEs (small and medium enterprises) are still performing well,” said MTUC secretary-general N. Gopal Kishnam.

Bank Negara’s economic report for the first quarter of this year showed that business activity grew between 5.6% and 9.6% in all industrial sectors, except for agriculture.

The services sector grew by 6.4%, especially in consumption-related businesses while the manufacturing sector’s 5.6% growth was driven by strong exports, particularly in the electronics and electrical cluster, the report said.

“The construction sector was supported mainly by the non-residential and residential sub-sectors, while the mining sector continued to record stronger growth amid higher crude oil production,” BNM said.

Total economic growth, however, was 5.6% in the first quarter of 2015, down from 5.7% in the last quarter of 2014, and lower than the 6.3% recorded for the first quarter of 2014.

If staff reductions were needed, Gopal Kishnam said, employers should first start with foreign workers.

“SMEs are flooded with migrants, if there is a need (for retrenchment), repatriate them first and pay the balance of wages.” – The Malaysian Insider