The impact of minimum pay implementation on small businesses operating cost and sustainability: A case of service business

Abstract

The implementation of minimum wage requirement in Malaysia beginning mid 2016 seems to impact both employees and employers in different ways. While this implementation could increase household income and claimed to boost employees’ productivity, employers or business operators, on the other hand are experiencing stringent effect on their business operating cost. The effect is more significant for small business operators, including the childcare centers. Childcare industry operates in the service sector, which represents the main contributor of Malaysian SMEs. Unfortunately for the industry, there is an increasing numbers of childcare centers have to cease their operation due to inability to comply with the minimum pay requirement. In the absence of thorough understanding of the phenomena, the small businesses, particularly among institution-based childcare, is at the risk of losing their businesses. This exploratory study intends to assess how the implementation of minimum pay requirement affects the existing operating cost structure, and consequently business sustainability of Malaysian childcare industry.