Malaysia's oil palm plantation industry is expected to gradually adopt the Malayan Agricultural Producers Association (Mapa) pay hike proposal for some 157,270 plantation workers nationwide.
Industry executives say the plantation companies have no choice but to offer the same thing to avoid losing staff and more importantly attract local workers to join the already labour-strapped sector.
Johor-based Kim Loong Resources Bhd managing director Gooi Seong Heen said the sector has to follow suit to prevent workers from jumping ship.
"Labour cost will go up but it will not be significant. Hopefully with the pay hike, the workers will work harder and plantation companies will get higher productivity," Gooi told Business Times.
From September 1, some 157,270 plantation workers will get a 10 per cent pay increase and are guaranteed a minimum monthly pay of RM850.
Malaysia has some 500,000 plantation workers, half of which are foreigners.
Most of Malaysia's plantation companies in Peninsular Malaysia are members of Mapa while only a handful from Sabah are Mapa members.
The pay hike by Mapa follow closely Sime Darby Bhd's unprecedented pay hike effective July 1 for its 37,000 estate workers.
Separately, Genting Plantations Bhd, the plantation arm of Genting Group, is also giving all of its more than 12,000 estate and oil mill workers and non-executive staff a RM200 pay increase a month, effective September 1 in conjunction with Mapa's scheme.
CIMB Investment Bank analyst Ivy Ng Lee Fang said over time, other plantation companies will have no choice but to respond with incentives for their staff to work harder.
"But I think, most of the plantation companies in Malaysia will wait until September 1, to get a clearer picture of the scheme.
This is because most plantation companies in Sabah are not members of Mapa and for now they are not adopting to it yet. They would want to evaluate it first, talk to their human resource department, go on the ground and talk to their workers first and learn about it more before implementing it," she said.
She added although raising pay will increase production cost, this could be offset by higher worker productivity if the salaries are linked to performance.
A TDM Bhd official said the hike is long-awaited as foreign workers are known to work harder than their local counterparts, which leads to their salaries being almost equal or higher than that of Malaysian workers.
"Cost of production will definitely go up but plantation companies have no problems in absorbing it. Hopefully, the higher cost will be offset by higher productivity from the workers who are happy with their pay hikes," said the official.