The Muamalat Newsletter Vol. 2 2024

FEM eNewsletter | December 2024 59 Navigating Rising Labour Costs: HowDirect Selling can HelpMalaysian SMEs Thrive Richard Seow Business Consultant and Independent Researcher particularly for SMEs, which are the backbone of Malaysia’s economy, contributing over a third of the nation’s GDP and employing millions of workers (Seow, 2023c). As labour costs climb, many companies will need to adjust their strategies tomaintainprofitability. For labour-intensive industries, this could mean scaling back operations, automating certain processes, or even reducing the workforce. However, direct selling presents a viable alternative, as it operates with independent distributors rather than salaried employees (Seow, 2023c, 2024). This model not only alleviates the financial pressures associated with rising wages but also offers companies greater operational flexibility. Direct selling companies, including those engaged in multi-level marketing (MLM), rely on independent entrepreneur- minded distributors who earn commissions based on sales instead of receiving a fixed salary (Seow, 2022b, 2023a, 2023b). This arrangement allows businesses to significantly reduce overhead costs, such as wages, benefits, and the administrative As Malaysia gears up for the upcoming minimum wage increase from RM1,500 to RM1,700 in February 2025, businesses— especially those in labour-intensive sectors— are bracing for the challenges ahead. While the wage hike is designed to improve worker welfare, it presents considerable difficulties for many industries, particularly small and medium enterprises (SMEs) and labour- heavy sectors. However, one business model that stands to gain momentum in this shifting landscape is direct selling, an industry that has proven its resilience in turbulent times (Seow, 2022a). With its low capital requirements and flexible structure, direct selling is particularly well-suited to thrive amid rising labour costs and the changing consumer behaviours shaped by the COVID-19 pandemic. SMEs can consider utilizing the direct selling business model to promote their products and services while minimizing high labour costs. The impending wage hike is expected to have a significant impact on labour costs,