A WEAK economic outlook coupled with continuous pressure on businesses to keep costs down and expected higher inflation rate as a result of the on-going pandemic have forced Malaysian companies to lower their salary increment forecast for 2021.
A recent survey on salaries finds salary increase softening at 4.5% with 14% companies forecasting salary freeze in 2021.
This is in contrary to an average of 5% overall increase forecasted in the first half of this year, according to Mercer’s annual Malaysia Total Remuneration Survey (TRS) 2020.
Mercer, a human resources consulting firm, noted gross domestic product (GDP) is expected to contract between 3.5% to 5.5% in 2020 while inflation is projected to be at 0.5% in 2021, compared to -1.2% in 2020.
While that is forecast for next year, according to the survey results, there was still light at the end of tunnel for Malaysian employees this year despite the challenges triggered by the pandemic as salaries jumped by an average of 4.7%.
However, the survey highlighted that close to two in 10 companies have reported implementing a salary freeze.
This marks the first time in four years that overall salary increment has dipped below 5%, the survey pointed out.
The survey, which saw 529 Malaysian companies taking part, was first conducted between April and June this year, followed by additional surveys in July and August in light of the fast-changing market environment.
The flagship annual compensation and benefits benchmarking study, identifies current pay practices and benefits policies, as well as budget, hiring and turnover trends for the year ahead.
Elaborating on the survey findings, Mercer’s acting CEO for Malaysia Godelieve van Dooren said: “The economy is expected to stage a rebound in the range of 5.5% to 8% in 2021, and businesses may be cautiously optimistic, taking a ‘wait-and-see’ approach on their compensation strategy, depending on the course of the pandemic.
“This is likely a welcome news for employees as slowing inflation will also give real-wage increases a boost.
“On the other hand, due to the uncertainties, companies may decide to delay the increase of salaries, or lower the budget even further – depending on the industry segment of the company. After all, affordability remains a key criterion for deciding salary budgets,” she remarked.
Lifestyle Retail recorded the biggest dip
Across the industries, the survey revealed increments remained relatively stable for the High Tech, Consumer Goods, Life Sciences and Chemical industries, while retail, manufacturing and logistics industries saw a significant dip.
The drop in the retail, manufacturing and logistics, Mercer Malaysia Consulting Leader Koay Gim Soon explains, is owed to the change in consumer consumption patterns, lower spending capacities and reduced leisure activities as a result of the Corona virus.
Meanwhile, on the salary hike in tech industry, he said, “This is reflective of growth in demand seen for technology, due in part to the massive shift to remote working and related digital transformation efforts of businesses; as well as general stable demand for consumer goods.”
“However, it is important to note that the impact even within industries may be uneven. In consumer goods, for example, consumer durables as well as beverages like alcohol have come under immense pressure, which may impact salary increments in harder hit sectors,” he added.
Aside from these sectors, salary increment forecast for 2021 in Malaysia remained stable across job families as well.
The top two job families with the highest projected salary increase are healthcare and pharmacy services (5.2%) and production and skilled trades (5.2%).
General management jobs are predicted to receive the lowest increment at 3%.
Looking Ahead: A Wait-and-See Approach
Salary isn’t the only one that is predicted to see a fall next year, with the cautious business outlook, recruitment efforts are also expected to slow down.
Mercer’s pulse survey indicated 84% of companies in Malaysia have imposed a hiring freeze in 2020 with 81.4% stating that the hiring freeze will remain until business stabilises.
The survey also saw a shift in work environment with more Malaysian companies turning to remote working arrangements in response to the COVID-19 outbreak.
It (they survey) stated 62.2% of organisations have implemented remote working arrangements; and 31.7% have put in place flexible working arrangements.
“We expect to see more employers embrace flexible working arrangements post-pandemic, which may give companies an opportunity to consider how they compensate employees and review their total rewards packages.
“Policies to cover commuting costs or other voluntary benefits such as parking allowances that may have been necessary before the transition might prove unnecessary to a remote workforce. Instead, companies could consider supporting work from home allowances to provide a good work experience at home as well,” suggested Dooren.
For more data and insights from the Malaysia Total Remuneration Survey 2020, please click here. – Oct 27, 2020
