Salaries in Malaysia expected to rise in 2021 despite Covid crisis

KUCHING: While companies in Malaysia forecasted an average five per cent overall increase in salaries for 2021 when surveyed in the first half of 2020, recent surveys reveal a softening at 4.5 per cent, with 14 per cent of companies forecasting a salary freeze.

This is according to the Mercer’s annual Malaysia Total Remuneration Survey (TRS) 2020, conducted between April and June this year. Additional surveys were also conducted in July and August in light of the fast-changing market environment.

The survey also found that salaries in Malaysia increased by an average of 4.7 per cent in 2020, despite the challenges triggered by the Covid-19 pandemic. However, 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 five.

Godelieve van Dooren, Mercer’s acting chief executive officer for Malaysia said, “The economy is expected to stage a rebound in the range of 5.5 to eight per cent 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 welcome news for employees as slowing inflation will also give real-wage increases a boost. On the other hand, due to this uncertainty, 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.”

Across the industries surveyed, increments for high tech, consumer goods, life sciences and chemical industries remained relatively stable. The biggest dip in salary increases is reported in the retail, manufacturing and logistics industry.

Mercer consulting leader for Malaysia Koay Gim Soon said, “The salary increment in High Tech is reflective of the 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.

“It is not surprising that Lifestyle Retail recorded a drop, given the change in consumer consumption patterns, lower spending capacities and reduced leisure activities as a result of the pandemic.

“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.”

The salary trend forecast for 2021 in Malaysia remains stable across job families as well. The top two job families with the highest projected salary increase are healthcare and pharmacy services (5.2 per cent) and production and skilled trades (5.2 per cent).

General management jobs are predicted to receive the lowest increment at three per cent. Variable Bonuses for 2020 remained stable, mirroring trends in salary increases

Overall, budgeted bonuses for 2020 stayed the same as 2019 at 17 per cent. The High Tech industry saw the highest increase at 22 per cent compared to 20 per cent in 2019, while the Chemical industry saw an increase from 14 per cent to 15. The Lifestyle Retail industry saw the biggest drop from 12 per cent in 2019 to eight per cent in 2020.

“2019 proved to be a good year for businesses with 87 per cent of companies reporting bonus payouts of 1.9 to 2 months this year,” Koay commented. “The remaining 13 per cent did not provide any bonuses in 2020. However, we foresee a decrease in bonus payout in 2021, due to sustained uncertainty and the economic impact of Covid-19.”

With the cautious business outlook, recruitment efforts are expected to slow down in the year ahead, based on Mercer’s pulse survey.

A total of 84 per cent of companies in Malaysia indicated that they have imposed a hiring freeze in 2020 with 81.4 per cent stating that the hiring freeze will remain until business stabilises.