The Edge Online - Malaysian salaries on upward trend

Malaysian salaries on upward trend               

Tags: salary increaseWritten by Emily Tan   
Monday, 27 December 2010 12:14

Malaysian employers offered an average salary increase of 5% this year, slightly lower than 2009’s increase of 5.2%, and they are predicting an increase of 5.6% in the coming year, according to human resource consultancy Mercer’s Total Remuneration Survey 2010. The rising pay scale is a response to Malaysia’s steadily growing economy, coupled with the increased demand for and need to retain key talent. The survey included the responses of 353 Malaysian-based companies surveyed over June and July. The companies represented a range of industries and sectors including consumer goods, high-technology, energy and retail. Companies that reported salary freezes were excluded from salary increase figures.

“In 2010, only 2% of participants reported a salary freeze. They were excluded because they represent a small percentage and with a salary freeze, salary increment is a non-consideration,” said Richard Yu, Malaysia business leader for Mercer’s information product solutions in an email interview on Dec 23.

As with last year, the pharmaceutical industry reported the highest salary increase in 2010 of 5.6%. For 2011, pharmaceutical companies forecasted a salary increase of 6.3%. Other industries reported lower average salary increments, with consumer goods (24% of respondents) raising staff pay by only 4.7%. Shared services and outsourcing reported an increase in salary of 4.8% for 2010, while chemical and high-technology hiked pay by 4.9% and 5% respectively.

Variable pay and guaranteed bonuses differed widely across the industries, with workers in sales more likely to have heavily weighted variable pay packages.

Sales professionals in the pharmaceutical industry are reported to have received the fattest variable payouts at 71.6% of their annual base salaries in 2010, up from 59.5% in 2009. Across all industries, average variable pay as a percentage of the annual base salary in 2010 was 22.1%, up from the 20.4% in 2009.

Guaranteed bonus policies across industries showed an average bonus payment equivalent to 1.2 months’ base pay. The consumer goods industry gave a guaranteed bonus this year that was equivalent to 1.4 months’ base salary.

In Asia-Pacific, Vietnam showed the most dramatic increase in pay, with an average of 12.2%, said the study by Mercer. India is a close second with an average salary increase of 11.5% and Indonesia reported an increase of 8.4%. Lowest in the region was Japan with only 2.1%, followed by New Zealand with 3.1% and Hong Kong with 3.3%.

“Salaries and salary increases are reflection of a number of factors including GDP growth, foreign direct investment inflows, demand for talent and the respective industry’s growth rate,” said Yu. Having taken that into account, Malaysia’s annual total cash (comprising annual base salary, contractual bonus, fixed allowances and variable payments) is relatively competitive among Southeast Asian countries (excluding Singapore), he added.

Malaysia’s talent market is also growing increasingly competitive, with 56% of companies saying they plan to hire between June 2010 and May 2011, compared with only 39% in 2009 saying they plan to hire between June 2009 and May 2011.

Furthermore, 3% of companies last year reported plans to reduce headcount, and overall retrenchment rates across industries rose from 1.1% at end-2008 to 1.5% at end-2009. Only 1% reported plans to reduce headcount this year.

Meanwhile, the uncertain job market has made employees more reluctant to change jobs — turnover rates dropped from 16.8% at end-2008 to 16% across all industries in 2009.

And this year, companies reported that it was difficult to attract and retain staff such as sales professionals, engineering professionals and manufacturing para-professionals.

The main challenge for employers next year is the mismatch between available skill sets in the marketplace and industry requirements, said Yu. “This scenario will exert further demand on certain skills that are already in short supply. In 2011, companies will face challenges both in retaining talent with the currently available skill sets, as well as attracting new talent with the broader skills required.”

The way forward, said Yu, is for companies to formulate an appropriate rewards strategy that will enable companies to attract and retain required talent. “HR will also have to explore and implement appropriate career-management programmes that will enable companies to develop an adequate pipeline of talent required at various career levels,” he added.