Malaysia salaries expected to rise 4.5% in 2021

Salaries in Malaysia are expected to increase by 4.5% in 2021, Mercer's annual Total Remuneration Survey 2020 for the country has found.

While these figures are slightly lower than earlier forecasts of a 5% average, made in H1 2020, they remain comparable with the actual increase of 4.7% seen in 2020.

That said, of the 529 companies surveyed, 14% foresee a salary freeze in the coming year.

According to Mercer, the projected salary increments come on the back of a weak economic outlook for Malaysia, with the country's GDP expected to contract between 3.5% to 5.5% in 2020, as well as continuous pressure on businesses to keep costs down amid uncertainty brought on by the COVID-19 pandemic.

Inflation is projected to be at 0.5% for 2021, compared to -1.2% in 2020. Commenting on the findings, Godelieve van Dooren, Acting CEO, Mercer Malaysia, said the economy is expected to "stage a rebound" of between 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 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."

Salary increases across industries in 2020, projections for 2021

Across the industries surveyed, increments for the high tech, consumer goods, life sciences and chemical industries remained relatively stable, the survey revealed. At the same time, the biggest dip in salary increases was reported in the retail, manufacturing and logistics industry.

On these figures, Koay Gim Soon, Consulting Leader, Malaysia attributed the salary increment in high tech to 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.

While this was so, he noted it was "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."

Zooming in, the salary forecast for 2021 in Malaysia remained stable across job families, with healthcare and pharmacy services, and production and skilled trades having the highest projected salary increases (5.2% each).

General management jobs are predicted to receive the lowest increment at 3%.

Variable bonuses remained stable in 2020

Overall, budgeted bonuses for 2020 stayed the same as 2019, at 17%.

The highest increase was seen in the high tech industry (22% in 2020, vs 20% in 2019), while the chemical industry saw an increase from 14% to 15%. On the other hand, the lifestyle retail industry saw the biggest drop, from 12% in 2019 to 8% in 2020.

Koay added: "2019 proved to be a good year for businesses with 87% of companies reporting bonus payouts of 1.9 to two months this year. The remaining 13% 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."

Looking ahead: 81.4% of companies to continue with hiring freeze in 2021

Given the cautious business and economic outlook ahead, companies are expecting to slow down their recruitment efforts in 2021, the survey found. In fact, 84% of companies surveyed had imposed a hiring freeze in 2020, and, of these, 81.4% will continue with it until business stabilises.

Additionally, on a non-salary front, the survey also noted a shift to remote working arrangement among Malaysian companies, with 62.2% having implemented them this year, and 31.7% having put in place flexible work arrangements in response to the pandemic.