Aon Hewitt, a global human resource consulting firm, has published their Total Compensation Measurement (TCM) 2015 Study. This comprehensive report analyzes compensation data from 25,000 positions in 180 countries.

Salary increase by industry sector in Malaysia

While the global GDP is projected to grow from 3.1% in 2015 to 3.6% in 2016, regional economic conditions play a vital role in employee compensation decisions. In Southeast Asia, the Philippines and Vietnam led in 2015 with 6% and 6.5% growth respectively, a trend predicted to continue in 2016. Indonesia reported the highest consumer price index (CPI) increase at 6.8% year-over-year, while Malaysia, the Philippines, Singapore, Thailand, and Vietnam remained moderate. The Philippines also faced the highest unemployment rate in 2015 at 6.3%.

Malaysia’s economy in 2015 was impacted by the introduction of a goods and services tax (GST), a significant weakening of the ringgit, and falling commodity prices. The country’s GDP dipped to 4.7% in 2015, with a projected 4.5% for 2016. The CPI remained relatively low at 2.4% in 2015, projected to rise to 3.8% in 2016, with unemployment holding steady at 3.0% for both years.

Despite these economic challenges, the Aon Hewitt salary survey reveals stable salary increases in Malaysia, with a 5.6% rise in 2015 and a projected 5.8% in 2016. Prashant Chadha, Managing Director of Aon Hewitt Malaysia, emphasizes that in a challenging economic climate, informed reward decisions based on comprehensive data and a broader economic perspective are crucial. He suggests that leading employers integrate their reward strategies with aspects such as performance, career development, company culture, and diversity to enhance their overall employee value proposition.

The Aon Hewitt Total Compensation Measurement report indicates that average salary increases in 2015 and projected increases for 2016 have remained relatively consistent across all job categories. Variable payouts, like performance bonuses, saw a slight increase in 2015, reaching approximately two to three months of annual base salary, and are expected to stabilize in 2016. The Aon Hewitt 2015-2016 Malaysia Salary Increase Survey forecasts higher salary increases for most industries in 2016.

Malaysia recorded the second-highest involuntary turnover rate at 6% and the third-highest voluntary turnover rate at 9.5% in Southeast Asia this year. Aon Hewitt’s TCM 2015 Survey in Malaysia highlights the correlation between reasons for voluntary attrition and retention strategies. The top three reasons cited are “better external opportunities,” “further studies,” and “work-life balance.” Key measures adopted by companies to attract and retain talent include offering “above-market pay,” “improved work-life balance,” and providing “timely and meaningful feedback from managers.”

Nur Amani Yusnida, Aon Hewitt’s Performance, Reward and Talent Practice Lead in Malaysia, observes that with average salary increases hovering around 5.7% for the past five years, employers are adopting a cautious “wait and see” approach to salary budgeting. The focus appears to be on maximizing efficiency and minimizing costs. The downward trend in voluntary turnover from 12.2% in 2014 to 9.5% this year is indicative of the volatility and uncertainty in the Malaysian market.

Furthermore, Aon Hewitt’s recently published Hot Topic Survey provides valuable insights into how organizations in Malaysia are responding to the current economic landscape. The study indicates that the depreciation of the ringgit and the implementation of GST are the most significant economic factors impacting businesses. Employees are particularly affected by the recent increase in road tolls. However, they view the proposed minimum wage increase and the higher salary ceiling for Social Security Organisation (SOCSO) eligibility, as outlined in the 2016 Budget, favorably.

In response to the rising cost of living, 22% of companies plan to offer higher salary increases than initially budgeted, while 7% are providing one-time salary adjustments. Nearly half (47%) have reevaluated their benefits packages in the past two years, with a focus on medical coverage limits and mileage reimbursement. A significant 76% of organizations reported an increase in medical claims, and almost three-quarters (72%) noted a rise in medical leave following the recent haze problem.

Surendran Ramanathan, Aon Hewitt’s Southeast Asia Retirement and Investment Practice Lead, highlights the strain on both employers and employees due to the current economic climate. Businesses are grappling with budget limitations, while employees are dealing with the increased cost of living. He emphasizes the need for companies to prioritize the effectiveness of their reward spending.

Prashant Chadha underscores the findings of Aon Hewitt’s Best Employers Research and numerous interviews with CEOs and HR directors, stating that even as companies focus on cost optimization, employees need to maintain high performance levels. He notes that top performers will not only be rewarded through performance-based pay but also benefit from other career-enhancing rewards, ensuring both retention and alignment with organizational goals.

The Aon Hewitt Best Employers - Malaysia 2015 Country Report reveals that 78% of Best Employers integrate structured, formal recognition programs with manager-led recognition, significantly higher than the market average of 40%. It also shows that Best Employers compensate their high performers 21% more than average performers. This differentiation contributes to a more positive employee perception of recognition and the impact of performance on pay.

Best Employers demonstrate strength across all four pillars of their criteria: high employee engagement, a strong employer brand, effective leadership, and a high-performance culture. They report 38% higher revenue, 50% better profit growth, and a 38% higher rate of internal job filling compared to the market average.

Gap between rhetoric and reality in Malaysia organisations

1 International Monetary Fund (IMF)
2 Aon Hewitt 2015-2016 Global Salary Increase Survey
3 Aon Hewitt Total Compensation Measurement
4 Aon Hewitt Hot Topic Survey, November 2015. SOCSO provides social security protection to employees and their dependents through social security schemes to improve the employees’ social wellbeing.
5 Aon Hewitt Best Employers– Malaysia 2015 Country Report