Lower salary increments and bonus payout seen in 2021, survey reveals

Across the industries surveyed, increments for the high tech, consumer goods, life sciences and chemical industries remained relatively stable


CONSULTING firm Mercer Inc expects any prospects of a wage rise to soften in 2021 as Malaysia’s economic outlook continues to look bleak.

Its latest annual Total Remuneration Survey 2020 for Malaysia revealed estimates of a 4.5% decline in salary increases next year, with the country’s GDP likely to contract between 3.5% and 5.5% in 2020. Inflation is projected to be at 0.5% for 2021, compared to -1.2% in 2020.

Mercer’s consulting leader for Malaysia Koay Gim Soon said across the industries surveyed, increments for the high tech, consumer goods, life sciences and chemical industries remained relatively stable.

He said the salary increment in the high-tech industry 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’s 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 within industries may be uneven. In consumer goods, for example, consumer durables, and beverages like alcohol, have come under immense pressure, which may impact salary increments in harder hit sectors,” he told reporters in a virtual media briefing yesterday.

According to the survey, the biggest dip in salary increase reported is in the retail, manufacturing and logistics industries.

The poll conducted between April and June this year found 14% of total companies surveyed forecasting a salary freeze, with two in 10 companies already implementing a salary freeze.

Koay said 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 payouts in 2021, due to sustained uncertainty and the economic impact of Covid-19,” he added.

Meanwhile, Mercer’s acting CEO for Malaysia Godelieve van Dooren said companies had seen some success with remote working, with close to 50% stating that the option has not impacted productivity levels.

“We expect to see more employers embrace flexible working arrangements post-pandemic, which may allow companies 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,” she added.

Instead, companies could consider supporting work from home allowances to provide good work experience at home as well.

“While the future remains uncertain for many employers, it is imperative that a longer-term and more holistic view is taken despite pressures to make short-term decisions.

“Companies typically pore over compensation and benefit numbers, especially at a time like this, but there is an opportunity to look beyond salaries such as enhanced training and flexible health and wellness initiatives, to position their companies for recovery when demand returns,” she further explained.

Commenting on unemployment, she is optimistic the labour market will recover in 2021 and return to levels seen in 2019 pre-pandemic, contributed by the healing of the economy.

“The number of companies doing a pay cut currently is relatively small. When companies move to pay cuts, they protect the base, meaning it doesn’t have to downsize.

“We haven’t seen slower hiring intentions from the companies we surveyed. They may freeze the headcount or salary if they need to, but job cuts in the workforce have not been widespread,” she said.