Salaries in Malaysia projected to remain flat in 2024

Photo by Zukiman Mohamad

Aon plc has released the global and regional findings from its 2023 Salary Increase and Turnover Study. The survey revealed that salaries in Malaysia are expected to remain flat in 2024.

While salaries in Malaysia and Singapore are expected to stay flat at 5.0 percent and 4.0 percent respectively, the survey found the median salary is expected to increase 6.5 percent for Indonesia, 5.5 percent for Philippines, 4.9 percent for Thailand and 8.0 percent for Vietnam in 2024.

The salary increases are expected to hold steady in Malaysia despite economic slowdown concerns as employers struggle with talent attrition. The attrition rates across Malaysia rose to 16.2 percent in 2023 from 14.9 percent in 2022 as a consequence of an ever-changing talent strategy and the ongoing gap between supply and demand of talent. Attrition rates are the highest in Philippines at 17.5 percent and lowest in Vietnam at 13.8 percent.

Rahul Chawla, partner and head of Talent Solutions for Aon in southeast Asia said, “As companies navigate new forms of volatility, salary-increase planning has become challenging across the region. A reassessment of compensation strategies based on the latest data and analytics shows that it’s crucial for firms to stay competitive.

“By leveraging data from their own organisations as well as the market, companies can make better informed decisions enabling them to not only weather the challenges of an uncertain economic climate but to thrive in an evolving workforce landscape.”

The report further revealed that businesses in southeast Asia are cautiously optimistic about hiring, with 40 percent of the companies reporting no changes to their recruitment numbers, and 40 percent of companies having hiring restrictions.

Despite an increase in layoffs earlier in the year, Aon’s data shows headcount numbers across industries are still higher than pre-pandemic levels, with layoffs mainly occurring in the non-core/expansion areas of the business, while they continue to hire for other business lines.

New hire premiums are averaging between 5.6 percent and 13.3 percent, with firms becoming more cautious with compensation spends as they streamline budgets, enhance cost efficiency and re-evaluate compensation strategy. This contrasts with 2022, where southeast Asia saw a hiring boom and new hire premiums averaged between 14.7 percent and 23.6 percent.

Rachel Jayaprakash, market leader of Talent Solutions for Aon in Malaysia said, “Businesses in Malaysia seemed insulated from global economic trends. However, the country is now beginning to experience slower growth escalated by the rising cost of living and a depreciating ringgit.

“2024 is expected to be similar with moderate growth and consumption levels to normalise. It is imperative for organisations to make informed decisions using insights and robust market data to create a holistic employee value proposition.

“This will not only ensure pay packages remain competitive to sustain the rising cost of living but will also help build a resilient workforce in which employees are rewarded for their efforts and results.”

Looking ahead to 2024, salaries across industries in Malaysia also continue to vary in addition to the differences between countries.

The retail industry continues to have the highest budgeted salary increases at 5.2 percent, technology, life sciences and medical devices, and manufacturing are at 5.0 percent, while financial services is at 4.5 percent.

Across southeast Asia – Malaysia, Philippines and Singapore – more than half of the roles have had salary increases outrun inflation. In Singapore and Philippines 71.7 percent of salary increases outran inflation while Malaysia had 56.4 percent.

However, for Indonesia, Vietnam and Thailand, on average, 70 percent of salary increases lagged inflation. For 67 percent of firms in southeast Asia, inflationary pressures are included as part of their pay policy considerations when reviewing salary increases.

These insights are based on data gathered in the third quarter of 2023 from 950 companies across Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.