Cover Story: Deflated salary expectations for 2021
Written by Supriya Surendran/The Edge Malaysia December 05, 2020 14:00 pm +08
EXPECTING a salary hike next year and perhaps a bonus to boot?
Consider this: More than 30,000 companies in Malaysia have shut down their operations since March and the job loss tally was close to 90,000 at end-October.
The writing is on the wall for employees expecting hefty salary increments and bonus payouts next year, except perhaps, for those in specific sectors or with niche skills or experience.
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What’s the Salary Expectations for Malaysians in 2021?
Mercer’s annual Malaysia Total Remuneration Survey (TRS) 2020 conducted between April and June this year showed that companies were forecasting an average 5% overall increase in salaries for 2021.
However, recent Mercer surveys reveal a softening in the projection to 4.5% for 2021, compared with the actual increase of 4.7% in 2020.
“From our database of 529 multinational companies contributing to Mercer’s Total Remuneration Surveys, spanning 10 key industries, we observe that this is the first time [increase in] salaries have dipped below 5%, marking the lowest average salary increase in Malaysia since 2016,” says Godelieve van Dooren, Mercer’s acting CEO for Malaysia.
The obvious reason for the grim projection is the Covid-19 pandemic, which resulted in different phases of the Movement Control Order being implemented since March. The restrictions resulted in staggering losses for many businesses, especially those in the retail, tourism, hospitality and aviation sectors.
“Based on [our] survey results, the most impacted industries are retail and hospitality. However, it’s important to point out that the impact is uneven within industries. There may be sectors within an industry that are more affected than others. For example, while the consumer goods industry is generally performing well, the beverage sector (for example, alcohol) may be harder hit due to the restrictions imposed on entertainment and leisure businesses,” says Van Dooren.
Randstad Malaysia head of operations Fahad Naeem says that overall, the salary growth projection for Malaysian companies next year will be relatively conservative as companies are tightening their budgets to sustain their operations.
“The growth percentage in salaries that candidates can expect to receive in 2021 will highly depend on the industry’s projected performance as well as demand for the specific skills and experience.
“Employers are likely to offer a favourable salary increment to professionals who are equipped with specialised and niche skills as a tactic to retain them in the organisation. Workers in high-demand industries due to Covid-19, such as technology, e-commerce, chemicals and life sciences, may also see a steady increase in their salaries next year, depending on their individual functions.
“Workers in functions where there is a surplus of candidates or which are highly impacted by the Covid-19 pandemic will likely see a much lower salary increment. It is hence important for all Malaysians to adjust their salary expectations next year,” he tells The Edge.
As for bonus payouts, the Mercer survey stated that overall, budgeted bonuses for 2020 stayed the same as 2019 at 17%, which is equivalent to two months of the base salary.
“2019 proved to be a good year for businesses, with 87% of companies reporting bonus payouts of 1.9 to two months this year, with the remaining 13% not providing any bonuses in 2020. However, we foresees a decrease in bonus payouts in 2021, due to sustained uncertainty and the economic impact of Covid-19,” Mercer Malaysia consulting leader Koay Gim Soon said during the presentation of the survey.
Randstad’s Fahad says that bonus payouts in 2021 for work done in 2020 will depend on two factors — the industry that the employee is working in and the organisation’s performance.
“For instance, even as we expect all technology firms to be performing well this year, companies that develop products for aviation may suffer a hit due to the dip in demand.
“Most companies would also have a phased response plan for financial budgeting purposes. Support functions (such as non-revenue generating departments) will most likely see a bonus freeze. Commission structures for revenue-generating employees may have also changed to reflect the current economic situation. While they may still receive a bonus, it could be relatively lower compared to previous years.
“However, bonus schemes should be reinstated once the market recovers with the promising progress in vaccines and as companies revise their human capital investments for 2021,” he says.
Widespread hiring freeze
With the cautious business outlook, recruitment efforts are expected to slow down in the year ahead.
“Eighty-four per cent of companies in Malaysia indicated that they have imposed a hiring freeze in 2020, with 81.4% stating that the hiring freeze will remain until business stabilises,” says Koay.
Non-cyclical industries such as healthcare, the public sector, transportation and education are less affected by hiring freezes, and are in fact growing in terms of relative share of hiring, says Hays Malaysia managing director Tom Osborne. “We’ve also noticed that tech and financial industries are less impacted in many countries as well. Hiring trends by function vary, and we have seen an increase in the share of job posts in healthcare, community services, education and engineering, which is likely attributed to the change in talent demand since Covid-19.”
‘Hot jobs’ in 2021
Brian Sim, managing director and country head of Kelly Services Malaysia, says while it is true that some roles, such as data entry clerks, have been made redundant as companies embark on automation and digitalisation initiatives, new-collar jobs are being created as a result of these initiatives.
“For example, the data being churned out by the machines … will still need [the human touch] to analyse the data and decide what are the trends moving forward for that data. So, in this instance, they would need specialists in this area.
“Some of the roles that we foresee will become more popular in the future are data analysts and scientists as well as big data specialists. Also, we foresee that artificial intelligence and machine learning specialists will also form part of the new-collar jobs that will be made popular in the future,” says Sim.
For clarity, new-collar workers are defined as individuals who develop the technical and soft skills needed to work in technology jobs through non-traditional education paths.
“From the perspective of marketing, more companies will move from conventional marketing methods to digital marketing, hence we foresee the need for digital marketing and strategy specialists. These are some of the roles that we foresee will be created in the market, in hand with the technology adoption and digitalisation,” adds Sim.
Kelly Services Malaysia’s Salary Guide for 2020/2021, which was derived by combining the expert market knowledge of senior recruitment professionals within the Kelly and Capita Global network, as well as the latest job placement data recorded on the database, identified several “hot jobs” across industries.
These included lead software developer, analyst programmer and full stack Java developer for the information technology industry, and project change management specialists for the banking and financial services.
What kind of salary scales do these jobs offer? According to the guide, a lead software developer with five to eight years of experience can expect to earn a minimum of RM10,000 and a maximum of RM17,000 per month.
This is a slightly wider range compared with the 2018/2019 guide, in which the job commanded a minimum of RM9,800 and a maximum of RM16,000 per month.
Osborne says that legal candidates with compliance experience will be in great demand in 2021, due to the enforcement of Section 17A of the Malaysian Anti-Corruption Commission (MACC) Act 2009 (Amendment 2018) in June this year.
“There will be greater demand for lawyers with pertinent legal and compliance experience to ensure that portfolios are adequately covered and costs are saved, something that is essential in the current employment climate.
“In 2021, companies will be looking to become more efficient in the services that they provide. To this end, employers will be actively recruiting human resource (HR) professionals with experience in automating processes, and those who understand the various HR tools and technologies that can enhance the efficiency of the entire HR cycle through the hiring of project managers and shared services candidates.”
Osborne adds that the demand for cloud professionals will also increase as companies adopt hybrid working models.
“More and more companies are coming around to the benefits of hosting applications on the cloud, which means that 2021 will be a year of exponential demand for cloud technology, sparking a hunt for candidates with cloud security and DevSecOps skills.
Meanwhile, “dramatic global shifts are creating a boom in manufacturing companies establishing shared service centres in Malaysia. As this requires greater integration between supply chain and the business, new job titles such as supply chain manager and business process owner are being created. These positions, with a focus on automation and technology, are key to the future of supply chain and procurement in Malaysia, and candidates will be required to be flexible, able to transfer knowledge from established processes, and be in possession of systems knowledge as teams become leaner in the coming year.”
Upskilling and reskilling
According to PricewaterhouseCoopers (PwC) Malaysia’s survey on technology, jobs and skills conducted in April and May 2020, about half of all respondents believe that the onus for upskilling rests with the individuals themselves.
However, PwC Malaysia’s Director for its People and Organisation Consulting practice Indra Dhanu believes that the onus should not be on the individuals alone as it is also important for the government and the business community to prioritise workforce upskilling and reskilling.
“An individual’s contribution cannot bring in the same amount of results as what a concerted effort through public-private partnerships can deliver in implementing the national agenda on upskilling.
“For example, Malaysia is a leader in manufacturing especially in the state of Penang, so vocational schools and engineering institutions in Penang and the Northern Corridor Economic Region should focus more on areas such as automation, Internet of Things and robotics.
“So, when governments at the national level drive policies aimed at upskilling, then relevant courses can be cascaded or introduced to institutions, be it public or private institutions, and then the individuals can take up these courses to benefit from them. For instance in the UK, the Office for National Statistics realised that a lot of people were going to lose their jobs, hence the UK government came up with various programmes covering topics in digital, coding, artificial intelligence [to provide additional skills to this affected group of people],” he says.
Indra says that this is the right time for both individuals and organisations to start thinking of upskilling.
“The debate around digitalisation, upskilling and reskilling has always been there. Even before the pandemic, organisations were thinking about it but they were not actively doing a lot, in general.
“So now with the pandemic, many organisations are looking at optimising their costs and improving productivity in order to grow, and to grow, they would need to invest in technology, be it in simple basic Enterprise Resource Planning systems or in automation.
“Eventually, you will need individuals who are well trained and upskilled to run those systems for you and that is why it should be the long-term strategy for organisations to have the impetus to upskill their staff,” he says.
Ling Hsern Wei, head of PwC’s Academy, PwC Malaysia, says that a lot of business owners are currently managing a balancing act — on one hand needing to keep their day-to-day operations running, and on the other hand, needing to adapt their long-term plans for the future.
“As business models become affected by Covid-19, organisations are putting in place transformation plans, and when you have a transformation plan, you immediately create a skills gap within the organisation.
“The immediate reaction can be to cut costs, and this would include costs to upskill the staff. The danger in doing that is when you may have a transformation plan, but you don’t have the skilled workforce to be able to deliver that.
“With the half-life of learned skills now being around 2.5-5 years according to several studies, the era of having a degree that lasts a whole career is long gone. Organisations and individuals that embrace this are not just upskilling for now, but will make learning and relearning part of their DNA,” he says.
In Budget 2021, a total of RM1 billion will be allocated for reskilling and upskilling programmes, including RM100 million to the Human Resources Development Fund (HRDF) to implement training in collaboration with private-sector employers; RM100 million to the Malaysia Digital Economy Corporation (MDEC) to transition the existing workforce to fill the growing needs in the information and communications technology industry; and RM100 million to regional corridor authorities, mainly the Iskandar Regional Development Authority and Sabah Economic Development and Investment Authority to provide new skills training to workers badly affected by the closure of borders to foreign tourists, in order to assist them in securing new employment or source of income.
Initiatives announced earlier include Penjana HRDF, a training incentive programme that emphasises training in terms of reskilling and upskilling of Malaysians to enhance the employability of the unemployed.
The way forward
A win-win solution for navigating the job market in 2021 is for employees to leverage on training programmes provided by government institutions, and for employers to change their mentality when it comes to training their employees, says Kelly Services’ Sim.
“There are a lot of programmes out there, and it will be a waste for any candidate to miss an upskilling programme, especially ones that are being subsidised by the government. So I would advise employees to maximise this [opportunity].
“For employers, it is important for companies to motivate their employees through upskilling and other learning and development initiatives through engagement activities, as well as to ensure that employees continue to walk with them to progress further in the future.
“Hence, it is important for companies to have that mindset when it comes to investments. Don’t look at salaries, wages, learning and development costs as expenses. Treat it as investments,” he says.
In its report “Work in an Evolving Malaysia”, Khazanah Research Institute (KRI) says the Covid-19 crisis is clear evidence why digitalisation and automation matters, further supported by various government incentives for firms to digitalise and automate.
“However, the transition process for these firms should also be supported by investments to improve workers’ skills so that they can operate the new technologies installed to improve productivity and business resilience. Simply put, we must ensure that workers complement technological advancements rather than simply being substituted by them,” says KRI.
KRI adds that a delay in widespread technological adoption provides an opportunity for policymakers to support labour-enhancing technologies, strengthen the safety net for displaced employed persons and prepare people for changing labour market conditions.