Cover Story: With confidence down, can wages keep growing?

-A +A

LAST YEAR was a good year for Malaysian employees, who saw above-average increments and bonuses, while robust recruitment throughout the year offered many opportunities for job hoppers vying for better pay. But on the back of several high-profile layoffs late last year and early this year, 2015 might not be such a good year.

Consumer sentiment is cautious, the property market is softening, interest rates are up, the stock market is down and the economic outlook as a whole simply isn’t as bullish. And when businesses lose confidence, salaries and hiring tend to slow down too.

In such an environment, what can Malaysian workers expect from the job market this year?

A good year actually, but only if you are a skilled professional in the mid-to-top level of your field, say the country’s top recruiters.

“We genuinely do not see any evidence of a slowdown at all for the skilled workforce from the mid to senior level, not even within oil and gas. The need for local skilled individuals is as high as ever,” says Hays Specialist Recruitment (Malaysia) Ltd country manager Tom Osborne.

Osborne’s focus,however, is on the mid to high end of the job market where Hays operates. At the lower end, there has been a steady stream of news that has driven concern about a softening job market — nothing that will see unemployment rise, but slower wage growth and possibly fewer opportunities.

“Compared with 2014, more employers say they will be hiring less this year, while fewer employers say they will be hiring more this year. As a lead indicator, it suggests that confidence of the market is weaker, but that doesn’t mean it will be a bad year. 2014 was a very good year for us,” says JobStreet country manager Chook Yuh Yng.

She points out that postings on the recruitment site have not shown any signs of slowing down in January. However, listings in March, the peak recruitment period, will be more telling of 2015’s outlook.

JobStreet primarily covers white-collar recruitment ads from entry to mid-level positions. The company’s survey in late 2014 shows only 37% of managers plan to hire more staff this year, compared with 49% in 2014. At the same time, 24% of survey takers said they would be hiring less this year, compared with 14% in 2014 (see “Employers planning to hire less” below).

It doesn’t help that one of the country’s largest employers, Malaysian Airline System Bhd, is in the midst of trimming 6,000 staff from its 20,000 strong headcount. Even if most of the staff are reskilled and redeployed among other companies, it would still soak up a large number of vacancies.

While one could argue that MAS’s layoffs could have been expected, it came as a surprise when Standard Chartered Bank announced the shutdown of its equities business in Asia resulting in 11% of its Malaysian workforce being laid off.

Not long after, CIMB Group Holdings Bhd announced that it would be closing its Australian investment banking business. It may not be local, but the bank will have a number of Australia-based staff to redeploy locally.

Adding to the concern, there has been talk in the market of voluntary separation schemes being undertaken in some of the big local banks. Strangely enough, financial services had been one of the most aggressive sectors in hiring last year.

According to Chook, JobStreet saw a 27% increase in recruitment ads for positions in banking and financial services in 2014, making it the fastest growing sector in terms of recruitment. It is also the second largest sector by JobStreet recruitment ads (see “Top five job postings by industry”).

“There might be some slowdown at the investment banking and equities level, but that only makes a small portion of recruitment in financial services. Commercial and retail banking continues to do well, and there continues to be high demand for front office, revenue-generating positions,” says Sally Raj, managing director of Robert Walters Malaysia, a professional recruitment consultancy.

“It is not going to be a hunky-dory year. There is a lot of perceived negativity in the market and there are industries that will face a dip. But there is not going to be a complete downturn,” adds Sally.

Meanwhile, the fall in crude oil prices to less than US$50 a barrel in the past few months also puts the oil and gas (O&G) sector in the limelight. Upstream operations that have on-

going long-term supply contracts should not be substantially affected but the O&G service and support businesses are expecting a slowdown.

After all, the country’s largest employer in the sector, Petroliam Nasional Bhd (Petronas), plans to slash capital expenditure and operational expenditure by up to 15%, and between 25% and 30%, respectively, this year.

“We don’t cover the technical O&G, in relation to drilling engineers and rotation engineers. But based on the CVs that we have received, there are a lot of these people approaching us now for jobs. Their contracts have ended prematurely or their rates have come down,” notes Sally.

Although he has observed some retrenchment in Malaysia, Hay’s Osborne maintains that the skills shortage in the industry remains, especially for highly specialised and senior roles.

“The downturn in oil prices does not have an immediate effect on salaries. However the longer the oil price stays low, the greater the impact will be on overall staffing demand, which will ultimately impact salaries as competition for jobs increases,” he adds.

Nonetheless, Malaysian salaries remained relatively competitive in terms of increments, when compared with the region. According to a survey by Hays, 40% of Malaysians received an increment of more than 6% last year, compared with the 29% average across countries like China, Hong Kong, Japan and Singapore.

Looking ahead, even more employees are expected to get increments exceeding 6%. Forty-three per cent of Malaysian companies surveyed plan to hand out increments of more than 6%. In comparison, the average among countries surveyed was only 30% (see “Salary increases” below).

Divergence within job market

At the lower end of the job market however, JobStreet’s survey paints a slightly different picture, with less bonuses planned for this year as well as smaller than expected increments.

The survey shows that employers only plan to reward about 31% of employees with a bonus of two months or more this year. In comparison, 35% of staff were rewarded with bonuses exceeding two months last year.

Employees are also expecting bigger increments than employers are willing to give, notes Chook.

According to the survey, employers are only planning to give 31% of staff an increment exceeding 6%. However, over 54% of employees are expecting such a raise.

In a nutshell, it will continue to be an employees’ market for highly skilled professionals and specialists. Meanwhile, the lower end of the job market may see slower hiring and smaller increments.

“This is not unusual. It is something we see in many countries. Companies are willing to pay a high premium for skilled and experienced employees because there is a huge skills shortage,” says Hays managing director Christine Wright.

“As Malaysia’s economy grows and businesses grow, it creates new roles and increases vacancies. Businesses then need to compete for talent. It is a trend we have seen in other developing economies,” she explains.

On the other hand, companies are not willing to pay a high price for candidates without experience, since the firms are basically paying for soft skills — the candidates’ potential to develop, she adds.

Nonetheless, graduates tend to have very high expectations, says Chook.

“On average, graduates’ pay is about RM2,100 a month. While this isn’t very high, it has been increasing over the years. However, the graduates on average are expecting to be paid RM3,500. This is a very large gap and it needs to be lowered,” she says.

Poaching vs developing

According to a Robert Walters report, employees can expect from 22% to as high as 30% increments when they change jobs, particularly those who have the right skills and experience. This is largely due to the shortage of talent to fill the ever-growing number of mid to high-level vacancies.

So, what about candidates who lack the skills?

At the moment, companies would rather pay cash for people with the right skills than invest the resources to develop these candidates themselves. However, as the skills gap continues to grow, this will change, says Wright.

“Companies need to invest in developing their employees to fill their vacancies and retain staff. Employees need to see an upward career trajectory and want to be part of a company that is growing,” she says.

In fact, lack of career development is the main reason why three quarters of respondents were unhappy with their current jobs, according to the JobStreet survey.

Only 45.6% of respondents see themselves staying with the company for less than one year while 36% would likely leave after three years. Lack of career growth was the main reason cited.

Multinational companies are ahead of local businesses in people development, Osborne says, “I think that is recognised internally and within the local businesses. They are making strides to gear up to that level of standard. The candidates are aware of that as well.”

If local companies divert more resources into developing talent instead of poaching it from rivals, it would certainly narrow the skills gap in the country, adds Wright. However, the government and industry would have to work closely with educational institutions to make sure the right skills are being developed for the workforce of the future.

“Companies will always want someone who can meet the job description, 10/10. But most of the time, the candidates are only a 6/10 or 7/10. The question is whether these candidates have the soft skills, the potential to be developed into a 10/10,” says Osborne.

“Malaysians traditionally travel very well throughout the world. They are very diverse in their soft skills. When exposed to lots of different situations, when they need to use their soft skills, they do excel,” he adds.

chart_cs76_1054

This article first appeared in The Edge Malaysia Weekly, on February 16 - 22, 2015.