IN SPITE of a tougher operating landscape for businesses, demand for talent in the country will continue to rise, thereby fuelling expectation of a rise in salaries.

Employers face stiff competition for top talent. The impending rise in cost for businesses as a result of the implementation of the Goods and Services Tax (GST) in April next year will not have a big impact on salaries, say human resources (HR) consultants.

“Employers are aware that they need to attract professionals with good remuneration packages. GST is not likely to have a drastic impact on salaries and employment. Companies looking to overcome this may cut costs in other areas of their business. If they are looking at a critical hire, they will still go ahead,” Sally Raj, country manager of Robert Walters Malaysia, tells The Edge.

“As Malaysia’s employment market faces a scarcity of domestic talent, professionals changing jobs can expect an average salary increment of 10% to 20%. High-calibre talent with niche skills can even expect up to 30%,” she adds.

Kelly Services has seen at least a 5% to 10% increase in salaries across the board every year in the past 5 to 10 years. “Employers in Malaysia are also willing to pay a premium for top talent,” the HR consulting firm observes.

Salaries for skilled professionals in Malaysia are becoming more attractive, according to Tom Osborne, country manager for Hays in Malaysia.

“The cost of living factor needs to be considered in any salary comparison, and Malaysia’s cost of living is lower compared with many other countries. A growing demand for Malaysians — especially locals and returning Malaysians — is also helping to fuel positive salary increases in the country,” Osborne tells The Edge in a written reply. He adds that the level of salary increase in Malaysia is second only to China.

“The disparity between the salaries in Malaysia and other Asian countries lessens as the roles get more senior. More Malaysian companies require candidates that meet international standards and are willing to pay them salaries that commensurate with their skills.”

While Hays has yet to release its Hays Salary Guide 2015, Osborne says Malaysia again saw some impressive increases this year. “Almost one in three employers increased salaries by between 6% and 10%,” he reveals.

“In 2013, 47% of employers [here] raised salaries between 3% and 6%. A further 25% increased salaries between 6% and 10%, and 10% of employers gave increases above 10%. Meanwhile, 25% of employers increased salaries by less than 3%.”

The Hays Salary Guide 2014 notes that competition for top talent and wage pressure will remain the key features of the job market.

“Across Asia, the demand and supply ratio remains firmly in favour of candidates. While the region is not immune to economic challenges, in a global context, Asia remains a hot spot for recruitment activities and omnipresent high-level skill shortages are the bane of hiring managers,” it says.

Kelly Services notes that for this year, Malaysia saw an impressive increase in wages of 10% to 25% across solutions and specialisations.

Meanwhile, Robert Walters saw yearly increments of 5% to 7% for professionals who did not change jobs. “In 2015, we anticipate an average increase of 5% to 8% for non-job movers,” it says.

Hays’ Osborne says with regard to Malaysia’s allowance and bonus culture, companies in all industries are now starting to phase out contractual bonuses as well as other perks such as housing, travel and mobile phone allowances and loan interest payments.

“They are replacing these with higher base salaries and variable bonuses that create a performance-based environment, along with modern flexi-time benefits,” he adds.

Salaries set to rise, but not in real terms

Despite the expectation that salaries will increase, especially for performers, the net impact for employees will not be entirely positive due to inflation.

“Salaries across Asia-Pacific are set to rise an average of 7% in 2015, up a fraction from this year, with China and Vietnam the main drivers, but a pick-up in inflation across the region means that pay increases in real terms will drop slightly in the coming year,” according to a survey by Towers Watson.

The professional services company says the survey was timed to coincide with companies’ budget planning processes for next year, and it looks at a range of industry sectors and job grades, from factory shop floor to executive suite.

It adds that the findings show the challenges for businesses in the region as they seek to balance growing inflationary pressure and costs with attractive salaries to retain skilled staff.

“We’re seeing a pick-up in economic growth in Asia-Pacific in the coming year against a backdrop of declining unemployment, which will create inflationary pressures,” Sambhav Rakyan, data services practice leader, Asia-Pacific at Towers Watson, said in a press release.

“The challenge for companies is to keep employees engaged and reduce turnover, while not getting caught up in a pay-inflation spiral. From our research, we know that whatever people say, salary is the number one driver for attracting and retaining highly skilled staff, so a fine balance needs to be found,” he added.

Malaysia is expected to see its economic growth holding steady at 5% to 6% in 2015, despite expectations that a reduction in subsidies and the introduction of the GST will dampen domestic demand.

Moving into 2015, recruiting company Hays predicts that an increase in demand for IT professionals, the localisation of workforce and the return of Malaysians from jobs overseas will be among the issues that will shape the country’s recruitment landscape.

Kelly Services notes that Malaysia currently has just 27% to 28% of skilled workers — a figure that is targeted to increase to 33% next year. It adds that by 2020, the target is for 50% of Malaysia’s 13 million workers to be skilled and for the country to be a high-income nation by then.

This article first appeared in The Edge Malaysia Weekly, on December 29, 2014 - January 04, 2015.

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