29 November 2017

Malaysia, Kuala Lumpur


  • Overall salary increase in Malaysia across industries is projected to be 5.5%
  • High Tech (5.5%), Life sciences(5.5%) and Shared Services Outsourcing (5.6%) are the industries projected to have the highest salary increase in Malaysia
  • Consumer Goods Industry has the highest attrition rate in Malaysia
  • Overall most companies are holding steady with no change in hiring intentions
  • Manufacturing sector leads recovery, drives higher functional wage premiums
  • Sales and engineering talent most difficult to hire and retain 


Mercer unveiled the results of the ‘Compensation Planning for 2018’ for the region including predictions for hiring intentions and pay increases across Asia, Middle East and Africa. Figures and forecasts are based on Mercer’s Global Compensation Planning Report and Total Remuneration Survey (TRS).

Asia has been leading the growth revival in the global economy in the last three years, and for the first time in decades OECD expects all the 45 countries it tracks to grow in 2018 signaling a strong overall recovery. However, a rise in inflation in some parts of APAC such as India, Philippines, Myanmar and Vietnam may be a cause for concern. In 2018, the highest salary increases are forecasted for Bangladesh (10%), India (9.8%) and Vietnam (9.1%) while financial hubs Hong Kong and Singapore are both forecast to see 3.9% increases. Japan is forecasted to have the lowest increase at 2% followed by New Zealand (3%) and Australia (3%). Notably though, real wage growth (salary increase minus inflation rate) has also been steadily rising in the region, often reaching double digits in emerging markets. And, while forecasts vary quite widely across specific industries, the strongest push is likely to come from the chemical and life sciences industries.

Hiring in India, Vietnam and the Philippines is happening at a greater pace compared with other countries in the region, whereas hiring intentions are lower in Singapore, Malaysia and Hong Kong. The overall hiring outlook is positive, however, with five out of 10 companies looking to maintain headcount, including replacements for turnover. Hiring sentiment is often therefore a reflection of trends in staff turnover in certain countries and industries. The flipside of higher GDP growth and base pay increases though is that the staff turnover is higher for those countries. Attrition is higher for industries that have continued to outpace the slowdown we observed in the preceding year. Consumer and retail industries are faced with the highest levels of attrition, whereas the manufacturing industry has some of the lowest levels of attrition in the region.

A closer look at pay parity (in terms of annual total cash) reveals that there are now several ‘tiers’ of countries across the region. For example, in Australia, Japan and Korea, starting salaries begin at US$30k p.a., and rise steeply as employees reach senior levels, often reaching US$250–350k. Starting salaries are much lower (often just US$5k) in low-cost manufacturing bases, but again increase significantly at top management levels. In some countries – China, most notably – the highest-ranking executives out-earn their peers in the US and UK, Although, it is important to note that this picture changes once long-term incentives (LTIs) and European social security benefits are factored in.

Talent scarcity plays a major role here, and there are extremely high premiums to be gained by those people with the right skills, in addition to local language expertise. The rising numbers represent a challenge in terms of replacement costs in the form of higher salaries for new joiners, recruitment costs and lost production, all of which adversely impacts overall cost of operations and margins that are already under close scrutiny. 48% companies in Asia report having difficulty filling-in vacant positions, as compared with 38% of the companies globally struggling to find the right talent to fuel their business expansion.

Puneet Swani, Partner and Growth Markets Career Partner at Mercer said, “Hiring, retaining and engaging skilled talent in Asia Pacific will continue to be a top priority for companies looking to leverage the strong macroeconomic outlook for 2018. We continue to see a high level of pay increases used as a retention tool for high-performing talent. This has become even more critical, especially with the cross-industry movement of talent in specialist roles such as sales and engineering. We also find companies deleveraging pay in the wake of increased regulatory scrutiny of bonus pay outs, thereby reducing year-end bonuses and increasing base pay instead to reduce excessive risk-taking and discretion.”

“Companies in Asia Pacific are beginning to take a more holistic view of their total rewards philosophy across the contractual, experiential and emotional aspects of the employee value proposition. Our perspective is that getting the contractual pieces or base pay and benefits right is the foundation for an effective rewards program, but differentiating on these elements alone can be quite costly. Where differentiation can be more engaging and cost effective is in the career opportunities and well-being programs for employees. Employers are increasingly focusing on these experiential components of rewards – programs to deliver meaningful career experiences and flexible arrangements, as well as programs to help manage the physical, financial and emotional well-being of their employees,” Mr. Swani added.


Malaysia has managed to surpass GDP growth forecast and this growth is generally resilient despite challenges. Although cost of living is an ongoing concern in general, the overall sentiment this year is an improvement over the previous couple of years. On the political front, there is the impending general election due in 2018; businesses are looking for a signal that the new government will continue with some current pro-business policies. With talk of the 4th industrial revolution locally, the government has been strongly pushing the drive into areas like digital economy and more disruptive innovations. Example includes the opening of  the first Digital Free Trade Zone outside China (DTZ)

Overall salary increase in Malaysia across industries is projected to be 5.5%, according to Mercer’s Compensation Planning Report 2018. The High Tech, Lifesciences and Shared Services Outsourcing are the top 3 industries with highest salary increases next year, reflecting the government’s focus on digitalization and disruptive industries. Hiring intentions are projected to be relatively similar to previous years.

Harrison Tan, Malaysia Career Business Leader at Mercer said, “With the dawning of the 4th Industrial Revolution, the Malaysia government is determined to ride the wave of technology and innovation and bring up key industries to a higher value chain. On the flip side, in an age of automation, it is important for organizations to address the need to upskill their workforce. It is also critical that the companies do more to engage the talent they currently have especially given the acute shortage of talent in certain critical roles. This would mean an increased focus by companies towards creating differentiation through career pathways or innovative health and benefits.”


About Mercer

Mercer delivers advice and technology-driven solutions that help organizations meet the health, wealth and career needs of a changing workforce. Mercer’s more than 22,000 employees are based in 43 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), the leading global professional services firm in the areas of risk, strategy and people. With more than 60,000 colleagues and annual revenue over $13 billion, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit Follow Mercer on Twitter @Mercer.


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