Despite cost pressures amid COVID-19, companies in Malaysia stay focused on employee support and engagement


24 June 2020

Malaysia, Kuala Lumpur


Most companies say they are not reducing salaries and have no plans to retrench


  • Nearly three in four companies (72%) are likely to reduce spending on recruitment, but only 4% are considering retrenchment.
  • Employee support and engagement initiatives set to increase as more companies recognize employee well-being is critical for success.
  • 86% of surveyed companies are reducing salaries while 11% have revised variable bonus budget

Companies in Malaysia are decreasing recruitment budget while prioritizing employee engagement and support initiatives to cope with the impact of the coronavirus pandemic (COVID-19).


This is according to Mercer’s latest Pulse Survey, which provides an overview on how COVID-19 has impacted human resources budget allocation as well as salary and bonus implementation among companies in Malaysia.


Compared to the budget allocated in 2019, 72% of companies surveyed are likely to reduce spending on recruitment in 2020. 37% said they will only hire for replacements this year, while another 43% are planning a hiring freeze. Only 4% are considering retrenchment. 


At the same time, some companies are also taking this opportunity to enhance employee support and engagement. 13% of those surveyed are enhancing work-life balance programs to enable more flexible and adaptive work arrangements, while 11% plan to increase their budget for healthcare benefits. Another 6% plan to enhance their training and development initiatives.


Godelieve Van Dooren, Regional Industries and Career Products Leader, Asia Pacific, said, “Beyond protecting the lives and livelihoods of their employees, companies are prioritizing employee engagement and wellness at a time when manpower costs are being watched closely. This reflects a growing recognition among that employees are their most valuable assets, even more so at a time like this.”


The survey also looked at the impact of COVID-19 on salary increment and found that only 5% of companies in Malaysia have implemented a salary cut while 9% are considering the option. 23% of companies are also considering a reduction in budget for salary increment, while 17% have already done so. 


Across industries, companies in hard-hit sectors have indicated the largest reduction in salary increment budget –non-financial services (from 5.1% to 3.3%), manufacturing (from 5.1% to 3.8%) as well as retail and wholesale (from 5% to 4%). This is followed by consumer goods (from 5% to 4.6%) and life sciences (from 5.3% to 5%).


Koay Gim Soon, Consulting Leader, Mercer Malaysia forecasts that most of the companies in Malaysia that are severely impacted by the pandemic would implement pay reduction or headcount reduction to survive the financial crisis. Less affected companies, he believes, will most likely not implement the budgeted increment for this year, but maintain the current salary cost with hiring freeze.


Mr Koay added that companies should view the crisis as an opportunity to evolve and strengthen their culture. “Even as organizations fight to stay afloat during this time, they should allow their culture and values to shine. Companies who prioritize employee well-being, whether through wellness programs, healthcare support and flexibility at work caregivers, will stand out and do better in the longer run. When the pandemic ends, job seekers will also value these employers when the pressure to recruit and retain talent returns.”


Other Key Findings


Salary increments:  62% of companies have already given out their salary increments to employees. Of the remaining companies who have not implemented their increments, 19% have decided to delay while 16% indicated a salary freeze. The remaining companies are adopting a wait and see approach as they have payout cycles later in the year. 


Variable bonuses:  90% of companies already given out their planned bonuses, but 11% have reduced their bonus budget.


Adjustments to sales incentives:  Only 11% of companies surveyed have modified, or are modifying their sales incentive plans. Most companies (27%) said the adjustments will be made based on sales target as well as plans such as canceling business travel, followed by commission ratio (13%) and threshold (12%). 


A total of 201 companies in Malaysia across 12 industries took part in the survey which was conducted between 26 March and 10 April 2020. 






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