The global economic slowdown has led to significant disruptions to the world of work, influencing employee count, working conditions, and notably compensation. 

A recent study by Aon plc, revealed that there won't be any significant changes in salaries in Malaysia for the year 2024.While salaries in Malaysia and Singapore will remain the same at 5.0 per cent and 4.0 per cent, respectively, the survey indicates that the median salary is projected to rise by 6.5 per cent in Indonesia, 5.5 per cent in the Philippines, 4.9 per cent in Thailand, and 8.0 per cent in Vietnam in 2024. 

Despite concerns about an economic slowdown, salary increases are anticipated to remain stable in Malaysia as employers grapple with talent attrition. The attrition rates in Malaysia increased from 14.9 per cent in 2022 to 16.2 per cent in 2023 due to evolving talent strategies and the persistent gap between the supply and demand for talent. Among the surveyed countries, the Philippines has the highest attrition rate at 17.5 per cent, while Vietnam has the lowest at 13.8 percent. 

Rahul Chawla, partner and head of Talent Solutions for Aon in southeast Asia said, “As companies navigate new forms of volatility, salary-increase planning has become challenging across the region. A reassessment of compensation strategies based on the latest data and analytics shows that it’s crucial for firms to stay competitive. By leveraging data from their own organisations as well as the market, companies can make better informed decisions enabling them to not only weather the challenges of an uncertain economic climate but to thrive in an evolving workforce landscape.” 

The report also stated that businesses in Southeast Asia are cautiously optimistic about hiring. About 40 per cent of the companies reported no alterations to their recruitment numbers, while another 40 per cent stated having hiring restrictions. 

Despite experiencing an upswing in layoffs earlier in the year, Aon's data indicates that headcount numbers across various industries are still higher than pre-pandemic levels. The layoffs were predominantly observed in non-core or expansion areas of the business, while recruitment efforts continue for other business lines. 

New hire premiums are currently ranging between 5.6 per cent and 13.3 per cent, reflecting a more cautious approach to compensation spending by companies. This caution is driven by efforts to streamline budgets, improve cost efficiency, and reassess compensation strategies. This contrasts with the hiring trend in 2022, where Southeast Asia experienced a boom, and new hire premiums averaged between 14.7 per cent and 23.6 per cent. 

Rachel Jayaprakash, market leader of Talent Solutions for Aon in Malaysia said, “Businesses in Malaysia seemed insulated from global economic trends. However, the country is now beginning to experience slower growth escalated by the rising cost of living and a depreciating ringgit. 2024 is expected to be similar with moderate growth and consumption levels to normalise. It is imperative for organisations to make informed decisions using insights and robust market data to create a holistic employee value proposition. This will not only ensure pay packages remain competitive to sustain the rising cost of living but will also help build a resilient workforce in which employees are rewarded for their efforts and results.” 

Looking ahead to 2024, salary projections across industries in Malaysia showcase variations. The retail sector maintains the highest anticipated budgeted salary increases at 5.2 per cent, followed by the technology, life sciences, and medical devices, as well as manufacturing industries, all at 5.0 per cent. 

Meanwhile, the financial services sector is expected to see a slightly lower increase at 4.5 per cent. In Southeast Asia, specifically Malaysia, the Philippines, and Singapore, over half of the roles have witnessed salary increases outpacing inflation. 

Singapore and the Philippines reported that 71.7 per cent of salary increases exceeded inflation, while Malaysia recorded 56.4 per cent. In contrast, Indonesia, Vietnam, and Thailand experienced an average of 70 per cent of salary increases trailing inflation. Approximately 67 per cent of firms in Southeast Asia incorporate inflationary pressures as part of their pay policy considerations when reviewing salary increases.