The pay gap is an HR challenge that has been prevalent in Malaysia, even before COVID-19. No, we are not talking about the gender pay gap. We’re talking about the stark difference between household income and the cost of living in cosmopolitan cities like Kuala Lumpur.
Over the past few decades, the quality of life in Malaysia has improved tremendously. Thanks to technology, many Malaysians are connected to global online platforms, such as financial trading, e-commerce and social networking.
Having more access to high-quality goods and services has inherently increased the cost of living, which includes basic necessities such as education, housing and healthcare.
However, the current pay levels and job stability barely meet the needs of these rising costs of living in Malaysia that comes with a better quality of life.
The Department of Statistics reported that the mean monthly household gross income in the country has decreased by 10.3% to RM7,089 in 2020 from RM7,901 in 2019. A majority of households also experienced a decline in income during the pandemic, as more families from higher-income groups shifted to lower-income groups.
the pandemic has a play in lowering household income
During the peak of the pandemic, the unemployment rate in Malaysia went up as high as 5.3% in May 2020. While it took the country a few months to bring it back to the healthy 3% to 4.5% levels, the damage has already been done.
Many Malaysians who were already facing heightened cost issues no longer have a financial safety net to fall back on when they lost their job during the pandemic. Over the next few months, they braced themselves for even more uncertainties as they searched for employment opportunities during a time when most employers are conscious about incurring new headcount costs on a tight budget.
In some cases, even when they do find a job, the salary that these employers offer could fall below the candidate’s expectations. This is not necessarily because the candidate is asking for too much pay, but it may be all the employer is able to offer at that point in time.
However, many candidates will still accept the offer so that they can, once again, have the assurance of a steady source of income.
the overqualified and overworked will switch employers as soon as there’s a chance
Unfortunately, oftentimes these workers who accepted the job with lower wages are overqualified and overworked in these roles.
The 2021 Randstad Malaysia Employer Brand Report revealed that 54% of respondents were worried about losing their job due to COVID-19.
Motivated by a fear of losing their jobs, these employees are willing to take on more work to reduce their chances of facing another retrenchment or become yet another collateral loss in a restructuring exercise due to COVID. This ties in with the “last-in, first-out” belief, where the latest hire is usually deemed most at risk of being retrenched should things go south.
It’s also common for this group of employees to search for a new job even if they’ve just secured employment, as long as the salary is higher than what they are receiving now.
During a pandemic year when we thought employee value propositions like job security and growth opportunities would be more important, our survey data speaks otherwise. The 2021 Employer Brand Research survey found that ‘attractive salary & benefits’ still rank top amongst respondents in Malaysia.
why should companies pay their employees more?
The answer is very simple.
Organisations are either skills or talent short, and you need someone with the right experience and expertise to fill these roles. If you don’t budget enough to hire the right people with the right skills, you’ll end up losing the best talent to your competitors who are willing to pay more than the average.
Additionally, you would also lose access to the in-demand skills and expertise that could be critical in helping you achieve your company’s ambitions.
A good salary offer undoubtedly helps to attract new talent that you want to your organisation. A good remuneration strategy is also critical for retaining your workforce. A well-compensated and satisfied employee will less likely have a motivation or reason to find out how much other companies are offering, so they are more unlikely to switch employers.
In a way, they will also grow to become loyal employees who are grateful for the opportunity to work with a company that takes good care of them. They will be motivated to do more for the company, including signing up for upskilling programmes to prove their commitment to their job.
It would also be easier to transform these employees into advocates, as they would be more willing to promote the employer brand to peers who are looking for a job, or a customer who needs a product or service that your company sells.
how to address pay disparity?
Your employees are instrumental in driving your business forward and as a business leader, you should know their worth. When your employee is distracted and worried about their income stability and expense budgets, it will have a corresponding impact on their work productivity. So in a way, your success is somewhat linked to how safe your employees feel about their financial safety net.
Aside from pay raises, there are many other ways you can show your employees that you value their contributions to the organisation.
You can look at developing personalised remuneration packages that take into account the employee’s work performance, skills and productivity levels, particularly for the top talent you are looking to hire.
Many companies offer discretionary bonuses that are calculated based on KPIs that are aligned and agreed upon by the employee. In an effort to retain good employees, these discretionary bonuses are given to them throughout the year rather than a one-off payment.
Benefits could also come in the form of an annual stipend. As more and more companies explore the possibilities of flexible working arrangements after the pandemic, some benefits such as having a pool table in the office or transport allowance may no longer meet the intrinsic needs of the employee.
Instead, work-from-home stipends could help the employees alleviate the financial burden that arose from remote working. When employees work from home, they may spend more on broadband, electricity or even for equipment such as an ergonomic chair or a new keyboard.
Another form of remuneration could be paid sabbatical leave. Given the very fulfilling and rewarding nature of this benefit, companies can choose to award this only to high-performing employees who have worked in a company for a long time. After all, these employees deserve a break and enjoy some time to take care of themselves.
Most importantly is, whatever remuneration package you choose to go with, is that you ensure that your employees are constantly feeling valued at work. When you reward your employees only once a year, they tend to forget about it after a while, especially if they are overworked. The negative experiences will accumulate and overshadow the benefit that they have enjoyed 9 months ago.
HR leaders can encourage managers to use team budgets for small rewards, such as celebrating work anniversaries and birthdays with the team. Even simple things like gifting a beautifully decorated cake, the latest Nintendo Switch game or a bouquet of flowers would do more good to an employee’s morale and motivation than you would imagine.
it’s the perfect time to review your salary benchmarks and structure
As Malaysia exits from months-long lockdowns to find some normalcy in life again, there is no more perfect time to review your organisation’s salary benchmarks.
In the next few months, many employees will be eager to know what’s next for them too, especially with the upcoming bonus season. Have they met their KPIs? Are they going to be receiving bonuses? Will there be a promotion?
If you’re set on retaining your workforce and resuming your hiring activities next year, you will need to start reviewing your workforce wages now to ensure that you’re ahead of the curve. If you’re not sure where to start or how salary benchmarks have changed since the pandemic, reach out to our specialised consultants for the latest salary trends and insights on the employment market.
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