NEWS
Aon Hewitt Annual Salary Study Predicted Salary to Increase 5.8% in 2011
Better External Opportunities most cited reason for voluntary attrition

Kuala Lumpur 15 November 201o | Salaries in Malaysia are predicted to rise by an average of 5.8 percent in 2011 compared with an actual of 5.2 percent in 2010. The result is based on the findings from Malaysia Salary Increase Survey conducted by Aon Hewitt (NYSE: AON), a global leader in human capital consulting and outsourcing solutions.

The economy has experienced an accelerated growth with its GDP expected to increase from -1.7 percent in 2009 to 7.0 percent in 2010. This is reflected by a predicted salary increase of 5.8 percent in 2011. This GDP growth has created better external opportunities for employees, reigniting the war for talent. Malaysia’s inflation is expected to be at two percent in 2010, with a higher forecast of 2.6 percent in 2011.

The study has shown that in the last two years, businesses in Malaysia have shown steady improvements. There are more companies whose business have shown ‘Significant Improvement’ in 2010; at 15.6 percent compared to 5.2 percent in 2009. Companies which have responded ‘Slight Improvement’ have also increased from 35.3 percent in 2009 to 45.9 percent in 2010. None have responded ‘Significant Decline’ this year compared to 3.4 percent of companies last year.

The study sees a similar upward trend in salary increases across Southeast Asia due to the recovering economy conditions. Vietnam has the highest increase with 10.4 percent in 2010 and a projected increase of 11.5 percent in 2011, followed by Indonesia 7.5 percent and 7.9 percent respectively. This is due to the high inflation in these countries. For Philippines, we see a 6.4 percent increase in 2010 and projected increase of 7.0 percent in 2011 and Thailand with 5.3 percent and 5.7 percent respectively. Singapore has the lowest increase similar to previous years with 3.7 percent in 2010 and a projected increase of 4.4 percent in 2011.

“As the economy strengthens with growth appearing to be sustainable, employers increased salaries with the dual intention of making up for the lower increase in previous years as well as to retain their employees,” said Aon Hewitt’s Southeast Asia Rewards Center Lead, Surendran Ramanathan.

In line with the improved economy and business outlook, it is predicted that there will be less salary freeze and salary cuts among organizations. Salary freezes in organizations are down from 8.3 percent in 2010 to 2.3 percent in 2011.

As majority of the organizations are expecting a better performance this year, bonus payout for end of this year is forecasted at an average of 21 percent of annual base salary (which is almost three months base pay). The average bonus payout was averaged at 17 percent of annual base salary in 2009. Bonus projection is expected to be slightly higher across all employee levels.

The average overall turnover rate (including voluntary and involuntary) for participating organization is 15.7 percent for 2010. The voluntary turnover rate for Malaysia has increased from 10.1 percent in 2009 to 13 percent this year. “As the economy improves, we see more employees leaving organizations for better opportunity and higher pay else where. In the past, employees were more hesitant to move due to job uncertainties as a results of the bleak economy”, said Surendran. Across all industries, the employee group with the highest voluntary rate is Junior Manager/Supervisor/Professional category. Surendran added that this is typical among the younger generation who is more mobile, and constantly seeking better external opportunities. The hi-tech/information technology industry has the highest turnover rate of nearly 21 percent followed by financial services of which is at 17.7 percent.

For the third consecutive year, the most cited reason of voluntary attrition is “Better External Opportunity”, with 92.2 percent of organization reporting this. The other two most cited reasons are “External Equity of Compensation” and “Limited Growth Opportunities”.

The survey also shows that a poor performer receives an average increase of 2.7 percent.. Surendran explained that this shift in having a smaller proportion of employees rated at top performers but at the same time providing much higher salary increase for top performers is intended to drive performance in the organization. Therefore employees are encouraged to go the extra mile as they will be rewarded accordingly.

Source : AON Hewitt