Aon Hewitt's View on Transforming the HR Landscape

KUALA LUMPUR, Malaysia, Nov. 30, 2015 /PRNewswire/ -- Today Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), released the latest trends and insights from its Total Compensation Measurement™(TCM) 2015 Study at a Rewards Conference attended by HR professionals from prominent Malaysian corporations. Global TCM is Aon Hewitt's comprehensive compensation benchmarking study that covers 25,000 positions across 180 countries. Other key topics discussed during the session were sales compensation in retaining high performers, leadership practices and Best Employers practices.

Salary Increase by Industry Sector in Malaysia

While Gross Domestic Product (GDP) is forecasted to increase from 3.1% in 2015 to 3.6% in 2016 globally, the economic climate closer to home is a crucial element when making decisions related to employee rewards. Within South East Asia (SEA), Philippines and Vietnam experience the highest growth in 2015 at 6.0% and 6.5% respectively and are projected to continue to enjoy the highest growth in 2016. Indonesia witnesses the highest Consumer Price Index (CPI) at 6.8% in SEA year on year whereas Malaysia, Philippines, Singapore, Thailand and Vietnam show a moderate CPI. Philippines has the highest unemployment rate at 6.3% in 2015.[1]

Following the implementation of the Goods and Services Tax (GST), drastic depreciation in ringgit currency, declining commodity prices and other related economic factors in Malaysia this year; Malaysia experienced a decline in GDP to 4.7% in 2015 and a projection of 4.5% in 2016, a slightly reduced CPI at 2.4% in 2015 and a projection of 3.8% in 2016, and a slightly increased unemployment rate at 3.0% in 2015 and 2016.[1]

In this context, the Aon Hewitt salary survey shows however a stability of the salary increases for 2015 at 5.6% and a projected increment of 5.8% in 2016.[2]

Prashant Chadha, Managing Director of Aon Hewitt in Malaysia said: "With a rocky 2015 and shrinking budgets, organisations must make rewards decisions not just with reliable data but also driven by the bigger picture and economic climate. Best Employers pair their rewards decisions with other aspects like Performance, Careers, Culture, Diversity, etc. to further strengthen their total rewards approach in line with employee value proposition."

Aon Hewitt Total Compensation Measurement indicates that overall salary increment in 2015 and projected salary increment in 2016 remain relatively consistent across all employee categories whereas variable payouts (performance bonus) increased slightly in 2015 to about 2 to 3 months of annual base salary and are projected to remain stable in 2016. Aon Hewitt 2015-2016 Malaysia Salary Increase Survey shows higher salary increases projection across most industries in 2016.[3]

Malaysia recorded the second highest involuntary turnover rate at 6.0% and third highest voluntary turnover rate at 9.5% this year in SEA. Aon Hewitt TCM 2015 Survey in Malaysia shows the correlation between voluntary attrition reasons and retention measures, the top 3 being: "Better External Opportunity", "Further Studies" and "Work Life Balance" while key measures taken to attract and retain employees are "Pay Above Market", "Improved Work Life Balance" and "Timely and Meaningful Feedback from Managers".[3]

Nur Amani Yusnida, Aon Hewitt Performance, Reward and Talent Practice Lead in Malaysia said: "With salaries and increases remaining stable since 2011 (average increase of 5.7% over the past 5 years) employers are taking the 'wait & see' cautious approach to budgeting salaries. The consistent theme seems to be 'Doing more with less', optimising costs wherever possible. Voluntary turnover is trending down this year at 9.5% from 12.2% in 2014 reflecting the volatility and instability of the market conditions in Malaysia."

In addition, Aon Hewitt's recently launched Hot Topic Survey provides insights on how organisations are reacting to the recent economic environment impacting both employers and employees in Malaysia. The study reveals that the highest impact of the current economic environment on organisations comes from the depreciation of the ringgit followed by the implementation of the GST. The recent road toll hike also has a significantly negative impact on employees. However, employees view the minimum wage increment and increased salary cap for SOCSO eligibility that was proposed in the 2016 Budget as positive. To cope with higher living cost, 22% of organisations indicated their plans of providing higher salary increases than initially budgeted for and 7% of organisations are providing a one-off salary adjustment. 47% of organisations have revised their benefits program in the last 2 years, particularly the medical limits and mileage claim. 76% of organisations reported an increase in medical claims and 72% indicated an increase in medical leave following the recent haze issue.[4]

Surendran Ramanathan, Aon Hewitt Southeast Asia Retirement and Investment Practice Lead said: "The current economic environment has adversely impacted both employer and employees, companies are facing budget constraints whilst employees are expecting to cope with the increase cost of living. Therefore companies should ensure their rewards dollars are spent more prudently to get the biggest bang for the buck."

Prashant Chadha emphasized: "Based on our Best Employers Research and through numerous CEOs and HR directors interview we note that, while organisations optimise costs, employees must continue to strive, and high-performers will not only benefit from pay for performance but also from other career-linked total rewards to ensure retention and alignment to business goals."

Aon Hewitt Best Employers -- Malaysia 2015 Country Report shows that 78% of Best Employers combine structured, formal recognition programs with manager-driven recognition as opposed to market average of only 40%. The study also revealed that Best Employers compensate their high performers 21% higher than their average performers. This differentiation results in higher employee perception in terms of recognition and performance impact on pay.[5]

The Best Employers have also shown their strength across all four pillars of Best Employers specifically in high Employee Engagement, compelling Employer Brand, Effective Leadership and a High performance Culture. The Best Employers enjoy 38 percent higher income than market average, attain 50 percent higher growth in profits than market average and have filled 38 percent more job openings internally compared to market average.

Gap between Rhetoric and Reality in Malaysia Organisations

[1] Source: International Monetary Fund (IMF)
[2] Source: Aon Hewitt 2015-2016 Global Salary Increase Survey
[3] Source: Aon Hewitt Total Compensation Measurement™
[4] Source: Aon Hewitt Hot Topic Survey, November 2015. SOCSO (Social Security Organisation) provides social security protection to employees and their dependants through social security schemes to improve the employees' social wellbeing.
[5] Source: Aon Hewitt Best Employers -- Malaysia 2015 Country Report

About Aon Hewitt

Aon Hewitt empowers organisations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organisational and personal performance and growth, navigate retirement risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness. Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide. For more information on Aon Hewitt in Asia Pacific, please visit www.aonhewitt.com/apac  

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