A Malaysian perspective on compensation and benefits for millennials

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Balamurali Tamilwanan
Skrine, Kuala Lumpur
bala@skrine.com

Millennials, or Generation Y, are individuals born between the years 1981 and 1996. These individuals often find themselves subject to much scrutiny and criticism, particularly from the Generation X (those born between the years 1965 and 1980), with words such as ‘self-important’, ‘impatient’ and ‘disloyal’ being some of the many unflattering adjectives used to describe them. Is this criticism justified, or are millennials just misunderstood? The negative perception of millennials seems to revolve around the notion that they are imbued with a sense of entitlement and that they live in a world that is bereft of a sense of realism. From an employment perspective, millennial employees are demanding more at the workplace, particularly in relation to compensation and benefits, leaving employers puzzled as to how to deal with this delicate issue. This article seeks to examine, from a Malaysian perspective, what millennials look for in compensation and benefits packages and why it may be in the best interests of employers to start listening to and engaging with millennials in the workplace.

The statistics speak for themselves: Malaysian millennials are unhappy

The statistics gathered from various surveys conducted on Malaysian millennials paints a very bleak picture for employers. Millennials comprise 50 per cent of the nation’s workforce and this number is expected to rise to 75 per cent by the year 2025.^[1] Despite representing the bulk of the workforce, statistics show that millennial employees in Malaysia are far from happy, with an estimated 66 per cent of them having no plans to remain with the same employer for more than five years.^[2] In fact, only five per cent of millennial employees are of the opinion that they are going to stay with the same employer for the rest of their careers.^[3] Given these statistics, the important question that has to be asked is this: why are millennial employees in Malaysia so unhappy?

Malaysian millennials are unhappy for myriad reasons, but the common denominator appears to lie in the inadequacy of compensation and benefits provided by employers to them. In a survey conducted by PricewaterhouseCoopers, the top two factors cited by Malaysian millennials on what makes an employer attractive are competitive wages and good benefits programmes.^[4] However, most Malaysian employers do not live up to the expectations set out by millennials. In a day and age where living costs are soaring at unprecedented rates, the mean monthly salary and wages of employees in Malaysia, as measured by the Department of Statistics of Malaysia, is a dismal figure of RM 3,087.^[5] This figure falls far short of the average living costs for millennial Malaysians and often serves as a reason for them to leave their jobs for new opportunities. To make matters worse for millennials, the labour laws in Malaysia do not do much to compel employers to offer adequate benefits to their employees. The only benefits which are made mandatory under the law are contributions to the Employees Provident Fund,^[6] Social Security Organisation^[7] and Employment Insurance System.^[8] These contributions fail to meet what millennials seek and expect in an attractive benefits package today.

The facts above describe the unappealing state of the workforce that Malaysian millennials find themselves joining. As a result, employers find themselves facing high levels of turnover rates in the workplace.

The conundrum faced by employers: the effect of high turnover on companies

Turnover rates amongst millennial employees are at an all-time high. Studies show that the average job tenure of millennials is only 18 months.^[9] In view of the ever-increasing presence of millennials in the workforce, employers can no longer ignore this issue: keeping millennials happy is vital for business success and continuity.

Most employers are reluctant to provide millennials with better compensation and benefits because they see this as a cost-heavy exercise that provides them with no returns. However, the statistics seem to suggest otherwise. Studies show that employers spend much more money on replacing an employee than they would on crafting retention strategies, with some employers spending 90—200 per cent of an employee’s annual pay on replacing employees.^[10] Employers experiencing high turnover rates also inevitably suffer from a loss of productivity, as they must focus substantial resources on replacing lost employees, as opposed to business-driven objectives.

What these statistics suggest is that it is not entirely against employers’ interests to ensure that their millennial employees are kept happy. On the contrary, there is an incentive for employers to begin changing their compensation and benefits structures to align them with what millennials are looking for. This raises the question: how are employers to appease millennials?

An attractive compensation and benefits package for millennials

The art of designing an attractive compensation and benefits package for millennials is a difficult one to master. Far from being masters of the art, Malaysian employers seem to be providing millennial employees with much less than what they think they deserve. Studies suggest that one in three Malaysian millennials accept salaries and benefits that are lower than their expectations.^[11] The great disparity between what employers are prepared to offer millennial employees and what they are demanding poses a significant problem for employers: millennial employees show little hesitation in leaving their jobs as soon as a better offer is made. The solution to this situation is simple: employers must spend more time and resources on aligning their compensation and benefits packages with what millennials are looking for, or risk facing the consequences of high turnover. Some examples of what millennials require are listed below:

Flexible work hours and a work-life balance

Millennials value an employer that provides them with the leeway to work outside of rigid structures. A staggering 97 per cent of millennials in Malaysia prioritise a work-life balance.^[12] Today technology is advanced that there is no longer the need for employees to be present in the office from 0900–1700. Employers should maximise the use of technology and provide millennial employees with the option of working from home as and when this is needed. There is enough evidence to show that employers who presently have such structures in place benefit from increased productivity, high staff morale and job satisfaction amongst its employees.^[13] The presence of a flexible work schedule also helps to enhance work-life balance for employees, an aspect which most millennials look for in their employment. Employers that are willing to provide employees with flexible working hours are much more likely to attract the best talent, and retain them for a longer term.

Competitive salaries

As highlighted above, Malaysian millennials are entering the workforce at a time when living costs are at an all-time high. It should, therefore, come as no surprise that these millennials show great concern about the earning potential of their jobs. When asked about what represents the most important thing an employer can provide, most Malaysian millennials appear united in stating that attractive compensation is the most important consideration.^[14] It is therefore difficult to dispute the notion that competitive salaries represent a massive incentive for Malaysian millennials and that they, therefore, play a role in ensuring longevity of employment. In this regard, Abdelbaset et al concurs that millennials are highly motivated by tangible, extrinsic rewards, such as competitive salaries and fringe benefits and that employers who ensure their millennial employees are paid adequately will also benefit from employees who are much more fulfilled in the workplace.^[15]

Training and development

Millennials are much more likely to stay with an employer that shows an interest in their personal and professional development and growth. 33 per cent of millennials are attracted to employers that offer excellent training and development programmes, with a further 40 per cent suggesting that they value working with strong coaches and mentors.^[16] This strongly indicates that millennials are constantly looking to better themselves, even after they secure employment. In order to provide this, employers should ensure that a proper structure is implemented in the workplace, focusing on the development of millennial employees. In this regard, employers ought to take a two-pronged approach: ensuring adequate guidance internally; and providing employees with allowances for professional development programmes that enable them to pursue interests outside of work.

The above examples may seem excessive to some employers and questions will be asked by them about the necessity of pandering to the requests of millennials, whose desires appear to be insatiable. However, instead of debating the shortcomings of millennials and their various demands, employers ought to examine how they can use the challenges posed by millennials to help invigorate a positive change in the workplace. In doing so, and in designing proper compensation and benefits schemes for millennials, employers must bear in mind that there is not simply one all-encompassing approach. The first step employers should take is to start engaging with their millennial employees, examining what it is they want and how best to align compensation and benefits to their interests. This may prove successful not just in hiring the best millennial talent, but also in retaining them and, thereby, reducing turnover rates.

Concluding remarks

It is difficult for anyone to minimise the role millennials have in the modern-day workforce. That said, it is also clear that much work must be done to bridge the gap between employers and millennial employees when discussing the issue of compensation and benefits. Employers must look at the bigger picture and seriously consider implementing progressive measures, or risk having to deal with the negative impact of a high turnover rate. There is enough empirical data to suggest that employers ought to do so, not just for the benefit of millennial employees, but for themselves, to ensure they do not fall behind in an ever-competitive labour market. The first step is to engage millennials in the workplace and to ultimately implement changes that will be to the advantage of the modern-day workforce as a whole.

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