How can employers in Malaysia address low salary issues to retain talent?

In Malaysia, concerns about low salaries are often treated as a morale problem, something to be softened with appreciation posts, team lunches, or culture campaigns. Yet for many employees, salary dissatisfaction is not an emotional complaint. It is a rational assessment of whether their work can sustain their lives, whether their effort will be rewarded over time, and whether staying put is financially sensible when the market offers faster pay growth elsewhere. When employers frame low salary issues as a temporary mood that can be managed with messaging, they miss the real signal: compensation has become a strategic retention factor that affects hiring, productivity, and long-term capability.

The reality is that “low salary” in Malaysia is rarely just a single number on a payslip. It is often the result of a system that lacks structure and credibility. Employees may accept modest starting pay if they can clearly see how their pay will grow, what skills will be valued, and what milestones will lead to promotion. Problems start when pay feels stagnant, progression feels vague, and compensation decisions seem inconsistent between departments or managers. In that environment, even an employee who likes the work can begin to feel trapped. Once that feeling sets in, they will interpret every small frustration as a sign that leaving is the only way forward.

Recent changes in Malaysia’s wage landscape have also raised expectations and sharpened comparisons. The phased move to a RM1,700 minimum wage, aligned nationwide from August 2025, made the pay conversation more direct and less negotiable for employers who rely on frontline and early-career workers. But raising the floor does not automatically solve retention. Many companies comply with minimum requirements yet still lose skilled staff because the gap is not only about the minimum. It is about the middle, where employees are paid “not terrible” but cannot see a credible path to meaningful increases without job hopping. Minimum wage policy shapes the baseline, but retention is shaped by whether the employer can present a compelling total deal that makes staying feel like progress.

Employers who want to address low salary issues effectively must begin by changing how they think about compensation. Salary cannot be treated as a private HR calculation that managers barely understand and employees are expected to accept. It needs to operate like a management system, one that connects business priorities with job design, performance expectations, and skill development. The goal is not simply to pay more, although many firms will need to pay more for certain roles. The goal is to build pay credibility, the sense among employees that compensation is fair, explainable, and linked to real growth.

Pay credibility starts with knowing where the company truly sits in the market. Many firms claim they are “competitive” without a clear benchmark, relying on outdated salary assumptions or anecdotal comparisons. In a labour market where information travels quickly and employees can easily compare offers, vague claims do not hold. Employers need to identify the roles that matter most to their business outcomes, understand the market range for those roles, and decide whether they intend to lead, match, or lag. That decision should be explicit because each choice has consequences. A company that chooses to lag on pay must offer a stronger path in other areas, such as faster skill growth, clearer promotion pathways, or benefits that meaningfully reduce employees’ living costs. Otherwise, lagging becomes a slow drain that shows up as constant turnover and rising recruitment expenses.

Once the market position is clear, employers need to focus on progression rather than treating pay as a once-a-year ritual. Employees do not only ask, “How much am I paid?” They also ask, “How will I be paid next year, and what must I do to earn it?” If the company cannot answer that question with clarity, employees will find the answer elsewhere. This is why many retention problems surface even after a salary review. The raise may be real, but if it feels arbitrary or too small relative to effort, the employee concludes that future increases will be just as disappointing. Progression becomes believable when it is built into the structure of roles. Instead of having job titles that are mostly decorative, employers can define levels that reflect increasing scope, responsibility, and skill. Each level should have clear criteria, and those criteria should be communicated in a way that employees can understand. In Malaysia, introducing this kind of structure often feels uncomfortable because some companies worry it will invite salary demands. In practice, structure reduces conflict because it removes uncertainty. When employees understand what the company values, they can invest in the right skills. When managers understand what qualifies someone for a higher band, they can coach employees more effectively and advocate for them with greater credibility.

A structured progression system also helps employers address a particularly painful issue in low salary environments: pay compression. Pay compression happens when new hires are brought in at higher rates because the market has moved, but existing employees are still sitting near their old pay levels. Over time, the difference between a loyal performer and a newly hired colleague becomes uncomfortably small. When employees notice this, they feel penalized for staying. If the employer responds by saying, “Be grateful you have a job,” it accelerates resignations. Fixing pay compression is rarely cheap, but it can be done strategically. Employers can identify the roles where churn would cause the most damage, correct salaries in those roles first, and create a plan to address the remaining gaps over time. The key is to show that the company understands the issue and is actively managing it rather than pretending it does not exist.

Malaysia’s policy environment also offers employers tools that can make salary improvements more sustainable. Wage growth is often resisted because of margin pressure, and that pressure is real for many businesses. Yet the smartest employers do not treat wage increases as purely a cost. They treat wage growth as something that must be funded by productivity and capability. This is where Malaysia’s wage initiatives can be useful, not as public relations programmes, but as operational support. The Progressive Wage Policy, for example, is designed to encourage structured wage progression tied to skills and performance, with government wage supplements that can ease the immediate burden for eligible employees and firms. Employers who use such frameworks thoughtfully can raise wages in a way that feels fair and consistent, while also building a story that employees can believe. When a wage increase is linked to visible progression, it feels like a system, not a one-off favour.

At the same time, employers should not rely on policy support as a substitute for competitive pay. Talent retention is driven by the employee’s lived experience. If wages are low and the work environment makes growth feel impossible, subsidies will not stop people from leaving. What policy tools can do is create space for employers to build the systems that make wage growth sustainable. That sustainability is critical because employees do not just evaluate pay today. They evaluate whether pay growth will keep pace with their lives. This is where benefits become more than a standard checklist. Many Malaysian employers offer benefits, but employees often feel that these benefits do not truly offset low salaries. Sometimes the problem is that benefits are outdated, offering things employees do not value. Sometimes the problem is that benefits are poorly communicated, so employees do not even understand what they have. And sometimes the problem is that the benefit experience is frustrating, with complicated claims and unclear coverage. When salary feels low, employees look at the rest of the deal more carefully. If benefits feel generic or confusing, the company loses an opportunity to strengthen retention without relying solely on base pay.

A more effective approach is to treat benefits as a precision instrument. Not every employee values the same support. A young professional may value learning allowances, certification support, and flexibility that allows them to pursue side projects or family responsibilities. A mid-career employee may value stronger medical coverage, family-related support, and predictable working arrangements. A caregiver may value flexibility more than a small monthly increment. Employers can build a benefits framework that offers choice within a controlled budget, allowing employees to select what matters most to them. This approach can make total rewards feel more generous even when base pay cannot rise dramatically in one go. It also sends a signal that the employer sees employees as individuals with different life stages, rather than a single category of “staff.”

However, benefits alone will not compensate for a salary strategy that lacks credibility. Employees will accept tradeoffs when they are clear, fair, and aligned with real opportunities. They will not accept tradeoffs when the company appears to be saving money without offering anything in return. That is why productivity and capability development are essential. If an employer wants to raise salaries sustainably, it must be able to generate more value per employee. That does not simply mean asking employees to work harder. It means redesigning work so time is spent on higher-value tasks, investing in tools that reduce repetitive work, and improving processes that currently waste effort. Many businesses leak productivity through unclear decision-making, poor handoffs, and unnecessary approvals. Fixing these issues can create room for meaningful wage growth.

Capability building in Malaysia also comes with a unique advantage that many employers underuse: levy-funded training support through HRD Corp. When businesses complain that they cannot raise wages because productivity is not improving, yet they do not fully utilize available training mechanisms, they are often choosing a more expensive path. They end up hiring externally at higher salaries instead of upgrading existing employees in a more cost-effective way. Training will not replace the need for pay increases, but it can make those increases more justifiable and sustainable because it expands what employees can do and what the business can deliver. When an employee gains a new skill that directly improves business performance, a raise is no longer a sentimental retention move. It becomes an investment with a measurable return.

Even with a strong pay structure and thoughtful benefits, employers can still fail if managers are not equipped to communicate compensation and growth. In low salary environments, employees often leave because the path to better pay feels blocked or arbitrary, and that perception is shaped most strongly by the direct manager. If managers avoid pay conversations, give vague promises, or explain decisions inconsistently, employees lose trust. They may assume the company is intentionally holding them back. To fix this, employers must treat managers as retention infrastructure. Managers need training and support so they can discuss salary ranges, progression criteria, performance expectations, and development plans with confidence and consistency. They also need clear guidance on what is possible and what is not, because false hope damages trust more than honest constraints.

A useful way to think about retention is that employees rarely want only money. They want money and certainty. They want to believe that their effort will lead to improvement, that promotions are achievable, and that compensation decisions are grounded in a fair system rather than personal preference. Employers who can offer that certainty reduce the need for employees to test the market simply to validate their worth. In contrast, employers who keep pay opaque and progression vague essentially push employees toward job hopping as the only reliable salary strategy.

Ultimately, Malaysian employers addressing low salary issues must make a strategic choice about what they are competing on. Some will compete on cash, choosing to pay at or above market for key roles. Others will compete on progression, offering faster skill development and clear pathways that lead to higher pay over time. Others will compete on flexibility and purpose, making work arrangements and mission meaningful enough to offset a slightly lower salary. In today’s environment, most employers will need to offer at least two of these dimensions convincingly. Relying on a single strength is increasingly risky because employees can access alternatives more easily and can compare total offers with less friction than before. Solving low salary complaints is rarely achieved through a single adjustment. It is achieved when the employee experience becomes coherent. Employees can see how they grow, how they earn more, and why staying is a rational choice rather than an act of loyalty. That coherence comes from pay structures that reflect reality, progression systems that employees can trust, benefits that feel relevant and clearly communicated, and a productivity strategy that makes wage growth sustainable. When those pieces come together, salary stops being the only story employees tell about the company. It becomes one part of a broader, credible deal that makes talent want to stay.