TO keep businesses alive in 2020 and survive next year, small and medium enterprises will likely forgo bonus payouts and halt recruitments, business leaders said.

They predict more than 90% of local companies will not pay out bonuses to employees this year.

And while the government has taken steps to incentivise employers who hire new graduates and locals, many companies are not participating in such schemes yet because their own prospects are unclear.

The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM)’s Koong Ling Long said bonuses can only be expected from highly profitable industries such as glove manufacturers, online products and medical services.

The vast majority of companies will be more concerned about keeping costs low as the pandemic is expected to continue.

“To give out bonuses is to spend money for the future. There is only a month left and 2020 will end soon.

“Employers feel if they fail to retain sufficient cash flow, it will be difficult to survive 2021,” said Koong, who heads the tax and SME divisions in ACCCIM.

Industry players are not expecting overall performance to improve in the first half of 2021 if the pandemic continues, he added.

Shamsudin Bardan, the executive director of the Malaysian Employers’ Federation (MEF), said if any bonuses are paid out, expect them to be minimal.

“Before the pandemic, companies usually paid an average of two months of salary. Now it would be great if it could be for one month.

“But most won’t be able to pay bonuses at all. I think employees can understand, and will be happy as long as they keep their jobs in this situation,” said Shamsudin.

Cautious over recruitment

Koong said employers will also think twice about filling any vacancies.

“They will likely choose to replace vacancies with existing employees, which can also reduce costs.

“Rental and labour are the heavier costs for SMEs. The human resources bill for SMEs accounts for about 30%, which is quite heavy.

“This does not only involve wages, but provident fund contributions, insurance, Socso, bonuses and various other employee benefits.

“Some companies are simply not rehiring, such as retailers, who would merge two stores into one and halve the staff. This kills two birds with one stone. Save rent and human capital,” said Koong.

Many SMEs would have utilised internal funds by now, and would be seeking a loan or finding investors, which is even more difficult, he added.

And while the government has made available a RM600 subsidy for wages per worker, Koong said many smaller businesses would likely forgo this in favour of laying off workers.

He said this would be the likely scenario if the conditional movement-control order (CMCO), currently imposed in all but three states in the peninsula – is further extended beyond the December 6 deadline.

Outsourcing

In tandem with the rise of the gig economy, MEF’s Shamsudin believes that more and more companies will resort to outsourcing parts of their business instead of hiring full-time employees.

“The economy at this stage is still very slow. I would say that most employers have a policy of freezing employment. They are not confident that they can hire employees at this stage, especially if it is full-time.

“All hiring will be short-term contracts, and will mainly be in marketing and sales, which are currently the main positions.”

He also said that under the current situation, companies are paying more attention to online business.

“They mainly look for professionals in e-commerce, but they are mainly outsourcing services rather than giving full employment.”

Until a reliable vaccine is available on a mass scale, everyone will continue to maintain a wait-and-see attitude, he added.

Human resources management consulting firm Mercer released a recent report pointing to the softening of salary and bonus expectations of domestic companies in 2021.

It also expects that more than 80% of companies will continue freezing recruitment until business is stable.

From Mercer’s findings, 20% of companies are choosing to freeze salary hikes, and another 55% are delaying wage increments. – November 26, 2020.