Companies operating in Malaysia are planning an average salary increase of 4.8 per cent for 2026, according to the 2025 Salary Increase and Turnover Study released by global professional services firm Aon plc.
In a statement today, Aon said the life sciences and medical devices sector is expected to register the strongest wage growth, followed by the manufacturing and retail industries. The study, conducted between July and September 2025, analysed salary adjustments and employee turnover data from more than 700 organisations across Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
Aon’s partner and Head of Talent Solutions for Southeast Asia, Rahul Chawla, said Malaysia’s current economic landscape is prompting employers to focus on retaining skilled professionals.
“With increased capital investment in technology and strategic sectors, organisations are prioritising the retention of top talent. As compensation costs continue to rise, agility and cost discipline are crucial. Forward-looking companies are leveraging real-time market insights and adopting comprehensive rewards strategies to stay competitive,” he said.
Malaysia’s attrition rate stands at 18.2 per cent, placing it among the three highest in the region. The Philippines leads with an estimated 20 per cent, followed by Singapore at 19.3 per cent.
Within Malaysia, retail and hospitality record the highest turnover at 22.2 per cent, while manufacturing and technology post 17.7 per cent and 17.1 per cent, respectively. Aon noted that increased talent movement is being driven by modest wage growth and evolving employee expectations.
With salary budgets projected to remain at 4.8 per cent for both 2025 and 2026, employers face mounting challenges in retaining key talent amid stronger regional opportunities. External factors – including global economic uncertainty, cost-optimisation measures and the rise of cross-border hybrid work – are expected to contribute further to voluntary turnover.
Despite the uncertain global backdrop, Malaysian firms remain cautiously optimistic. The study showed that 52 per cent of companies project a positive outlook, while 28 per cent anticipate headwinds. A total of 61 per cent expect no change in headcount, while 28 per cent plan to increase their workforce between five and 20 per cent.
Workforce priorities are also shifting, with 48 per cent of organisations focusing on optimising staff levels and 43 per cent prioritising the recruitment of high-quality talent to address skill shortages. The most sought-after roles include information technology (28 per cent), artificial intelligence/machine learning (26 per cent), cyber security (26 per cent), sales (25 per cent) and engineering (23 per cent).
Aon Malaysia’s Head of Talent Solutions, Rachel Jayaprakash, said employers are encountering significant hiring and retention challenges even as many seek to maintain or expand their workforce.
“Reliable market data and industry benchmarks are more critical than ever. Understanding pay levels for strategic roles enables companies to design total reward strategies that go beyond base salary. A holistic approach covering competitive pay, benefits and targeted incentives will help Malaysian firms attract and retain top performers and build future-ready workforces,” she said.
-HR HUB
