Understanding Types of Salary Schemes In Malaysia

(1) Stepped Salary Scales

This was the prevalent form of salary scale right up to the 1980's or thereabouts. It was the form used by government of Malaysia for civil servants, and also used in collective agreements in the private sector between trade unions and the employer. It is was therefore commonly adopted by employers which were union free as well. The increment step usually represents the fixed sum of annual increment to be given to an employee in that scale, irrespective of performance. Today, it is largely out of use, and still found in collective agreements where the employer is not too strong with emphasizing on pay for performance.

(2) Salary Range

This form of salary scale has taken over from the Stepped Scale above. It is favoured by employers who are conscious about paying for performance. Unions have gradually over the years accepted this form as long as the company can assure them that it is not in their favor not to grant increment if the company is doing well, and if the rate of increment for high performers will be better than the average performers who form the majority of the workforce. Unions have come to accept that poor performers should not be rewarded equally with those who are showing better performance.

(3) Open Scale

The Open Scale consist of only one starting salary for each position. For example,

• General worker RM1000
• Factory Hand RM1030
• Guard RM1030
• Clerk RM1100

This system is still widely used by family based businesses and SME type of business where the employer prefers the advantage freedom to set any higher salary as he need at the moment to get a person to join the company, without regard to the question of relative fairness to other existing staff in the same job or the other adjacent jobs. For this reason, the employer will hold the employee to strict confidentiality of personal salary.

This approach has the advantage of overcoming the disadvantage of lack of ability to pay at a general level that is competitive by offering higher at will as the situation demands to attract or retain an employee. However there are several disadvantages such as the tendency to be inequitable between individuals and job, high pay disparity and risk of over paying individuals.

Employers must decide what system best suit their needs and allow them operate with least problems. It is all a question of whether the system works in bringing in enough of the people and it is able to retain talents at a cost that it can afford.

The views of Chan Wang Tak
HR Consultant and Training Facilitator
Jan 2018

Credit: The article were provided through the courtesy of Chan Wang Tak.

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