Salary and wages in Malaysia.

This paper discusses the compensation practices in Malaysia against the backdrop of the legal framework for wage and salary deterination. It also examines the Malaysian labour market situation and trends in salary and wage administration together with the role of unions in compensation determination.

Malaysia is a country of more than 20 million located at the southernmost tip of mainland Asia. Besides being a leading exporter of commodities such as natural rubber, tin, palm oil, timber, petroleum, and natural gas, Malaysia is also one of the world's leading exporters of electronic semiconductors, room air-conditioners, and audiovisual equipment. Prior to July 1997, Asia was seen as a region exemplifying success in economic growth and development. Between 1991 to 1996, the Malaysian economy grew at an average rate of more than 8%. However, Malaysia could not shield itself from being negatively impacted by the 1997 Asian Financial Crisis where the nation suffered a 7.5% contraction in its Gross Domestic Product (GDP) in 1998.

In 2000, Malaysia had a workforce (defined as persons between 15-64 years old) of slightly above 9 million. About 60% of the workforce were below 35 years of age. Union members accounted for about 8.15% of the labour force. Unemployment was reported at 3% of the labor force, and foreign workers accounted for one out of every seven jobs (Malaysia 1996-1998, 1996).

This scenario shapes the Malaysian labour market condition. Until 1997, the salary and wage rate in the country had experienced a significant growth. This was a result of the rapid economic growth and near perfect employment. This paper will discuss the salary and wage practice in Malaysia. It will begin by describing the legal framework for wage and salary determination. It will then describe the Malaysian labour market and trends in salary and wage administration in the country. An examination of the role of unions is also included.

LEGAL PROVISIONS ON WAGE AND SALARY DETERMINATION

The legal framework for salary and wage payment in Malaysia is governed by the Employment Act 1955. The Act defines wages as basic pay and all other cash payments made to employees for their contract of service. The following payments, however, are not included as part of wages:

* The value of any house accommodation, the supply of any food, fuel, light or water, and medical attendance.