As competition for talent intensifies, SMEs can look beyond pay rises by prioritising salary transparency, recognition, career progression and employee trust.
By Nicholas Lam, Managing Director of Jobstreet by SEEK Malaysia
For many Malaysian SMEs, attracting and retaining talent has become one of the biggest business challenges. Rising employment costs, evolving workforce expectations and increasing competition from larger organisations have led many employers to ask the same question: how can smaller businesses compete when they cannot always offer the highest salaries?
It is an understandable concern. As businesses continue navigating higher operating costs while investing in growth, every hiring decision carries greater weight.
But the answer may not lie solely in having bigger salary budgets.
Findings from Jobstreet by SEEK’s Salary Pulse 2026 suggest that attracting and retaining talent is increasingly about more than the size of an employee’s paycheque. How employees are rewarded, recognised and supported throughout their careers can play an important role in shaping their overall workplace experience.
SMEs remain the backbone of Malaysia’s economy, accounting for 96% of all business establishments and contributing nearly 40% of the country’s GDP. Building a competitive workforce today therefore requires organisations to think beyond salary alone and focus on creating an employee value proposition that is both sustainable and meaningful.
The challenge for SMEs is not simply finding room for bigger salary budgets. It is rethinking how remuneration is communicated, how contributions are recognised and how employees are given confidence that they can grow alongside the business.
Salary benchmarking is only the starting point
Many employers benchmark salaries against the market to ensure they remain competitive. While this remains an essential part of remuneration planning, the latest research suggests it is increasingly becoming the baseline rather than the differentiator.
Employees today are looking beyond whether their salary is ‘fair’ and considering their remuneration more holistically. Beyond a paycheque, they want their salary package to reflect the value they create, recognise their contributions and provide a path for career progression.
This distinction is particularly relevant for SMEs, where financial resources are often more constrained than those of larger corporations. Matching the salary packages offered by multinationals may not always be realistic, but creating an environment where employees feel valued and understand how pay decisions are made is within reach.
Rather than viewing salary benchmarking as the finish line, employers should see it as the foundation upon which stronger employee engagement can be built.
Recognition does not always require a larger payroll
While competitive pay remains fundamental, the research suggests that when employers cannot fully meet financial expectations, how they reward and support employees becomes even more important.
Alongside fair remuneration, benefits such as performance bonuses, flexible working arrangements and retirement contributions can strengthen an organisation’s overall employee value proposition.
This is consistent with findings from Jobstreet by SEEK’s Workplace Happiness Index, which found that while 57% of Malaysians said a higher salary would make them happier at work, longer-term workplace happiness is ultimately shaped by a broader mix of factors, including purpose, work-life balance and positive workplace culture.
Together, these findings reinforce that while competitive pay remains essential, it is no longer enough on its own to attract and retain talent.
For SMEs, this presents an opportunity to compete on strengths that larger organisations may find harder to replicate, including greater flexibility, closer relationships between leaders and employees, and more personalised career development.
When paired with competitive and transparent remuneration, these can become meaningful differentiators in attracting and retaining talent.
Salary transparency can become a competitive advantage
One of the strongest insights from this year’s Salary Pulse research is that how organisations communicate about remuneration can be just as important as the remuneration itself.
Employees who had structured salary reviews and opportunities to discuss pay outside formal review cycles reported higher salary satisfaction, at 67%, compared with 52% among those whose organisations relied solely on annual reviews or had no formal process.
For SMEs, this presents an opportunity to build trust through greater transparency. Unlike larger organisations that often operate within rigid salary frameworks, SMEs typically have more flexibility to hold regular conversations about performance, career progression and remuneration.
These conversations can help employees better understand how pay decisions are made and what they need to achieve to progress.
This becomes especially important when employers are unable to meet salary expectations immediately. While 23% of employees said they would accept a pay rise that fell short of their expectations, they also said it would negatively affect their motivation at work.
This reinforces the importance of honest conversations about what employees can expect now, what they are working towards and how they can progress over time.
Employees are also more willing to have these conversations than many employers may assume. Among those who asked for a pay rise, 78% received one, either in full or in part, highlighting how open salary discussions can create opportunities for constructive dialogue and better alignment between employer and employee expectations.
Building trust through better salary conversations
Pay discussions have traditionally been viewed as difficult conversations, often reserved for annual performance reviews. However, the findings suggest organisations should rethink this approach.
While 40% of Malaysian workers feel comfortable asking for a pay rise, only 10% said they feel extremely comfortable doing so. This indicates that many employees remain hesitant to initiate salary discussions themselves.
For SMEs, this presents an opportunity to take the lead by creating regular opportunities to discuss performance, career progression and remuneration rather than waiting for employees to ask.
Employees who understand how salary decisions are made are better equipped to manage expectations and remain engaged, even when an immediate pay increase is not possible.
By initiating open conversations, setting clear milestones for progression and explaining how remuneration decisions are reached, employers can build trust while giving employees greater confidence in their long-term growth within the organisation.
SMEs can compete on trust, not just pay
As Malaysia’s labour market continues to evolve, SMEs should not assume that competing for talent means competing on salary alone.
Employees continue to value competitive remuneration, but they are also seeking transparency, recognition and confidence that their careers can grow alongside the business.
For SMEs, this presents an opportunity to leverage one of their greatest strengths: the ability to build closer relationships with employees and create workplaces where contributions are recognised quickly and communication is open.
Ultimately, businesses that succeed in attracting and retaining talent will not necessarily be those with the biggest salary budgets. They may instead be those that create an environment where employees understand how they are rewarded, believe their contributions matter and can clearly see a future within the organisation.
For Malaysian SMEs facing increasing pressure to attract and retain skilled talent, better salary conversations could therefore be just as important as bigger salary budgets.
To learn more about how Malaysian workers perceive pay, progression and remuneration, employers can refer to Jobstreet by SEEK’s Salary Pulse 2026: Malaysia report.
