SME vs Corporate: Who Pays More?
Determining how much to offer a jobseeker requires hard work. You don’t just ballpark a figure; as an employer, you must have done your research to establish your competitive edge over other companies. After all, you don’t want to miss out on outstanding talent. Neither would you want to overpay a candidate and risk bankruptcy!
Salary and compensation depend on multiple factors, including the location, industry, market demand, and size of the company. Regardless, every employer must understand salary benchmarking to ensure that they offer fair pay to attract suitable talent.
Understanding SMEs and corporations
Do SMEs or corporations pay more? The answer is not always clear-cut, as many factors can affect salary.
Most would think that SMEs, which typically have fewer than 250 employees, have limited resources and would pay their employees less than corporations. But that is not always the case. Conversely, corporations have more rigid processes and offer less flexibility regarding salary offers.
Either way, SMEs and corporations are essential to the Malaysian economy. SMEs are responsible for creating most new jobs, accounting for 99.2% of all businesses in Malaysia. Meanwhile, corporations still contribute to the majority (64%) of the country’s GDP.
The effect of salary on employee performance
Whether you run an SME or a corporation, you must understand the latest salary trends. Why? Because there is a distinct link between salary and employee performance.
Employees who are paid more are more likely to be satisfied with their jobs and to perform at a higher level. Higher salaries provide employees with a sense of financial security and motivation. Additionally, higher wages can help attract and retain top talent, leading to improved company performance.
Salary differences between SMEs and corporations in Malaysia
According to the JobStreet Malaysia Salary Guide 2023, there are significant salary differences between SMEs and corporations in Malaysia.
In the Computer/IT industry, for example, corporate professionals earn an average salary of RM7,500 per month. Meanwhile, SME professionals earn an average salary of RM6,700 per month. This difference is even more pronounced in the Property & Real Estate industry, where corporate professionals earn an average salary of RM5,000 per month. In contrast, SME professionals earn an average salary of RM3,500 per month.
The infographic below shows a quick comparison between SME and corporate salary ranges.
You can learn more about SME and corporate salary differences by downloading the JobStreet Malaysia Salary Guide 2023. This report breaks down salaries into the various industries and specialisations in Malaysia.
Other than the size of your company, here are factors to consider when determining your compensation package.
Factors influencing employee compensation
1. Salary structures
SMEs and corporations have different salary structures. SMEs often have a more relaxed structure, which means more room for salary negotiation. However, it can also be a challenge for SMEs, as they may not afford to pay their employees as much as corporations.
Meanwhile, corporations typically have more formalised salary structures. Their rigidity ensures they pay their employees fairly and equitably. However, employees may be unable to negotiate a higher salary because of the lengthy procedures.
2. Benefits and perks
Benefits and perks are non-salary compensation that companies offer their employees. They can include health insurance, retirement plans, paid time off, employee discounts, and flexible work arrangements.
Corporations typically offer a wider range of benefits and perks than SMEs. This is because corporations have more resources and can afford to provide more generous benefits packages. SME benefits may be fewer or less generous, or they may offer alternative perks that cater to the specific needs of their employees. Casual dress codes? Fridays off? It is definitely easier to bend the rules with less tradition holding you back!
3. Job roles and hierarchies
Corporations typically have more hierarchy levels than SMEs, meaning employees have a wider room for career advancement and earn higher salaries. But while SMEs may have fewer levels of hierarchy, lateral growth can still appeal, especially to younger employees.
In a recent JobStreet survey, 31% of Malaysians expressed their desire to try different career options and have reskilling opportunities. If you can offer growth opportunities, whether vertical or lateral, that can be a valuable recruiting and retention tool.
Other factors to consider
Besides the top three factors that influence compensation determination, here are other common considerations to think about:
1. Career growth As stated earlier, the chances for skill development matter to employees. Whether SME or corporate, companies that offer compensation packages that include advancement and career movement have an advantage.
SMEs can offer career growth opportunities by providing clear and transparent promotion criteria. They can also offer mentorship programmes and training opportunities to help employees develop the skills they need to advance.
On the other hand, large corporations can offer even more career growth opportunities. They may have formal talent development programmes that include rotational assignments, mentoring, and training. They may also have more opportunities for lateral moves and promotions.
2. Work-life balance A staggering 72% of Malaysian employees are motivated by a good work-life balance that offers them time for family, friends, and hobbies.
SMEs can offer work-life balance by being flexible with work hours and allowing employees to work from home. They can also offer paid time off and other benefits that help employees balance their work and personal lives.
Large corporations can also offer work-life balance benefits and may have more resources to do so. They may offer on-site daycare, fitness centres, and other amenities that make it easier for employees to balance their work and personal lives.
3. Health and wellness Malaysians understand that health is wealth. So, offering benefits such as comprehensive health insurance, mental health support, and wellness programmes can attract talent.
SMEs may be unable to offer the same health insurance benefits as big corporations. However, they can still provide other health and wellness benefits, such as gym memberships or on-site fitness facilities.
A small tech startup could provide wellness programs, yoga sessions, and mental health resources to support the well-being of its employees. A pharmaceutical corporation could offer comprehensive health coverage, employee assistance programs, and on-site fitness facilities.
4. Recognition and rewards Employees will likely work harder when they receive recognition for their efforts. Consider offering performance-based bonuses, incentives, or even non-monetary awards to contribute to their job satisfaction.
SMEs may not have the budget to offer large bonuses or incentives, but they can still recognise and reward employees for their hard work in other ways. Think public praise or employee-of-the-month awards.
An SME could institute a monthly “Employee of the Month” award with a small monetary bonus or a day off as a way to recognise outstanding performance. Meanwhile, a major technology company could have a tiered bonus structure tied to individual and team performance, as well as recognition events like annual awards ceremonies.
Organisational strategies Research and learn about industry standards and market benchmarks. For example, an SME in the creative industry could research what similar-sized companies offer in terms of compensation to ensure their packages are attractive within their niche. Working in a well-established corporation? Conduct regular salary surveys to benchmark its compensation against industry leaders, ensuring it remains competitive.
Again, determining salary compensation all boils down to the awareness of market trends. So, download the JobStreet Malaysia Salary Guide 2023 and learn more about the industry and specialisation you work in.
In the ever-changing landscape of work, employers must stay on track of salary and compensation trends. Understand the top factors that attract employees, and you will be able to create more effective and equitable compensation packages.
Every employer must remember that compensation is not just about salary. Benefits, perks, and opportunities for career growth also attract top talent. However, it is a powerful motivator that most jobseekers consider.
As such, ensure that you offer fair compensation according to the location, industry, market demand, and size of your company. Research about salary rates and talk with other employers in your industry.