Contracting on the rise in Malaysia as a flexible staffing solution

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In recent times, contract hires have served as a strategic, flexible staffing solution for a scalable workforce in Malaysia. More companies are turning to contract professionals to manage or work on new projects as part of their business recuperation plans in the wake of economic uncertainty brought about by COVID-19.

In fact, 62% of organisations in Malaysia included contracting positions in their headcount, while 30% of companies also responded to say that COVID-19 has resulted in the need for them to increase their contractor hiring, says our survey report launched in July 2021, Talent On-demand: The Rise of Contracting in Malaysia.

Companies are facing greater levels of scrutiny on permanent headcount numbers, while others are engaging temporary and contract staff to execute ad-hoc projects

Marlinda Zulkifli, Head of Page Contracting Malaysia, says, “Even before COVID-19 hit in 2020, many organisations were already employing contractors as a way to flex and scale their talent needs. The pandemic has further highlighted the need for companies to reassess their growth strategy and operational costs – and one component that stood out was the deployment of talent, both in the short and medium term. Companies are facing greater levels of scrutiny on permanent headcount numbers, while others are engaging temporary and contract staff to execute ad-hoc projects.”

Contractors serve more than just temporary help

Contracting has been a popular employment strategy both opted by businesses and working professionals. Contractors are also known as contingent staff, temporary workers, short-term staff, non-payroll and interim hires.

They are hired generally for a fixed-term duration. While it was predominantly a mainstay hiring solution for high-volume, low-cost employment, there has been a marked increase in demand for contract staff solutions for white-collar and more senior positions.

An emerging trend that we’re definitely seeing is that organisations are now increasingly considering interim staff for senior positions such as C-Suite roles

Overall, 58% of organisations surveyed said they use contractors for project implementation and digital transformation, all of which were accelerated due to COVID-19 and the need to facilitate remote working. On average, 3 in 5 contractors will receive a contract extension in Malaysia, and 2 in 5 get converted to permanent roles.

In addition to creating an agile solution to any headcount challenges Malaysia’s companies may face, Marlinda comments, “An emerging trend that we’re definitely seeing is that organisations are now increasingly considering interim staff for senior positions such as C-Suite roles. It offers many advantages, as they’re able to benefit from specialised skillsets or knowledge for a specific period of time.”

Attracting and retaining contract candidates

However, the report found that hiring contractors can sometimes be more challenging than expected. 1 in four companies expressed that they had difficulties in attracting contingent workers for short-term contract roles.

For a company to position itself as a desirable employer, it needs to present its benefits package, career opportunities, and company culture and environment in ways that resonate with the contractors.

Under management [of contract staff] can hinder productivity and performance, preventing the integration of contractors into the company’s overall workforce

Marlinda observes, “As organisations look beyond their permanent employees to create an agile workforce, they need to change their way of engaging with the contracting workforce. Traditionally, companies may undermanage non-payroll staff as temporary workers usually only stay in a company for a short period of time. However, under management can hinder productivity and performance, preventing the integration of contractors into the company’s overall workforce.”

It is encouraging to note that 70% of companies surveyed furnish contract hires with training, while 40% provide team-building exercises to help integrate contracting staff with the broader team. In addition, some companies offer a buddy system or create an environment to help ensure equality between permanent and temporary workers.

One of the primary competitive elements that differentiate an independent contractor from a full-time employee is the benefits package. Of the companies who responded, the top three contractor benefits provided by organisations in Malaysia include annual leave (80%), medical leave (77%) as well as training and development (59%).

While an increasing percentage of the Malaysian workforce are becoming receptive to the idea of taking on contract positions, a common misconception is that contractors are only secondary employees in an organisation.

While there are still opportunities for improvement, our findings reflect a positive trend. Most Malaysian companies offer on-par benefits for their contractors. Notably, 22% provide higher wages for contract employees.

On top of that, 73% of companies offer the same annual leave for contractors, 85% equip contractors with training on par with what permanent employees get, and 80% provide flexible work arrangements.

The Talent On-demand: The Rise of Contracting in Malaysia report by Page Contracting Malaysia outlines our findings of trends and insights on contracting in Malaysia as a strategic hiring solution.

This report was collated as a result of a survey conducted with leaders and executives in 205 companies across Malaysia. Download the report to learn more about the contracting landscape in Malaysia.

Looking to work with contractors? Contact our recruitment consultants to connect with the top contractors in your industry.

Michael Page