Why Employee Benefit Costs Are Going Up in Malaysia
A deeper look shows several underlying factors driving costs up. Since the pandemic ended, Malaysians are going to the doctor more often. Mercer’s 2025 Health Trends Report points out a big jump in check-ups and long-term care visits leading to more claims that insurers need to factor into their prices. Insurers have also started to change how they calculate risk. In September 2025, The Star reported that some industries saw premiums go up by as much as 18%. Big companies might be able to bargain for better rates, but SMEs—most of which use shared plans—end up paying more. Meanwhile, the competition for skilled workers raises expectations. Mednefits’ 2025 survey reveals that 76% of Malaysian employees see medical benefits as a key reason to stay with an employer. Reducing benefits can lead to staff turnover, decreased morale, and increased hiring expenses.How Cost Increases Impact SME Budgets
Think about a company with 50 workers. If medical coverage costs RM1,500 for each employee , a 10% rise bumps the per-employee cost to RM1,650. After adding dental, optical, wellness, and administrative fees total cost increases can reach RM25,000–RM40,000 each year. To show the money trouble here’s a table that sums up the main things driving up costs and how they affect small and medium businesses:Rising Benefit Costs & How They Hit Malaysian SMEs (2025)
| Cost Driver | What’s Happening | Impact on SMEs |
| Medical Inflation (10–14%) | Higher hospital, medication, and treatment costs | Annual premium increases of 10–18% |
| Increased Healthcare Utilisation | More outpatient visits post-pandemic | Higher claim ratios → more expensive renewals |
| Talent Competition | Employees expect better benefits | Cutting benefits risks turnover & lower morale |
| Pooled Insurance Structures | One high-claim company affects all | SMEs pay more despite low usage |
| Limited Negotiation Power | SMEs lack volume leverage | Fewer options to reduce premiums |
How Malaysian SMEs Are Responding
Industry experts say SMEs no longer stay quiet about rising costs. Marsh McLennan sees a clear pattern: companies are changing their benefits to offer more options while keeping risks in check. Mercer’s 2025 Total Rewards Study shows that 44% of SMEs aim to negotiate new deals, while 30% plan to split costs (like small employee payments). Tech companies such as Mednefits notice that SMEs now look at claim patterns to find the real issues. For instance, lots of clinic visits for small health problems point to chances for online doctor visits, health programs, or steps to prevent illness.Practical Strategies SMEs Can Use in 2025
SMEs that keep their costs in check pay attention to visibility and create smart plans. They start by checking if their plan still works each year seeing how their benefits stack up against what others offer, and working with brokers who know SME group plans inside out. Many of them set up different levels of benefits—giving more coverage to higher-ups while making sure everyone else gets the basics. Some ask employees to chip in 5–10% for non-urgent outpatient care to cut down on needless claims without breaking trust. Keeping people healthy before they get sick is paying off. Mercer and Mednefits point out that regular check-ups, help with mental health, and doctor calls over the phone or video can lower the number of claims by up to 15% as time goes on. More and more small and medium-sized businesses now use HR and payroll systems like Info-Tech HRMS. These systems bring together benefit usage, payroll deductions medical claims, and insurance updates. This gives SMEs a clearer picture allowing them to predict premium changes well before renewals and negotiate based on facts—not guesses. Hybrid benefit models are becoming popular too. Some SMEs fund outpatient benefits themselves through set budgets while insuring major medical needs. This approach offers flexibility and keeps costs predictable—but it needs careful tracking.Balancing Affordability With Employee Expectations
Healthcare perks now have a crucial impact on keeping employees. Mercer’s research indicates that flexible benefits can boost worker satisfaction by up to 30%. Workers—particularly Millennials and Gen Z—seek perks that address both physical and mental health. Slashing perks without explaining why hurts trust. But revamping perks , with well-thought-out options, keeps spirits high and boosts the company’s image. Why Are Employee Benefit Costs Going Up in Malaysia in 2025? “Employee benefit costs are climbing because of healthcare inflation (10–15%) more people using healthcare services, pricier insurance plans, and workers wanting better health benefits. Small businesses can handle these costs by talking to insurers pushing for preventive care, looking at data, trying mixed benefit plans, and using HR software to track benefits.”How Info-Tech Helps SMEs Handle Rising Costs
Info-Tech Malaysia backs SMEs by offering a combined HR & Accounting Software to track medical claims, link perks to payroll, and create detailed cost reports. With up-to-the-minute data, SMEs can:- Keep track of benefit usage
- Spot expensive claim patterns
- Predict premium hikes
- Streamline payroll deductions
- Follow EPF, SOCSO, and EIS rules
Frequently Asked Questions:
What’s behind the rise in medical insurance premiums in Malaysia come 2025?
Medical inflation more outpatient visits higher hospital expenses, and new insurance pricing models all play a part in driving up premiums.
How much extra will SMEs shell out for employee benefits in 2025?
Most SMEs should brace for increases of 10–15%, while some industries might see jumps as high as 18%.
Is it possible for SMEs to offer good benefits without breaking the bank?
SMEs can keep costs in check while keeping employees happy by redesigning plans, rolling out wellness programs introducing co-pays, setting up tiered benefits, and using data to negotiate better deals.
How does HR software help manage rising benefit costs?
Programs like Info-Tech enable small and medium businesses to monitor claims, examine expenses, predict premium hikes, and combine benefits with payroll to budget better.
Are hybrid or self-funded plans safe for SMEs?
These plans can work well when backed by robust monitoring systems and defined claim limits. Many small and medium enterprises insure major medical needs while paying for outpatient care themselves.