Malaysia has to address the challenges of globalization to become a developed nation by year 2020. Changing economy to one that is based on knowledge-economy and enhanced importance of the service sector needs a competitive workforce with high performance and capability. This article analyses the impact of workers’ competence towards their performance in the private service sector. The analysis is based on a sample of 1136 workers who are either executive, manager or professional from three service sub-sectors, namely, education, health and information and communication technology (ICT) in Selangor, Federal Territory of Kuala Lumpur, Penang and Johor collected in 2007/2008. In this analysis, Workers’ Performance Index (WPI) and Workers’ Competence Index (WCI) are developed and subsequently used to analyze factors determining workers’ performance in the selected service sector. The results show that workers’ competence has significant influence towards workers’ performance. Besides that, human capital and workers’ characteristics also determine workers’ performance in the service sector.

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