Corporate pay rise, bonus plans on track

Most companies plan to keep their salary and bonus adjustment plans intact, despite Thailand’s worst flooding in more than 50 years that significantly affected businesses and consumers in the Kingdom, according to a survey conducted by Mercer (Thailand), a leading consultancy and outsourcing firm.

Nonetheless, a Thai Yamaha Motors executive pointed out that most firms would need to review their remuneration structures to cope with the government’s Bt300 daily minimum-wage policy and its implementation of a Bt15,000 minimum salary for bachelor’s degree holders next April.

Mercer (Thailand)’s associate for information product solutions Naruenard Somjaivong said a snapshot survey undertaken by his company in response to the floods in Thailand in October and November, revealed that 77 per cent of survey participants – 132 companies – were affected by the floods, but less than one per cent of the participants  plan to implement headcount reduction or downsizing.

Most participants (95 per cent)  do not have a plan to revise their salary adjustments after the flood situation. Similarly, 86 per cent of the respondents do not plan to revise their targets of variable bonuses for this year, he said.

This means most participants will maintain their original salary adjustments and variable bonus payment plans. According to Mercer’s total remuneration survey conducted just before the flood crisis, Thai companies plan to increase salary by six per cent in 2012 and pay a bonus equivalent to 2.4 months of salary for their 2011 performance. These compare with 5.8 per cent salary adjustment in 2011 and 2.4 months bonus for 2010.

About 62 per cent of all industries expected “no change” in their salary increase rates for 2012 when compared to 2011, while 26 per cent of them expected higher increases. The electronics industry was the most upbeat with 44 per cent of the participants planning a higher salary increase, but the survey was conducted prior to the flood, Naruenard stressed.

Mercer’s associate was speaking at his firm’s conference held last week to announce the results from the total remuneration 2011 and the flood snapshot surveys.

However, Thai Yamaha Motors’ general manager of human resources Sakda Homfung told the conference that he believes Mercer will need to conduct another remuneration survey in January or after April when the new minimum-wage structure comes into force because the minimum-wage adjustment and the implementation of the minimum Bt15,000 monthly salary to degree holders would significantly affect costs and the remuneration structure of companies.

Sakda said productivity and cost management had become a key issue for companies and their human-resource departments to cope with the rising costs in 2012 but he did not think investors would flee Thailand because of the problems. “I still believe manufacturers are still flowing to Thailand. Few will relocate their bases. However, what we need to be cautious is that they may switch some higher-margin products to other countries and this trend has already begun,” he said.

Sakda said although the Thai Yamaha factory had not been flooded, it could currently run the factory at only 30-40 per cent of the capacity due to a lack of parts whose suppliers had been hit by the floods.

Mercer (Thailand) managing director Wittapon Jawjit said to  maintain  workforce engagement  thorough difficult times, firms should focus on implementing a strategic “total remuneration” policy and transforming their human resource functions.

Although firms cannot avoid implementing the government’s wage policies, creating a “sense of earning” among their employees should be within the firms’ ability, Wittapon said, urging companies to constitute what he called the “earning reward” system. 

“Unlike government, firms cannot be only spending their money. Employees will ‘take it for granted’ that a pay increase will be provided by firms, which do not intend to, and there will be no productivity gain,” he said.

Pay increase without justified rationale will distort  workers’ behaviour and cannot guarantee their engagement, Wittapon said.

Other key findings from Mercer’s Total Remuneration Survey 2011 include:

_ The top-three industries that pay the highest annual base salaries in 2011 are high-tech, chemical, and consumer goods industries.

_ Pharmaceutical industry is top on the “annual total cash” pay list, following by chemical and high-tech industries. This is because most pharmaceutical firms are “sales-driven” organisations that pay a lot of sale incentives to staff.

_ In terms of “annual total remuneration”, pharmaceutical is still on top, followed by chemical and consumer goods industries.

_ There has been no correlation between key economic indicators and salary increases as well as variable pay in Thailand. Even in the years when there was minus economic growth, Thai firms still paid bonuses and gave a salary raise for their staff.

_ Sixty-four per cent of employees in all industries receive fixed bonus at one to three months per year. A minimum one-month fixed bonus has become a typical practice.

_ A majority of participating companies (52 per cent) plan to recruit more staff in the next three months, while 46 per cent expect no change in recruitment, and two per cent plan a workforce reduction.

_ Participating companies raised their head counts by 13 per cent in 2011. Their staff turnover rates averaged 14 per cent this year.

_ The most difficult jobs to recruit and retain in 2011 are sales and marketing, engineering, pharmaceutical and medicine professionals. Last year, the most difficult jobs to recruit and retain were sales and marketing, engineer, and finance professionals.

 

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