Companies brace for hike in costs

The government’s new minimum daily wage and starting salary for fresh degree graduates are likely to push up the payroll cost for companies in Thailand by 10-30 per cent, according to a survey conducted by global consultancy Hay Group.
More than 70 per cent of organisations that took part in the survey said they expected to have “moderate” to “most” impacts from the government’s plan to deliver its election promise to increase the daily minimum wage to Bt300 and a starting salary of Bt15,000 for bachelor’s degree holders beginning from next month. Of the total respondents, 40 per cent of firms expect to have “moderate impacts”; 30 per cent anticipate “significant impacts”; and four per cent “most impacts”, while 18 per cent say they are likely to have “little impacts”, and eight per cent “less impact”.
Hay Group’s bi-annual survey involved 119 organisations, most of them multinational companies and leading organisations in Thailand with revenue of about Bt1 billion to Bt50 billion and 51-300 employees.
About 61 per cent of the respondents disagreed with the government policies, citing higher payroll and operating costs, and suggested the adjustments should be gradual and “step by step” and considered according to industries and their ability to pay, rather than across the board, said Thanwa Chulajata, Hay Group’s country manager for Productised Services Unit, at the consultancy’s Annual Executive Forum held last Friday.
“For the service sector, in particular, payrolls already account for 50 per cent of their costs,” he said.
On the other hand, 39 per cent of the survey participants agreed on the government’s wage and salary increase policies, saying these adjustments would make the pay more relevant to the employees’ current cost of living, and help lift up Thai labour skills and standards.
Leading independent economist Sethaput Suthiwart-Narueput told the Hay Group’s forum that there was a need to raise Thailand’s wages, which over the past many years had been raised by only 2-3 per cent annually, merely to cope with inflation. However, the adjustment to Bt300 daily is considered too high, he said.
Sethaput, a former chief economist at Siam Commercial Bank, said the enforcement would be an important issue as a study had found that half of the workers in 76 provinces in the country had actually been paid less than the minimum wages.
On the other hand, if the government can successfully enforce its new daily wage policy, the impact will be large considering the fact that 11 million workers are currently receiving less than Bt300 daily, he said.
Meanwhile, the Hay Group survey reveals that Thailand’s average salary increase will remain at around 6 per cent this year and next year, continuing with its decade-old trend despite fluctuating economic growth, inflation, and government policies. It forecasts base salary increase of 6.14 per cent this year, and 6.11 per cent for 2013.
“For the last 10 years, salary adjustments have stayed in the range of 5-6.5 per cent, regardless of inflation,” said Thanwa.
Actual total bonus payment for 2011 averaged 3.02 months, differing marginally from the forecast of 3.03 months.
There are also small differences in base pay increases across various business sectors. The consumer goods sector registered the highest salary increases at 6.72 per cent for this year with a forecast of 6.4 per cent for 2013, while insurance firms, affected by last year’s flood, plan the lowest pay increase of 5.39 per cent for this year, and 5.31 per cent in 2013.
The finance sector, also reeling from the recent floods, has lowered its average bonus payment for 2011 to just 1.67 months and two months for this year, compared to its normal bonus of 2-3 months. On the other hand, the utility sector made the highest bonus payment of 4.21 months for 2011, with plan for 3.83 months’ bonus in 2012, said Thanwa.
Among seven countries in Asia included in the Hay Group study, salary increase trends in Thailand for 2012 and 2013 are the lowest except Singapore where salary adjustments are forecast to remain flat at 4.5 per cent for this year and the next. The highest pay raise on the list is Vietnam with 13.7 per cent this year and 13 per cent planned for next; followed by India (11.18 per cent and 12.13 per cent), Indonesia (10.4 per cent for both 2012 and 2013), China (8.7 per cent, 9.5 per cent), and Malaysia (6.2 per cent, 6.1 per cent).
India tops the ranking of regional variable bonus payments with 4.41 per cent months for 2011 and 4.27 months forecast for 2012, followed by China (3.3 and 3.9), Indonesia (3.1 and 2.9), Thailand (2.7 for both 2012 and 2013) Malaysia (2.4 months for both years), Singapore (2.4 and 2.1), and Vietnam (2 months for both years).
All countries included in the survey registered double-digit staff turnover rates in 2011, except Indonesia where the rate was 8.2 per cent. Companies in Malaysia suffered the most with 16.4 per cent of their employees leaving their organisations last year, followed by 15 per cent in Thailand, 14.3 per cent in Singapore, 13.9 per cent in China, 13.5 per cent in India, and 12.6 per cent in Vietnam.
Other major findings for Thailand from the survey included:  65 per cent of the companies are expected to increase their headcount; 28 per cent planned no change; and seven per cent expected to decrease.

--The top-three recruitment difficulties were:
-Sales staff at supervisory/junior professional levels
-Engineering staff in supervisory/junior professional levels
-Information Technology in middle management/seasoned professional

--The top-three areas of highest employee turnover:
-Sales staff at supervisory/junior professional levels
-Engineering staff in supervisory/junior professional levels
-Production in middle management/seasoned professional levels

--The top-three concerns regarding current human resource issues:
-Leadership transformation/development
-Talent management and career path
-Employee engagement

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