Mon, Jul 28, 2008 - Page 12 News List

No end in sight for performance-based salaries: observers

By Crystal Hsu  /  STAFF REPORTER

While inflation has eroded incomes, a performance-based salary policy that has been extensively adopted by firms contributes to wage declines, observers said yesterday, adding that the chance of a reversal in the trend is slim in the foreseeable future.

The nation’s workers earned an average of NT$37,066 a month between January and May, the Directorate General of Budget, Accounting and Statistics said. The figure, while edging up 1.58 percent year-on-year, marked a negative growth of 2.01 percent after adjustment for inflation of 3.66 percent for the same period.

The inflationary pressure would pose less of a threat if nominal wages increased at a quicker pace, as before 2000, when the gain often exceeded 5 percent but has since slowed down to 1.5 percent.

The figure is unlikely to rise sharply as companies by and large have adopted a performance-based pay system to keep their personnel outlays down in the face of sharp competition at home and abroad.

Ryan Wu (吳睿穎), chief operating officer of Internet-based 1111 Job Bank (1111人力銀行) said almost all domestic service sectors have based their payroll on employee performance since the new pension system took effect two years ago.

Under the system, employers are required to set aside pension funds on a yearly basis, rather than paying a lump sum upon the retirement of employees. The measure is designed to prevent companies from shutting down before their employees have the chance to collect their pensions.

A merit pay policy allows employers to raise wages and provide bonuses for workers who perform well.

“The policy helps save fixed expenses as companies don’t have to give bonuses to all employees or at the same time,” Wu said.

Official statistics show that assorted bonuses account for 20 percent of the wages workers take home regularly.

Wu said a pay raise of less than 3 percent may contribute to real wage declines, after taking inflation into consideration.

Chen Jeng-yi (陳正毅), chairman of Sigma Marketing Co and former spokesman for the General Chamber of Commerce of the ROC (商業總會), said that companies have few incentives to hike wages under the trend of globalization.

Chen said industries had moved their assembly lines to China, Vietnam or other places in recent years because labor costs there were lower.

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