It is encouraging that the legislature preliminarily passed a bill on Monday stipulating that listed firms should share their profits with employees and raise wages, clearing the way for the final passage early next month.
Making profit-sharing compulsory might not be the perfect way to boost salaries, but it is the government’s very first — albeit tiny — step toward tackling the burning issue of wage stagnation by using the law, rather than just moral suasion.
On Monday, legislators gave preliminary approval to a revision of the Labor Standards Act (勞動基準法) that would force companies to share profits and to work with their employees each year to produce a profit-sharing plan. Violators would be fined from NT$500,000 to NT$5 million (US$15,930 to US$159,300) based on another revision, which also passed a preliminary review.
However, legislators backed away from a proposal that set a specific figure for corporate profit-sharing, saying there is no one-size-fits-all model.
Democratic Progressive Party Legislator Lin Shu-fen (林淑芬) proposed that firms allocate at least 20 percent of their annual profit to profit-sharing.
In addition, legislators proposed revising the Company Act (公司法), Factory Act (工廠法) and the Small and Medium Enterprises Development Act (中小企業發展條例) to boost salaries by legally imposing profit-sharing on the nation’s listed firms.
Companies that allocate a certain amount of their profit to pay increases could receive a reduction in business tax, legislators proposed.
In the 14 years prior to last year, real wages fell by 0.1 percent, while in South Korea, Singapore and Hong Kong, they increased by 2 percent, 1.3 percent and 1.3 percent respectively, according to statistics released yesterday by the National Development Council.
The so-called “pay raise” amendments are considered the government’s first practical steps toward ending long-term wage stagnation.
The stimulus measures are seen by some economists and central bank Governor Perng Fai-nan (彭淮南) as tools to spur private consumption and revitalize the economy after tax cuts for corporations failed to result in more business activity.
Some doubt how big the effect of the “pay raise” amendments will be, since only listed firms would be obliged to conform to the new rules. About 3 million employees, or one-third of the nation’s 10 million salaried workers, would be subject to the extra benefits.
These rules may not have an extensive impact on the job market, but they should create an environment in which local employers start thinking about the feasibility of sharing more profits with employees, beyond meager — or nonexistent — annual pay raises and year-end bonuses.
A survey by local job agency 1111 Job Bank found that nearly 30 percent of local employers support the “pay raise” amendments, higher than the disapproval rate of 18 percent.
Half of 815 firms listed on the stock market plan to increase employees’ salaries this year, with pay raises likely to average 3.5 percent, according to Financial Supervisory Commission statistics.
It is undeniable that there are a number of miserly bosses who are reluctant to assign a portion of their profits to their employees, while no one is arguing that shareholders receive more profit when companies earn more.
The four “pay raise” amendments are certainly not a cure-all, just the beginning of efforts to raise wages.
The government must implement more measures to magnify the effect, while local enterprises more carefully calculate whether paying higher wages to maintain a well-trained and skillful workforce is a cost-effective way of remaining competitive.
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