New wages policy meeting business approval

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New wages policy meeting business approval

The National Wage Committee recently announced that it had decided to scrap the fixed 300-baht per day minimum daily pay rate in 2016 and replace it with a so-called floating rate, although 300 baht will remain the absolute minimum.

While welcoming the decision, the Federation of Thai Industries (FTI) said the floating rate should be based on the strength of the economy on a province-by-province basis. The FTI said it agreed with the National Wage Committee that the fixed rate needed to be scrapped, and said the new daily minimum wage should be overseen by provincial wage committees. They would be in a better position to determine the strengths and weaknesses of small to medium enterprises (SMEs) in particular and could make recommendations as to the right level of daily wage which should be payable in their area.

Obviously, the higher the economic growth in a province the higher the minimum daily wage. Provinces with special economic zones (SEZs), for example, require skilled and unskilled labour and should be in a better position to pay higher wages than provinces where overall business levels are weak or poor.

The Labour Ministry said it would continue to conduct analyses as it currently does on wage rates, paying especial attention to inflation rates and the cost of living in each province.

The 300-baht minimum daily wage became a national law in January 2013 under the now-ousted Yingluck Shinawatra government and data supplied by the Industry Ministry estimated it led to wage cost increases amounting to 16.1 percent of total production costs, up from a previous 11.9 percent.

The results of the wage rise were mixed, although labour-intensive industries such as textiles and garments saw some companies forced out of business while others either streamlined their workforce or relocated to neighbouring countries such as Cambodia, where daily wage rates are much less.

The Thai Chamber of Commerce (TCC) has announced it will conduct its own feasibility study on the effect of the new floating minimum wage on businesses. That study should be complete by the end of July.

The TCC is aiming to collect information from SME’s in particular as well as major industries as to what potential positives and negatives will result from the move to a floating daily wage rate, which still keeps 300 baht as the minimum. The TCC has said it is still too early to gauge the impact at this time.

Nonetheless, there does appear to be a general consensus that a floating daily wage rate is a step in the right direction, especially for businesses located in the poorer provinces.

 

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