The SOE salary revision

The suspense is at last over.  Salary revision for employees working in state-owned enterprises has been finally finalised.  The revision between 19 and 25 percent at various levels will come into effect from July 1, 2014.

In other words, many will feel that it was worth the wait.  The decision to pay them an almost eight-month revised amount in arrears will come as a generous Losar gift.  With the corporate allowance also increased from 20 to 25 percent, it is a significant revision.

And the revision this time for the corporate sector, minus corporations owned or linked to Druk Holdings and Investment, will go down well with the low salaried.  The raise is more for those who earn less, and less for those who earn more.

In every earlier salary revision, whether for civil servants or corporate employees, it was those in the low-income bracket that complained most. The logic was that, if salaries are revised because of increasing cost of living, it affected them the most. A flat rate raise, they believed, widened the income gap because of the difference in basic salary, which made a huge difference in actual terms.

The order from the finance ministry, owner of the SOEs, mandates a 25 percent (highest) for those in grade XIV and below.  Although not many SOEs follow the grade system, it does make sense to give a higher raise to the lower income group.

The order also fixed a maximum ceiling at 25 percent, and SOEs are left to decide to go lower if they cannot afford. This makes sense too. There is no point in forcing a corporation to raise salaries, if it receives a subsidy from the government or cannot afford the raise.

At the same time, paying huge salaries, depending on their income is unfair.  Consider corporations that have almost a monopoly and are making huge profits. The margin comes from the protected status and not because they are the best performers.

Meanwhile, a salary revision, either for civil servant or corporate employees, is closely watched.  With more employees in corporations, there is a possibility of raising the cost of living with a salary revision. This will affect the others, those in the private sector and beyond.

In the developed world, private sector employees enjoy higher salaries and better perks. Government jobs are not as much in demand as they are here. This is because the private sector is hugely developed. In most countries, they are so powerful that they influence government decisions.

While we can do without the latter, the private sector needs to be recognised more than ever now. We keep telling our young graduates, at all levels, to look for prospects beyond the corporations and the civil service. But apart from a few big business houses, there is not much private sector in the country today.

Those working in the private sector should not be victims of a government or corporate salary raise. It is an important sector, the engine of growth, or so they say. But it should not stop with lip service.

If there is a priority today, it should be developing the private sector with appropriate plans and legislations.

1 reply
  1. irfan
    irfan says:

    A salary hike is always considered good news and gives the right reasons to welcome it. It’s indeed a fitting gift for Losar for many and probably a salary increase that has been well due for a hike. But the role and contribution of the private sector in the economy remains more or less unchanged to talk about. If we mention the big business houses in Bhutan or elsewhere, the growth story in the long run remains more inorganic in nature with varying markets. Even for the employees, the career growth is about maximizing values of skills learnt and developed through switching of jobs and exploring opportunities in other countries as well. But for a private sector to be considered otherwise; there is a need for a workforce as a prized resource that’s always open for experimental learning bringing out innovations through optimized resource utilization.

    Skills need to be groomed for horizontal growth that can be sustained in its organic nature within and across organizations. When best of the people straight out of colleges and universities are opting more for a civil service or corporate or public sector job, it makes things difficult for the private sector especially when we look beyond the big private business houses. All of us are hungry for experiences that can produce very predictable career growth, but not many are ready to experiment and explore for that innovation we talk about so frequently. That army to be raised still remains unexplored or hidden in our culture and a private sector can change things a bit. At times, too much of definitions can spoil the party without the experimental theories.

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