Incentives shift for Taiwan ‘s tech workers
Investors and management of Chunghwa Telecom agree the company has more cash than it needs .Nevertheless , Taiwan’ s largest telecommunication Service provider is going to issue 139 millon new shares next month – to give away to employees as a bonus . But it may be the last time company does this .we will discontinue the practice out stock bonuses, says Lu Shyue-ching , Chunghwa Telecom’s new Chairman.
The company in not alone .Hundreds of Taiwanese firms, especially in the technology sector ,are adjusting the structure of compensation packages ,following a series of changes to the accounting and tax treatment of stock bonuses.
Issuing large amounts of stock has long been the cornerstone of tech industry compensation in Taiwan .Every year ,the island’s employers gave both management and general staff generous numbers of new share which were seen as a way of attracting good workers for free.
But investors who saw their shares diluted in this way have long demanded changes ,
And the government has finally acted .from now on .Taiwanese compaies must report such bonuse
As a financial expense in their company accounts,which will reduce their profits significantly.
These legal change are revolutionizing the island’s pay pracices. High –tech companies have started paying more cash to general staff and middle management and giving more long-term incentives to top management , say Charles Wang ,General Manager of Watson Wyatt ,the human resources consultancy ,in Taiwan .
The biggest change can be seen at the general staff level ,where the base pay will have to increase considerably .Traditionally,profit-sharing ,mostly in the form of stock bonuses,accounted for up to 50 percent of total compensation in the high-tech sector, say Mr.Wang ‘Under the new structure ,the total guaranteed cash portion will increase,and the remaining part of compensation will be made up of variable performance bonuses and a much smaller segment of profit –sharing in the form of cash bonuses.
At the middle management level, there has been an increase in the weight of the merit-based pay component in salaries and the replacement of stock bonuses with stock options.
For managers at the top ,stock bonuse and other short-term incentives still make up 40 percent of compensation .And they have seen little increase in their base wages but,like their mid –level colleagues ,are receiving a higher proportion of performance related pay and long-term incentives in their pay packages . They have also experienced the introduction of stock options and a series of non-cash perks.
While in many European countries the attraction of such perks is limited because they can be taxed,so far Taiwanese regulations don’t apply to non-fanancial rewards. By providing a top executive with a company car or ,alternatively ,covering the expenses of a leased car,a company can effectively provide him or her with a tax-free perk,say Mr.Wang.
All of these change mean the compensation packages of Taiwanese companies will gradually start resembling those of their foreign rivals .For general staff ,the proportion of cash bonuse in relation to total compensation is now almost the same in Taiwanese as foreign high-tech companies –between 13 and 15 per cent
Consequently, as these long- estabished practices disappear and employees no longer swich jobs according to stock bonus payment changes ,Taiwanese companies will be looking for other ways of attracting talent.