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The SOE salary revision

The government has approved the salary revision for enterprises that it owns or controls. After the announcement on Friday, there are more confusions and, therefore, more questions than appreciation.

Why with effect from December? Why replace the 25 percent allowance by the 20 percent housing allowance and how does the raise ensure that salary of those working in state-owned enterprises (SOE) are higher than that of general civil servants?

This happens because a salary revision is the beginning and not the end of the issue.

The finance minster has tried to explain it, but there is no clarity. The government said a notification will be issued on Friday, but it has not so far. Hopefully the notification will clarify a lot of doubts.

A salary revision for SOE follows a revision for the civil service. This has been the trend. Whether a SOE is making money or is totally dependent on government hand out is immaterial. Everybody gets a raise worked out by the finance ministry.

No salary revision makes everybody happy. There is always a group who feel neglected. The civil servants have moved on after expressing a lot of frustrations. The 13,000 or so employees in the SOEs will move on if they are clarified on the doubts they have.

With the revision, some SOEs are worried, especially those who do not receive subsidy or support from the government. Those with 100 percent government equity need not worry whatever the raise. The money will come from the government coffer. It is those SOEs both with social mandate and left on their own to sustain. How will they fund the revision is weighing heaviest on the minds of the management.

A new inclusion in the revision is the Performance-Based Variable Incentive. This is a good initiative where performance will be incentivised. But applying this to all SOEs needs careful planning. The DHI companies that practice this have spent years fine-tuning it.

The salary revision in that way is to have an impact on the performance of employees and management in the SOEs. SOEs are important. They contribute about 40 percent of the domestic revenue and is the second largest employer, after the civil service.

To drive performance, SOEs are also mandated to sign a performance compact with the government. There will be issues here as the profiles of SOEs differ and performance could conflict with the government’s other policies.

The Duty Free Corporation and the Army Welfare Project make revenue from the sale of alcohol. Increasing production or import of alcohol directly contradict with alcohol or import substitution policies. Such companies may sustain and create jobs, but the profit they churn out, for instance, could be at the cost of health of the public.

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