The EU has temporarily suspended the GSP+ concessions. The Government response has been to promise measures to counter this, hinting at a possible devaluation of the currency and to suggest that the factories concerned look to improving productivity.
There is however a fairly simple measure that can help reduce production cost while raising employee satisfaction. What is this measure? A suspension of EPF and ETF payments for a specified period of time.
Employers are required to contribute 12% of salaries paid to the EPF and a further 3% to the ETF, a total of 15% of salaries. Employees are required to contribute 8% towards EPF.
My suggestion is that the Government suspend EPF and ETF payments for a fixed period of time, perhaps a year, until the EU concessions can be renegotiated. Under the arrangement that I propose the company would not have to contribute the 15% while the 8% would no longer be deducted from the salaries of employees. Thus there is an immediate saving of 15% on the ages bill, which is very significant, while the employees get a bonus in the form of an 8% pay hike. The GSP+ concessions reportedly worked out to a 10% saving on cost, I'm not sure how much a 15% saving on payroll costs translates to conversion cost but it is significant.
Food for thought, perhaps?