Provident fund plans 3% initial contribution
For the compulsory provident fund plan structure employers and employees both are required to contribute 3% of their salaries and add up to 10% of their salaries by year 10, with the salary cap of 60,000 baht per month (approximately $ 1,714).
However, if an employee earns less than 10,000 baht per month (approximately $ 286), then the employer would be the only contributor. For the administration of the compulsory provident fund, no details have yet been confirmed about the person who will manage the investment.
The Fiscal Policy Office said the government is preparing to adopt the compulsory provident fund plan in 2018 for the first year, starting with companies with 100 or more employees, and then will gradually applying the plan to every company with one employee. Up to the 6th year of this law enforcement
3 ways to affect employers
Companies that already have private funds yay not require further contributions to the compulsory provident fund. But may need to consider adjusting existing plans to be in the same direction with details for the employer.
- Current Provident Fund Structure
An employer who already has a provident fund plan, their current contribution structure should be re-examined. Especially cost analysis to understand the impact that will occur if the government increases the minimum rate of provident fund payments from 2% to 3% for funds operated by private companies. And it might be a good time for employers to consider a comprehensive corporate provident fund in terms of overall fund structure and investment strategy. To ensure that it is consistent with the various strategic goals of the organization.
- Transition from a Defined Benefit Plan to a Defined Contribution Plan
Many companies in Thailand still use the defined benefit plans that prevent the company from knowing the expenses to the company until the benefits are paid upon retirement. And because the provident fund is compulsory defined contribution plans, the employer should consider the existing plan structure. And assess whether there should be an amendment or not to reduce the risk of costs that will increase.
Moreover, as with government agencies and non-governmental companies around the world, companies in Thailand should also consider modifications to their defined benefit plans. To be a defined contribution plan that is good or not This might be a good opportunity to consider if it hasn’t changed. Changing the plan may help the company reduce its long-term debt burden from the company book. As well as enabling the company to manage the income statement more accurately. And reduce the long-term risk of salary increase and return on investment.
- Determining the Use of Compulsory Provident Funds in the Future
It is estimated that companies that do not have their provident funds, will have to implement this compulsory provident fund plan. On the other hand, a company that already has a provident fund, for them no action is required. While there is not much information on how compulsory provident funds can be implemented, companies need to reconsider their existing retirement benefit plans., including welfare regulations and supervision.