Application Architect @ Next | Cloud-Native Architecture, Azure DevOps
If anyone is interested in how a stable currency pegged salary scheme work, here's one way of doing it. We have a few challenges to work with 1. Any company that has a registered business in Sri Lanka cannot legally pay their employees in any currency other than LKR 2. If the base salary fluctuates every month based on exchange rates, that's challenging to the company in terms of processing and to the employee in terms of proving that they have a stable income (to obtain a loan from a bank for example) 3. Depending on when, where from and the bank the company transfer foreign currency to their local bank, the exchange rate they get will vary significantly. 4. When the salary if pegged to a stable currency - you still have the slim risk of rupee appreciating against that currency and therefore an individuals salary falling below what it used to be before the pegging. This is undesirable for the employees. 5. If you establish a "floor" exchange rate to protect your employees from the above, then this floor rate can't be the floor rate at the day of the employee joining - because that will put the employees who joined at a lower exchange rate at a disadvantage should the rupee appreciate. 6. Employer is responsible for EPF contributions at a rate of 12% of the total earnings except for bonuses, incentives and travel reimbursements. 7. Employer is responsible for ETF contributions at a rate of 3% of the total earnings except for bonuses, incentives and travel reimbursements. 8. Employee is responsible for advanced individual income tax on their income. Based on these constraints, below is *one way* of pegging the salary to a stable currency. 1. Declare the employee salary in the stable currency (for example US$ 5,000 per month) 2. Declare a floor exchange rate at which should the rupee appreciate, the company would protect the employee salaries. (For example 200:1 - meaning the employee will get the exchange rate of 200 rupees per US$ even if the exchange rate drops to 100 rupees per US$) 3. Make the rupee value at floor exchange rate the fixed salary of the employee (i.e. The employee who's getting US$ 5,000 will get a fixed salary of 1,000,000 rupees if the floor exchange rate is 200:1) 4. Pay the remainder of exchange rate margin as an incentive (i.e the same employee above will get 425,000 rupees as an incentive on a month in which the exchange rate is 285:1 against the US$) - making it an incentive transfer the full benefits to the employee immediately. 5. EPF, ETF is calculated on fixed salary - tax is calculated on the full payments made including incentive. EDIT: Whether the delta of the exchange rate is paid as an allowance, basic, bonus, incentive is basically how you want to do it. You basically have an x amount of money allocated in a stable currency to pay an individual. With different options, you have different statutory obligations. #SriLanka #PeggedSalaries #hyperinflation #USD #Payroll #SoftwareEngineering #Salaries
Dilum Navanjana thanks for compiling this list: https://peggedplacetowork.lk/
Apart from (potentially) paying income tax, there should not be any disadvantage for an employee since EPF/ETF is percentage driven. Infact is would be advantageous during retirement. There are ways to get tax benefits (UpTo a certain amount) if the employee is knowledgeable enough. Also, I recall incentives are also taxable after a certain amount. Also, the employer is not loosing since the fx rate that is paid remains the same, which was already budget-ed. This way the foreign currency received to the country remains the same while there is more (potential) tax income to the country (regardless of personal political views.) Establishing the floor value (eg. As per the exchange rate in February 2022) would be the way forward. Comparatively, if a win for the employee, employer and the country.
Very useful
I see some backslash on pegged salaries on LinkedIn as well as other social media. Honestly, It's up to employers to decide whether they do it or not. I do understand that a company serving the local markets will struggle to do that. But, if a company earning in a foreign currency is not helping their employees to get through this hyperinflation, that to me smells very much like corporate greed. And it's the employees choice to decide where they want to work and how they want to earn. https://mitrai.com/careers/
There seems to be a misunderstanding about the EPF contribution. https://epf.lk/?page_id=811
Rukshani Fonseka
My views are Mitra staff are already relatively wealthy. Fix the salary to the current rate and the deviance invest in a scholarship / training programme for deprived individuals but not via donation, instead harness the concept teach a man to fish - not sure the exact methodology, thats for you to figure out. But no one ever goes hungry in Sri Lanka, people are overfed for their current lifestyle - so education might be the way forward
Indrajith Ekanayake Hope this helps with your survey ??
Marketing Enthusiast | B.Sc. Marketing Management Sp. USJP |ACIM
2 年Thanks for posting