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Vol.14 2010.4
COMPENSATION & BENEFIT PRACTICE
The Mediatek cut the Employee Dividend Contribution Rate
In response to the policy that employee profit sharing should be taxed by the market price, Mediatek Inc. announced that the dividend contribution rate will be adjusted from 25 % to 20% of annual profit after tax. Mediatek will also adjust the base pay structure in order to protect the employees’ competency. The corporation indicates that reducing dividend contribution rate can improve the ROE and investors’ intentions to invest more in Mediatek.

Mediatek is the stock king of IC Design, and the leading index of Taiwan stocks and high-priced electronics stocks. As the Mediatek plans to reduce the dividend contribution rate, it is very likely to induce a trend, which makes other IC designers follow Mediatek.
While the employee profit sharing is taxed by market price this year, some analysts indicated that the employees who benefit largely from stocks in IT industry are the most impacted ones. Since the employees have to pay tax for both base pay and dividend, the strategy that IT companies use dividend to attract talents is not as effective as before.

The TSMC has implemented employee stock sharing since the company went public in 1994. To response to the impact caused by taxing the dividend by market price, the employee dividends in TSMC are all in cash since this year, and the new employees are uncertain to be the stock holder afterwards.

Considering government regulation and the salary structure change of IT industry, the Mediatek announced that the dividend contribution rate will be 20% next year. It doesn’t mean the dividend amount for each employee would be lower. With the supporting measures such as pay increase, the talent competency could be remained. The company hasn’t decided the range of the raise in pay.

The Mediatek indicated that the rule that treats employee bonus as earning distribution is not settled yet. It is estimated that 10% of the dividend will be released as bonus, including stocks and cash. Each proportion is uncertain. The other 10% will be released by award calculation, all in cash.

(Source: Economic Times)
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