Warning over minimum wage increase

Contractor Nawarat Patanakarn Plc says an increase in the daily minimum wage to 450 baht could reduce its gross margin to 3-4%, from the current 5-6%.

Pasan Swasdiburi, senior vice-president for the company’s new business and strategic planning department, said a sudden wage hike would affect the firm’s backlog, which is valued at 32.5 billion baht.

“We are monitoring this issue, though any potential increase will be carefully considered by the tripartite national wage committee, accounting for factors such as the economic environment and labour conditions,” he said.

Of the company’s backlog, roughly 10-20% is attributed to wages, said Mr Pasan.

The impact of the wage increase would affect half of the wage costs, as the rate was previously set at 300 baht per day.

The remaining half would be allocated to skilled labour, which was already receiving wages higher than 450 baht per day.

The impact of a wage increase would result in a 2% increase in costs, leading to a reduction in the company’s gross margin to 3-4%, from 5-6%, said Mr Pasan.

“We will continue working without interruption as the impact will be minimal if our projects are progressing while the wages remain unchanged,” he added. “However, we believe there will be measures from the new government to mitigate our impact.”

The company’s vice-president Visut Suwanwitwaj said a delay in the formation of a new government would not have any impact on new projects from the governmental sector where the company is awaiting the bidding results.

“The budgets for those projects have already been approved, but for new ones, we need to wait and see the new government,” he said. “It will indeed have an impact on new jobs next year, but we have no concerns as our backlog is quite substantial.”

According to the National Economic and Social Development Council, the annual growth projection for government spending in 2023 remained at 2.7% as of May 15.

However, the growth projection for private sector investment was reduced from 2.1% to 1.9%.