This subtle difference in Asian working culture helps employers and employees alike

One of the key, but subtle, cultural differences of working in Asia is that it’s common to discuss salaries in terms of monthly pay, rather than annual.

In other parts of the world, it’s common to use a gross, per annum, base figure. It took some getting used to after years working in the UK, but all things considered, I have to say it’s a far better way of understanding salary levels in our daily lives.

After all, we use other metrics for the cost of living on a monthly basis: the mortgage on a house, rental on an apartment, credit card repayments, our TV or music streaming subscriptions, why not our salaries? Instantly, once you know what a job will pay monthly, you’ll be able to align the cost of living based on that pay.

In addition, most Asia countries have some form of government-mandated employee provident (pension) fund: Hong Kong's Mandatory Provident Fund (MPF), Singapore's Central Provident Fund (CPF), and Malaysia's Employee Provident Fund (EPF), as some examples. Each will have their rates of contributions required by employee and employer.

In Hong Kong, both employee and employer each contribute 5% of the employee’s relevant income to the MPF scheme, capped on both sides at HK$1,500 per month (roughly £150 or US$192). An employee can therefore see up to HK$3,000 per month landing in their MPF account which gets invested by the provider, usually a bank or an insurer with an investment funds division.

By breaking down salaries into monthly figures, individuals can better grasp their compensation structure, including bonuses and deductions. This shift in perspective aids in efficient financial planning and management, regardless of income levels.

Perhaps this is one of the reasons why the retail investor base is so large and active in Asia?

The other benefit to this is that some jobs offer an extra month’s bonus for a year’s full service, so you often talk about "x12" or "x13" basis of pay, making it easier for a job seeker to understand the breakdown of compensation more easily. Other roles, although less likely in this climate, may include COLA or some other housing allowance.

Just today, I saw an advert in the UK for an in-house legal counsel, with the stipulated pay being £65,000 p.a. Before you even break that down into a gross monthly salary of £5,416.66, that gross annual figures covers all manner of hidden costs like National Insurance Contributions (NICs), Pay As Your Earn (PAYE), and in larger companies, group or other pension schemes. Just from that gross annual figure, you can’t really tell how much net amount of money lands in your bank account at the end of each month.

I find "the Asia way" to be a more practical and insightful way to navigate market trends as a recruiter and business owner, and personal finances in my own capacity.

How about you? Do you discuss salaries on a monthly or annual basis where you live; which method do you prefer?

This post was originally published on LinkedIn in July 2024. Click like and engage with us!