A thesis submitted in fulfilment of the requirement for the degree of Master of Human Sciences (Political Science)

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REMUNERATION POLICY FOR LOWER-RANK PROFESSIONAL CIVIL SERVANTS:

A CASE STUDY OF SOUTHERN THAILAND

BY

AZEEZAH SADAMA

A thesis submitted in fulfilment of the requirement for the degree of Master of Human Sciences (Political Science)

Kulliyyah of Islamic Revealed Knowledge and Human Sciences

International Islamic University Malaysia

OCTOBER 2019

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ABSTRACT

This research sought to identify the effectiveness of Thailand’s 2015 remuneration policy implemented by the government of Prayut Chan-o-cha in motivating civil servants towards better job performance. Guided by expectancy theory, a questionnaire is designed to measure perception on the 2015 remuneration policy as well as civil servants’ perceived performance after the implementation of this policy. 250 copies of the questionnaire were collected from the lower-rank civil servants from 5 different provinces within Southern Thailand. The analysis shows that vast majority of civil servants agree with the policy and there is a significant improvement in their work performance due to the policy. In addition, through the use of Pearson’s coefficient correlation, the analysis signifies a strong positive relationship between perceived incentive and perceived performance of civil servants. This implies that the performance of Thailand’s civil servants can be improved further if the right incentive was to be given.

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ثحبلا ةصلاخ

ABSTRACT IN ARABIC

ماعل ةيدنيلاتلا روجلأا ةسايس ةيلاعف ديدحتل ثحبلا اذه ىعسي تتح تقبُط تيلاو 2015

ناشت تويارب ةموكح -

زيفحتل اشتوأ اًدانتساو .مهلمع في لضفأ اًءادأ اومدقيل ةموكلحا يفظوم

روجلأا ةسايس هاتج روعشلا سايقل نايبتسا ميمصت تم ،عقوتلا ةيرظن لىإ 2015

سايقل كلذكو ،

عجم تم .ةسايسلا هذه قيبطت دعب ةموكلحا يفظوم ءادأ ةموكلحا ينفظوم نم ًنًايبتسا 250

نمض نم ةيندتلما بترلا يوذ 5

تاظفامح نأ لىإ ليلاحتلا يرشت .دنليتا بونج في ةفلتمخ

لمعلا في مهئادأ في ظوحلم نستح كانه نأو ،ةسايسلا عم نوقفتي ةموكلحا يفظوم مظعم تلايلحتلا رهظت ،طابترلال نوسيرب لماع مادختسباو ،كلذ ىلع ةولاع .ةسايسلا هذه ببسب ولم كردلما ءادلأاو كردلما زفالحا ينب ةيوق ةيبايجإ ةقلاع نكيم هنأ لىإ يرشي اذهو .ةموكلحا يفظ

بسانلما زفالحا قيبطت تم اذإ ةيدنلياتلا ةموكلحا يفظوم ءادأ ينستح

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APPROVAL PAGE

I certify that I have supervised and read this study and that in my opinion, it conforms to acceptable standards of scholarly presentation and is fully adequate, in scope and quality, as a thesis for the degree of Master of Human Sciences (Political Science)

………..

Norhaslinda Binti Jamaiudin Supervisor

………..

S M Abdul Quddus Co-Supervisor

I certify that I have read this study and that in my opinion it conforms to acceptable standards of scholarly presentation and is fully adequate, in scope and quality, as a thesis for the degree of Master of Human Sciences (Political Science)

………..

Rabi’Ah Aminudin Internal Examiner

This thesis was submitted to the Department of Political Science and is accepted as a fulfilment of the requirement for the degree of Master of Human Sciences (Political Science)

………..

Rabi’Ah Aminudin

Head, Department of Political Science

This thesis was submitted to the Kulliyyah of Islamic Revealed Knowledge and Human Sciences and is accepted as a fulfilment of the requirement for the degree of Master of Human Sciences (Political Science)

………..

Shukran Abdul Rahman Dean, Kulliyyah of Islamic Revealed Knowledge and Human Sciences

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DECLARATION

I hereby declare that this dissertation is the result of my own investigations, except where otherwise stated. I also declare that it has not been previously or concurrently submitted as a whole for any other degrees at IIUM or other institutions.

Azeezah Sadama

Signature ... Date ...

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COPYRIGHT PAGE

INTERNATIONAL ISLAMIC UNIVERSITY MALAYSIA

DECLARATION OF COPYRIGHT AND AFFIRMATION OF FAIR USE OF UNPUBLISHED RESEARCH

THE IMPACT OF MOBILE INTERFACE DESIGN ON INFORMATION QUALITY OF M-GOVERNMENT SITES

I declare that the copyright holders of this dissertation are jointly owned by the student and IIUM.

No part of this unpublished research may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without prior written permission of the copyright holder except as provided below

1. Any material contained in or derived from this unpublished research may be used by others in their writing with due acknowledgement.

2. IIUM or its library will have the right to make and transmit copies (print or electronic) for institutional and academic purposes.

3. The IIUM library will have the right to make, store in a retrieved system and supply copies of this unpublished research if requested by other universities and research libraries.

By signing this form, I acknowledged that I have read and understand the IIUM Intellectual Property Right and Commercialization policy.

Affirmed by Azeezah Sadama

……..……….. ………..

Signature Date

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ACKNOWLEDGEMENTS

Thanks to Allah (swt) who gives me strength in order to complete this work. This research would not be able to accomplished without the help and support from various individuals. Firstly, it is my utmost pleasure to give a special thanks to my supervisor Assistant Professor Dr. Norhaslinda Bt. Jamaiudin who dedicate her time to guide and support me throughout the course of completing this paper. Secondly, my gratitude also goes to my lecturers Assistant Professor Dr. Rabi’Ah Bt. Aminudin, Associate Professor Dr Abdillah bin Nor, Assistant Professor Dr. Muhamad Fuzi Omar, Assistant Professor Dr Rohana Abdul Hamid, Professor Dr. El Fatih Abdullahi Abdelsalam, and Associate Professor Dr. SM Abdul Quddus who provide feedback on my research.

Thirdly, I would like to acknowledge my family who granted me the gift of their unwavering belief in my ability to accomplish this goal: thank you for your support and patience. Lastly, I would like to extend my thanks to the 250 respondents who gave their time in answering my survey.

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LIST OF TABLES

Table No. Page No.

2.1 Cronbach’s Coefficient Alpha Reliability Test of the Data 24 3.1 Part of the Monthly Salary Structure of Police Officer at 4

Selected Ranks 38

3.2 Base Salary Table for Civil Servant 42

3.3 Salary Structure for Range System 46

3.4 Salary Structure for Step Rate System 47

4.1 Demographic Information of the Respondents 50

4.2 Response on Open-ended Question 52

4.3 Findings of Construct Number 2 54

4.4 Findings of Construct Number 3 57

4.5 Pearson’s Coefficient Correlation Between Perceived Monetary

Incentive and Perceived Performance of Civil Servants 60

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LIST OF FIGURES

Figure No. Page No.

1.1 Expectancy Theory Model for 2015 Remuneration Policy 16

3.1 The Level of Government in Thailand 33

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LIST OF ABBREVIATIONS

BMP Best Management Practise

CCS Cambodian Civil Service Department

CSA Civil Service Act

GDP Gross Domestic Product

IMD Institute of Management Development

JILPT Japan Institute for Labour Policy and Training

KPI Key Performance Indicator

MRS Malaysia Remuneration System

MSPC Merit System Protection Commission

MYR Malaysian Ringgit

NCPO National Council for Peace and Order OCSC Office of Civil Service Commission

OPDC Office of the Public Sector Development Commission

P4P Pay-for-performance

PAD People’s Alliance for Democracy

PMS Performance Management System

PPP People’s Power Party

PRP Performance-related Pay

ROA Return on Assets

SD Standard Deviation

SEM Structural Equation Modelling

SPSS Statistical Package for the Social Sciences

THB Thai Baht

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CHAPTER ONE INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The public sector in Thailand has experienced significant changes and reforms under the administration of its military government. Several initiatives have been implemented to ensure there is effective and efficient service delivery to the public, this includes combating corruption and reducing political tension in the country. Indeed, the improvement of Thailand public sector’s performance has become one of the government’s priorities under the leadership of the Prime Minister, Prayut Chan-o-cha.

It is pertinent to note that the public sector’s performance is closely related to the performance of its civil servants. One initiative to boost their performance is to have a better personnel management system. On this note, in 2015, the government revised and introduced a new remuneration policy and applied monetary incentives to induce performance among lower-rank civil servants.

Currently, there is a total of 2.18 million civil servants in the Thailand public sector (Office of Civil Service Commission (OCSC), 2017A; OCSC, 2017B). The administration of the public sector in Thailand is guided by three legal frameworks.

There are two legal acts which were introduced in 1991, namely the Organisation of State Administration Act and The Government Organisation Act, which cover state and governmental structures. The third act to guide the public sector was introduced in 2008 and is known as The Civil Service Act (CSA). The Act covers all aspects of the public sector, ranging from government agency structures, the obligation of civil servants and matters concerning the management of public personnel, including position, promotion, recruitment, retirement and a remuneration system.

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The remuneration system, which is part of the CSA 2008 was revised and new incentives were introduced in 2015. This is known as the 2015 remuneration policy.

The new measure aims to improve the quality of lower-rank civil servants through monetary rewards. As such, lower-ranked civil servants’ salaries have been increased by a total of 4%. This policy is expected to boost lower-ranked civil servants’

motivation levels, and in turn, improve the performance of the government, since they are one of the main forces within the public sector. The 2015 remuneration package is a comprehensive policy which covers all civil servant categories. In this context, the government has not only increased lower-ranked civil servant salaries but also adjusted the maximum salary for all categories of civil servants up to 10%. The aim was to motivate every civil servant to improve their performance in order to obtain this monetary reward (OCSC 2015).

The 2015 remuneration policy embedded a performance management system (PMS) and linked pay with performance. It has been reported that after 3 years of implementation, the performance of Thailand’s public sector has significantly improved. As reported by IMD (2017), the performance of Thailand’s public sector rose from 30th to 27th out of 63. The improvement can be due to the increase in employee motivation resulting from monetary rewards. The present study, therefore, seeks to examine the importance of monetary incentives and to what extent monetary incentives improve the performance of civil servants, within the context of the public sector of Thailand.

1.2 STATEMENT OF THE PROBLEM

It is known that the performance of a government is reflected in the quality of its public sector. Therefore, the performance of a public institution highly depends on its civil

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servants’ performance. In this context, in 2015, the Thailand government introduced a new remuneration system to improve the performance of professional lower-ranked civil servants. A total of 22.9 billion Thai Baht (2.48 billion MYR) was allocated for the implementation of the 2015 remuneration policy which benefits approximately 1.98 million civil servants (Thaipublica, 2014). The allocation is expected to improve the performance of the public sector. The objective of the policy is to use monetary incentives as motivational tools to improve the performance of civil servants.

Employee motivation can be associated with many factors, such as leadership quality, management policy, hierarchical structure, and a supervisor-subordinate relationship (Khan, Ahmed, Paul, & Kazmi, 2018; Mokhtar, Azman, Sauid, Ebrahim,

& Mustakim, 2019). However, other research conducted have disclosed that monetary incentive is considered one of the most dominant factors that can influence an employee’s motivation and job performance (Herranz-Zarzoso, & Sabater-Grande, 2018).

Based on a survey conducted by Bangkok Poll (2018) on public sector performance, the majority of respondents agreed that the performance of Thailand’s public sector has improved significantly under the administration of the military government, especially after the implementation of the 2015 remuneration policy. The improvement in Thailand’s public sector performance is supported by the improvement in its international ranking as reported by IMD (2017) and Transparency International (2018). The performance ranking of Thailand over the past 2 years has improved from 30th to 27th out of 63 countries, while its corruption ranking has significantly improved from 102th to 76th, out of 175 countries. However, no proper research was carried out to explore the determinant factors that led to the performance improvement. It was reported that there were many contributing factors and that monetary rewards could be

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one of them. Little is known about the relationship between pay and performance, especially after the implementation of the 2015 remuneration policy. Thus, the question is, to what extent does a remuneration system contribute to the improvement of Thailand’s public sector performance, as well as the performance of its civil servants.

This question, as well as civil servants’ perceptions on the implementation of this new pay system under the leadership of Prime Minister Prayut Chan o-cha, is under researched

This research paper, therefore, seeks to examine employees’ perceptions on the recent improvement of Thailand’s remuneration policy and to measure the relationship between monetary incentives and performance in the context of the Thailand public sector.

1.3 RESEARCH QUESTIONS

This research aims to examine the following questions:

1- What are the key components of the 2015 remuneration policy and how does it differ from the previous pay structure?

2- How do the civil servants perceive the implementation of the 2015 remuneration policy?

3- What is the relationship between the perceived financial rewards of the 2015 remuneration policy and perceived performance of Thailand’s civil servants?

1.4 RESEARCH OBJECTIVES

This research has the following objectives:

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1- To examine and compare key components of the 2015 remuneration policy and the previous pay system.

2- To evaluate civil servants’ perceptions on the implementation of the 2015 remuneration policy.

3- To determine the relationship between perceived financial incentives received and perceived performance of Thailand’s civil servants.

1.5 SIGNIFICANCE OF RESEARCH

There have been multiple recent studies about job motivation in Thailand. However, most studies only focus on the general job motivation in particular organisations and not specifically on the 2015 remuneration policy (Ngarmlert, 2016; &

Chareonwongsak, 2017). As such, this study will contribute to the body of knowledge in the aspect of professional lower-ranked civil servant’s performance levels. The study can produce fruitful information in terms of the importance of monetary incentives as one of the factors that can increase performance among civil servants. Furthermore, it can be a useful guideline for the government to improve their future policies, particularly within the aspect of remuneration in the Thailand civil service.

1.6 LITERATURE REVIEW

Remuneration policy provides a clear understanding of an organisation’s remuneration structure. It presents means to maintain the productivity in that organisation through managing the performance of employees which can be done in many forms, such as bonus salary and non-monetary incentives. Remuneration policy often involves the performance management system (PMS) which is used as a method to maintain high performance of the employees. Many factors are involved in the PMS, for instance, the

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structure of the working system, efficiency internal communication, or even the environment of the work place. Undoubtedly, incentive is one of the most relevant factors of PMS, especially incentives that are related to the performance of the employees.

There is a vast amount of literature that discusses the importance of remuneration policy as a means to improve the performance in both public and private sectors. This section discusses about the existing literature that focuses on the pay-for- performance system in general and also specifically in Thailand contexts.

1.6.1 General Context

Pay for performance (P4P) or performance-related pay is used as a tool to manage effective employee’s performance. P4P system uses monetary incentive as a fundamental component in motivating employees. This type of motivation is known as extrinsic motivation, and it refers to employee’s behaviour that is driven by external rewards. The numerous emergences of P4P-based remuneration policies suggest that monetary incentives are effective in improving the performance of employees in both public and private sector. Many studies have been conducted in analysing the relationship between monetary compensation and employee’s performance for more than 20 years. Even though the system was initially developed by the private sector, it has now been integrated in performance management system for both public and private.

In Japan, a similar system to P4P called Seika-shugi which was introduced in the early 1990s. It is a system that focuses on the employee’s performance at individual level. Each employee receives specific amount of income based on short-term individual’s performance. In general, there are about 57.8% of Japanese private

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companies that have adopted Seika-shugi by the end of 2008. Japan Institute for Labour Policy and Training (JILPT) in 2009 has investigated the implementation of Seika-shugi in 917 private companies and found a strong evidence upholding the benefits of this system. Guided by social cognitive theory, the JILPT explains that Japanese people perform exceptionally well when exposed to external incentive. Due to the Japanese culture that shapes their behaviour, employees tend to have high self-efficacy.

According to the theory, these people can perform efficiently because they considered given tasks as something to be overcome rather than to stayed away from. The JILPT concludes that the introduction of Seika-shugi has considerably influenced the performance of employees towards a positive direction.

Similarly, a study by Lai (2009) on Singaporean office workers in the private sector also shows evidence on the effectiveness of P4P system. An online questionnaire was given out to 378 workers to evaluate their perception on factors that motivate employees toward better performance. Aligned with the theory of efficiency wages, the finding reveals that majority of workers approve how an above equilibrium optimum wage can significantly influence their quality of performance and reduce their turnover rate. The study agrees that monetary incentive along with other tangible rewards are the best motivators for short-term employees like office workers. This explains how a merit-based compensation as in P4P system is an effective method for work motivation.

In addition, a significant correlation between pay and performance is recognised in a case study on 3,100 Indian private firms (Raithatha, & Komera, 2016). Among the sample studied, business group affiliated firms contributed to 36.37% of data collected while the rest, 63.63% are stand-alone firms. These stand-alone firms are not a subsidiary of any other firms. Guided by agency theory which explains how PMS can be designed in such a way that managers’ and shareholders’ interests can be aligned to

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strengthening the pay-performance relationship, there is a significant positive correlation being observed in stand-alone firms. However, it is suggested that a properly designed P4P system is crucial for any firm to be successful. This is because weak and insignificant pay-performance correlation can be clearly observed in many improperly managed business group affiliated firms within the study.

Another study regarding P4P system in Turkey that includes both private and public hospitals also shows significant relationship in pay and performance (Gok, &

Altındağ, 2014). The study compares the average performance before and after the introduction of P4P in all hospitals within the country by measuring the efficiency of each hospital. After the implementation, the calculated efficiency of and average income earned by public hospitals show significant improvement. The correlation coefficient is measured to be 0.675 at the significance level of 10%. However, private hospitals do not illustrate positive relationship. The study suggests that after the implementation of P4P system along with technological advancement supported by the government and the prohibition of privatisation, patients may prefer public hospitals over private ones. This would certainly affect the average income earned resulted in negative correlation in private hospitals.

Other than literature regarding P4P in private sector, pay-performance relationship was also witnessed in many studies that address public sector. For instance, Korm (2011) examines the P4P system implemented in Cambodian Civil Service (CCS) department. The study discovered that an average income of a civil servant is relatively below the average household expenditure. Majority of the 234 participants in the survey agree that low income is the main factor that affect their performance. This finding is a classic example supported by the theory of expectancy which suggests that individual’s behaviour targets the most satisfaction outcome. This is because money or monetary

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rewards is one of the most important outcomes that individuals wish for, these CCS employees divert their attention and effort away from the low-pay tasks given at hand and seek other external sources of income in order to make up for the insufficient compensation they received. As a result, the performance among workers within Cambodian public sector is quite alarming. Evidently, this poor achievement and low income in CCS promote a correlation between pay and performance.

Moreover, a study on South Korean government by Kim (2016) demonstrated a strong pay-performance relationship in public sector as well. The country has been using P4P system since its first introduction in 1999. Guided by goal-setting theory, South Korean PMS is designed to precisely specify annual targets to be achieved by civil servants. It is expected that understanding objectives in advance would significantly improve employees’ performance. However, the study informs that performance management at an individual level alone is insufficient. Organisation-level PMS is also required to enhance the correlation between pay and performance in South Korean public sector.

Likewise, a case study in Malaysia conducted by Jamaiudin (2008) regarding the implementation of Malaysia Remuneration System (MRS) had revealed a positive relationship between pay and performance. MRS was a newly improved version of Malaysian merit-based system that was introduced in 2002. About 206 randomly selected participants from various civil service backgrounds took part in the study. The finding agrees with the expectancy theory that showed a strong correlation between effort, performance, and employees’ expectation of rewards. More than 90% of the participants satisfy with the new system and 66.1% prefer MRS over the previous system. However, the study revealed that MRS does not motivate employees with high income as much as it does with lower income employees. This is because higher-rank

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employees do not feel that an extrinsic motivator like monetary incentive is an effective factor in motivating their performance as monetary reward is no longer their primary objectives.

The relationship between pay and performance exists even within environmental management program of the U.S. government (Talberth, Selman, Walker, & Gray, 2015). In this case study, P4P system is applied to develop an effective agricultural best management practices (BMPs) in handling nutrient pollution in the Chesapeake Bay watershed. The study reveals that a P4P approach for BMPs is able to achieve the same result in reducing pollution with just half the cost. However, the study also suggests that proper P4P system design is essential in order to make sure that most benefits can be accomplished from the system.

Even though several journal articles provide evidence in supporting the positive pay-performance relationship, there are still few papers that suggest otherwise. For instance, a study conducted by Sundström (2017) on adopting P4P system as an anti- corruption tool in South Africa in order to improve the performance in public sector turns out to have an unexpectedly opposite effect. Instead of diverting their effort away from corruption by offering incentives based on their performance as suggested in principal-agent theory, senior officers manipulated monetary incentives as a tool in controlling their subordinates. As quoted from Persson, Rothstein, and Teorell (2013),

“if the supposed principal [a senior officer] is also corrupt …, the principal-agent framework becomes useless as an analytical tool since there will simply be no actors willing to monitor and punish corrupt behaviour”.

Another example of unsuccessful P4P programme is in China and Pakistan education system (Wang, Lai, & Lo, 2014; Barrera-Osorio, & Raju, 2017). At the end of the programme, the students’ overall performances were not significantly increased.

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Instead of attempting to make students understand what they are learning, it was the teachers that guided them on how to answer questions correctly. The workload and stress of both students and teachers increase after using P4P system.

Undoubtedly, P4P system is popular among both public and private sector as indicated in the articles mentioned previously. It can also be seen that while private sector focuses mainly on the monetary incentives, public sector tends to spread out and provide both monetary and non-monetary incentives. However, it seems that most private sectors can effectively integrate P4P into its PMS. Whereas, the public sectors still face with certain limitations that hinder the full potential of the system.

In general, P4P system can be viewed from many perspectives. Monetary incentive is recognised as one of the most effective motivators for managing and maintaining employee’s performance. However, there are studies that pointed out on problems that can hinder the effectiveness of the PMS. Nevertheless, with proper design and performance management appraisal tools, P4P system can definitely achieve its maximum capability in motivating employees in public and private sector.

1.6.2 Thailand Context

Since 2004, the Public Sector Development Commission (OPDC) of Thailand has started implementing PMS that link employee’s performance to incentive. The programme is based on P4P system and follows the guideline of goal setting theory. It was introduced with the aim to improve the performance standards of civil servants as well as the quality of Thailand public sector as a whole. A number of studies have been conducted to analyse the effectiveness of the adapted system within Thailand public sector.

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Koomee (2007) and Wang-Aun (2013) investigate the effectiveness of PMS as well as motivational factors in Thailand. The findings reveal that even though there is a positive correlation between money and performance, it is not the best motivational factor. Wang-Aun (2013) notes that a fair remuneration system is believed to be among the most influential factors for managing performance of civil servants. In addition, Koonmee (2007) supports that Thailand PMS still needs major improvement due to its unjust and influenceable system. Both studies reveal that people demand impartial method of performance evaluation to which they believe is the most critical issue requiring immediate revision.

A similar study by Ngarmlert (2016) provides evidence to support the positive correlation between financial compensation and motivation which successively leads to effective performance. The case study focuses on 250 public servants who work at Public Warehouse Organisation within the Ministry of Commerce. By using Maslow’s hierarchy of needs theory, the study clarifies how work motivation can be driven by individual’s needs according to Maslow's pyramid. The most significant factors that contribute to work motivation are good environment, proper policy and management, and job security and stability - such factors can be found at lower levels of the pyramid.

The theory holds that these factors can be provided for employees through financial supports which suggests an indirect correlation between pay and performance in Thailand public sector.

Another study conducted by Wattanarungson and Sutunyarak (2016) on 218 public servants who work in different services departments suggests a positive outcome of P4P. Following the goal-setting theory, the study notes that developing plans to determine specific goals at individual and organisational level from the beginning would lead to effective performance of the employees. Thus, by having specific goals