FAQs about Oyu Tolgoi’s Adjustment to Average Salary Calculation

04 March 2024

FAQs about Oyu Tolgoi’s Adjustment to Average Salary Calculation in Accordance with the Amended Procedure on Determining Average Salary, Approved by the Minister of Labour and Social Protection, Effective from 1st April 2022.

Is it true that 25-30% reduction in employee wages?
We want to clarify that there have been no reductions in the base salaries and allowances of our employees. For example, our night shift allowance is 13% of the base salary, and it remains the same. Moreover, working condition allowance of 10-16% along with allowances for continuous operation and compensation for work on public holidays are unchanged. Additionally, 1.5 times and 1.2 times the average salary is still the same when calculating the overtime payment and night shift allowances, respectively.

Please explain in detail what the changes are?

We are making adjustment in how we calculate average salaries for overtime and night shift allowances, aligning with the by relevant regulations issued by the Ministry. This regulation has been in effect for nearly two years. However, Oyu Tolgoi delayed the implementation due to concerns over its impact on employees following the revised Law on Labor. Now, the company has decided to enact this procedure due to critical reasons.

There appears to be a discrepancy in understanding about this change. Hourly average wages are determined by dividing the employee’s total earned wages, including overtime and night shifts, by the hours worked.

Previously, when calculating overtime and night shift allowances, the basic salary, bonuses, and one-time bonuses were divided by the hours worked to derive the hourly average salary.

Under this previous calculation method, overtime and night shift allowances were computed from the total amount, inclusive of the employee’s allowances. Consequently, the salary of some employees experienced monthly increments. The company’s decision to implement this change aligns with the amendment to the average salary calculation procedure ratified by the Ministry two years ago.

Why is the company making this change?

The decision was not taken lightly and is a business critical decision to ensure we continue to ramp up operations in a sustainable manner and provide stable employment to our employees in the long-term.

The determination of the current average salary has created the following negative consequences and risks:

• Unsustainable and continued increase in labour cost;

• The principle of equal pay for work of equal value is lost, and the disparity and inequality of remuneration among employees will continue to worsen;
• Competition amongst employees to work on the night shift and increased interest in working on an extended roster creates an imbalance in the work and rest schedule,
• High risk to long-term sustainable employment if the upward cost trajectory continues with no cap.

It’s an important decision made after thorough consideration from various perspectives. The objective is to guarantee the stable continuation of business operations, ensure long-term dependable employment for our workforce.

Is the Trade Union or employees’ representation involved in decision making?

On 01 March, the CEO and other representatives of management team of Oyu Tolgoi received the Trade Union’s leaders and discussed further collaboration. Several meetings have been held since then. Following the meetings, we have agreed to establish a Working Group to further collaborate on the matter.

Have you considered the impact of the change on employees?

When making any decisions, Oyu Tolgoi LLC has been taking measures to reduce the impact on employees, improving the legal situation, and constantly taking into account the financial situation.

For example, as you know, according to the revised law, the working hours of rostered employees have been reduced by 25%, but the Company has decided to keep the base salary intact to prevent potential deterioration of the financial situation of its employees.

Moreover, we have been providing additional allowances and benefits. An example is a retirement savings fund implemented to provide financial security for our employees and their families