Wednesday 4 January 2012

Government intends to accept recommended wage cuts by the Committee to Review Ministerial Salaries 2011: PM Lee Hsien Loong

By S Ramesh, Channel News Asia, 4 Jan 2012

Prime Minister Lee Hsien Loong said the government intends to accept the recommendations of the Committee set up to review the salaries of political appointment holders.

Replying to Mr Gerard Ee following the submission of his team's report, Mr Lee said the government will publish the report as a White Paper and move a motion in Parliament on 16 January to adopt it as a basis for setting political salaries.

In his letter, the Prime Minister stressed that the issue of salaries is a complex and difficult one, with major implications for the future of Singapore.

Mr Lee said he's grateful the Committee has invested the time to undertake a comprehensive and careful review, based on fundamental principles and the long term interests of the country.

The Committee has also sought and considered a wide range of feedback from Singaporeans, with diverse views and expectations, and the final recommendations have benefited from these inputs, as well as the experience and judgement of the committee members.

Mr Lee noted that the committee had to strike a balance between attracting capable and committed leaders of integrity, strengthening links with the country's socio-economic progress and reinforcing the ethos of political service.

PM, ministers face pay cut of 36%-37%
By Imelda Saad and Joanne Chan, Channel NewsAsia, 4 Jan 2012

The committee reviewing Singapore ministers' salary has recommended cuts of up to 53 per cent -- the biggest reductions since salaries of office holders were pegged to private-sector pay in 1994.

This was disclosed on Wednesday by Ministerial Salary Review Committee chairman Gerard Ee at a news conference.

The eight-member committee was appointed by Prime Minister Lee Hsien Loong after the General Election last May.

The committee said the new pay formula is "more transparent and Singapore-centric". Describing the pay reductions as "severe" and "substantial", the committee said it was fully aware of the impact the cuts will have on the government's ability to attract talents.

But ultimately, the committee believes the recommended salary is a "reasonable" figure. The committee said it was guided by three principles.

Mr Ee said: "While it is a severe cut, (the pay) should be able to attract, not all, but some of the talents to come forward, but preserving the message that you're coming forward to serve in a political capacity and there are some sacrifices to be made."

Committee member and NTUC president John De Payva acknowledged the pay cuts will have some impact on the government's ability to attract top talents from the private sector.

"There is a significant cut and you've seen from the last general election, we could hardly get anyone from the private sector," he said. "So it's going to be a challenge and the emphasis is now going to be how strong is your calling to want to come and serve the nation."

CEO of Venture Corporation Wong Ngit Liong agrees. "This will be the real test that leaders stepping forward will be those that are keen in making great contribution to society and to Singapore at large."

The committee met 10 times over seven months, poring through hundreds of recommendations, including those made by past office holders, opposition MPs, academics and the man in the street.

The proposed pay formula takes into account a wider pool of top earners.

It is based on the median salary of the top 1,000 earners, who are Singapore citizens, with a 40 per cent discount.

The committee said with the discount, the pay is actually closer to the top 1,400th earner.

The discount is to reflect the ethos of political service.

Currently, ministerial pay is calculated based on the median salary of the top 48 earners of only six professions, with a one-third discount.

The committee recommended pensions be scrapped.

"We have decided to remove pensions all together," Mr Ee said.

"Political appointment holders appointed on or after 21 of May 2011 should not receive any pension. That's our recommendation.

"Those appointed before the 21st of May 2011 should have their pensions frozen, no more accrual of pensions, so if you continue working, there is no more entitlement to it.

"What is really important here is whatever pension that has already been accrued where previously once you reach 55 you are entitled to receive your pension.

"We say no. It should only be paid when they step down or retire. So you can continue working and the fact that you reach 55 doesn't mean you are going to touch your pension, you are not going to touch it until you step down."

It also recommended the GDP Bonus be replaced with a National Bonus that takes into account the socio-economic progress of Singaporeans.

That includes the real median income growth rate, the real income growth rate of the bottom 20th percentile and the unemployment rate of Singapore citizens as well as the real GDP growth rate.

Ministerial Salary Review Committee member Stephen Lee said: "It is quite logical to say that the minister's bonus can go up if Singaporeans, especially the medium and lower 20th percent, are also doing better."

So if the new formula is applied, the prime minister's pay will be revised to S$2.2 million from S$3.07 million a year -- a 36 per cent pay cut.

Ministers' annual pay will be reduced by 37 per cent to S$1.1 million, while a junior minister's annual salary could start at S$935,000.

The president's pay will be cut by 51 per cent to S$1.54 million.

The Speaker of Parliament will get the deepest cut of 53 per cent to S$550,000 a year.

With the new pay structure, the proposed variable component made up of bonuses and the Annual Variable Component (AVC) is capped at 13.5 months, down from the maximum of 23.5 months of variable pay a minister can earn presently.

Currently, ministers can earn an AVC of up to 1.5 months, a performance bonus of up to 14 months and a GDP Bonus of up to eight months.

Under the revised framework, the AVC will range from zero to 1.5 months, a performance bonus of up to six months and a National Bonus of up to six months.

However, there is no change to the current scheme of benefits.

All political office holders receive S$70 a month -- credited into their Medisave account, capped at 17 months or S$1,190 per year -- to buy Medisave-approved medical insurance, outpatient subsidies of $350 a year, and a maximum subsidy of S$70 per year for dental care.

There is no hospitalisation benefit, no housing perks and no tax exemptions.

Despite the significant cuts, the committee stopped short of saying that ministers have been overpaid.

"The past is the past; we made no reference to it, we just look at what we thought moving forward should be the case," Mr Ee said.

One of the toughest challenges, the committee admitted, was to agree on the right benchmark.

"You are quite right in worrying whether we'll be able to find enough people or not, so this is about the limit that we think we can go to and if we go way below that, I think Singapore will head for a disastrous time in trying to get talents," Mr Ee said.

The new ministerial salaries will be backdated to 21 May last year when the new government took office.

In a letter to the committee, Prime Minister Lee said the government intends to adopt the recommendations.

The 47-page report will be put in a White Paper and motion-tabled in Parliament for Members of Parliament (MPs) to debate the issue on January 16.

The report can be downloaded from

President Tony Tan volunteers to take 51% pay cut
By Elgin Toh, The Straits Times, 5 Jan 2012

President Tony Tan Keng Yam has volunteered to take a 51 per cent pay cut.

He has accepted the proposed annual salary of $1.54 million for the President.

A statement from his office on Wednesday said he had informed the Prime Minister 'he will adopt the President's salary as recommended by the Review Committee backdated to 1 September 2011'.

His medical benefits and access to an official car, however, remain unchanged.

The move by Dr Tan is entirely voluntary because under the Constitution, the President in office must agree before Parliament can change the Civil List.

The President's salary is provided for in the Civil List, which the Constitution states 'shall not be diminished during the continuance in office of the President'.

As President Tan took office on Sept 1 last year after the presidential election in August, Parliament can amend the Civil List only with his agreement, which he has granted.

Ministers' pay-cut formula unveiled
Channel NewsAsia, 4 Jan 2012 

The proposed formula for a junior minister's pay will be the median income of the top 1,000 earners who are Singapore citizens.

A 40 per cent discount will then be applied, working the pay out to be S$1.1 million per year.

This was revealed on Wednesday by the Ministerial Salary Review Committee chairman Gerard Ee, who also elaborated on how the committee arrived at the formula and the impact on attracting talent.

Mr Ee said the figures were no "magic numbers".

"It's something we looked at; we looked at different possibilities, and at the end of the day, we looked at the 1.1 million. Bear in mind, (it's) not necessary they're going to get 1.1 million," he said.

"It's a fixed and variable portion. And we ask ourselves, and we know roughly the talent pool, I mean from the different walks of life that we have, we say, seriously, someone who is at their prime there, is it too little for them or not?

"What's the impact (on) them to make a sacrifice? Don't forget, the financial sacrifice is one thing, but really to take office, you're talking about personal sacrifice about family and yourself.

"So we have to take in all the different factors and say, is it a reasonable salary or not. But you're right, we debated, it could be 1.1 (million), it could be 1(million), it could be 1.2 (million), it could be 1.3 (million), but in the end, we felt 1.1 was a reasonable figure for a total wage package.

"So no magic figure, based on the cumulated different experiences. If you look across the table, you have from employers, union, entrepreneurs, you have (BreadTalk founder and chairman) Mr George Quek, who operates locally and overseas.

"And you say, look, seriously speaking, what would you pay in your own organisation for such a person?"

Touching on the topic of the uphill task of attracting top private-sector talent, Ministerial Salary Review Committee member Wong Ngit Liong said: "All Singaporeans expect the political leadership to be of outstanding calibre, outstanding quality, so definitely we want to have a super A team for the Singapore government leadership.

"Of course, this cut is quite substantial, and some of us have some fear -- what would be the impact?

"We all hope that the talent pool in Singapore would be such that there'll be people who view the importance of stepping forward and providing this service and commitment and contribution to the nation, and salary is not the only consideration.

"I think this would be a real test, the leaders stepping forward will be those that are keen in making great contribution to the society and Singapore at large."

When asked if the prime minister should explain why the performance bonus was being decided for various ministers, Ministerial Salary Review Committee member Stephen Lee explained: "The CEO should have the flexibility to establish KPIs (key performance indicators) for each department, and subsequently also change it from time to time.

"So we really don't want to straitjacket the prime minister. And also, I'd like to say that the working of the Cabinet is that they each have their own ministry - that's one way to look at them.

"Once a week, they sit together and they also discuss matters concerning the whole nation. And from time to time, this department has changed, right. So we feel that one way to look at them is the team result - the national bonus.

"Another way is of course, your individual departments' performance. That one, we leave to the prime minister to set KPIs and evaluate the performance.

"But the national performance, we think that the suggestion of median income and the lowest 20 per cent, this makes sense and we'd like to incorporate them into the KPIs to respond to all those who have given feedback.

"Because it makes sense to the committee and it is quite logical to say that the ministers' pay, bonus can go up if Singaporeans -- especially the medium and lower 20 per cent -- are also doing better."

A look back at ministerial salaries
TODAY, 4 Jan 2012

The first formal method to benchmark salaries for ministers was established in 1994, with a White Paper on 'Competitive Salaries for Competent and Honest Government'.

Under the framework, an entry level minister's annual salary was pegged to two-thirds the average salary of the top four earners in each of six professions, namely bankers, accountants, engineers, lawyers and chief executives of local manufacturers and of multi-national corporations.

Prior to 1994, ministerial salaries were set by making informal comparisons with the private sector.

In 2000, the entry ministerial grade (MR4) benchmark was fine-tuned to make it more stable.

The benchmark's base was broadened by using median income, instead of average income, and a 50 per cent discount on gains from stock options was provided for.

This means the benchmark pegged the annual salary of an entry level minister to two-thirds the salary of the 24th highest earner, from among top eight earners from each of the six professions chosen earlier.

This salary benchmark remains in use today.

The six professions were selected because they were alternative professions that could have been pursued by ministers. The benchmark level shows the desired calibre of government leaders.

A one-third discount was also applied to signify the personal sacrifice involved in public service.

An entry level minister is appointed at MR4 grade. Ministers can also be appointed to more senior grades of MR3, MR2 and MR1 subsequently.

The President, Prime Minister, Speaker and Deputy Speaker are on fixed salary points, set at pre-determined ratios to an entry level minister's salary.

"Since the introduction of the benchmark in 1994, the actual annual salaries of the ministers have never reached the benchmark figures," said the committee reviewing ministerial salaries in its report released today.

The committee noted the "large gaps" between the benchmark and actual salaries over the years, even as annual salaries continued to be adjusted in response to market movements.

In 2010, the benchmark figure for the MR4 grade was S$2,598,000, while the MR4 annual salary was S$1,582,900. This was 39 per cent below the benchmark.

"During recessions, the ministerial salaries were cut while in years of good economic growth, their salaries were restored, but never to the level of the benchmarks," the committee said.

Pay, bonuses: What exactly a minister gets
By Chua Lee Hoong, The Straits Times, 14 Jan 2012

IN THE past week numerous questions have been asked about the recommendations of the Committee to Review Ministerial Salaries.

Here's my take on some of the common questions:

Different figures have been bandied about in the newspapers and online. $1.1 million. $935,000. $715,000. I am confused. What exactly is the pay of a new minister?

The committee is recommending a 'benchmark' salary of $1.1 million a year. This, however, is not automatically what every new minister will get a year.

Like for most people, a minister will get a monthly salary, and bonuses at the end of the year, whether financial year or calendar year.

The committee's recommendation assumes a 20-month annual package. Divided by 20, the 'benchmark' monthly amount becomes $55,000.

However, typically only 13 months can be said to be 'confirmed' pay - the 12 monthly instalments, and the 13th month Annual Wage Supplement.

The 'confirmed' annual pay amount is thus $55,000 x 13 = $715,000.

The remaining seven months are bonuses tied to individual performance and various nationwide indicators.

This means that if these indicators are not met, the annual remuneration package will be below $1 million.

Point Two: Like for most people in the public sector, there is a salary scale.

The committee recommended that the salary scale start from $46,750 per month, or 85 per cent of the 'benchmark'.

For a minister placed on this rung of the salary ladder, his annual 13-month package will be $607,750.

If his performance is up to scratch and the economic indicators in the National Bonus meet expectations, he will get a 20-month package of $935,000.

If both his performance and that of the indicators far exceed expectations, he could get a maximum 26.5 months - $1,238,875. But this is extremely unlikely.

What is the National Bonus and why have it?

This links a minister's pay directly to the well-being of Singaporeans and is an incentive for him to make that a priority.

The bonus range is from zero to six months.

The four indicators it is pegged to are the real median income growth rate, the real growth rate of the income of the bottom 20 per cent, the unemployment rate, and the real GDP growth rate.

Every minister will get the same number of months of the National Bonus, as the well-being of Singaporeans is the collective responsibility of Cabinet and not individual ministers. The effort is indivisible.

Is ministerial income tax-free?

No. Ministers pay the top tax rate of 20 per cent.

How about MPs' allowances?

Also taxable. Even for many who are not office-holders but hold other jobs, the allowance bumps them up into the top tax tier.

Why do office-holders also get the MP allowance?

This is international practice in Westminster parliamentary systems. The two roles are distinct and separate - being an MP and being a minister. A minister has to run his ministry, but at the same time he also has his constituency to look after.

Will a minister with two portfolios get two salaries?

Only one.

Will ministers and MPs get pensions?


Other benefits?

No. Only the Prime Minister gets a car, and this is subject to tax. The rest buy their own cars.

Some ministers drive their own cars; others may hire a driver but they pay for the driver out of their own pocket.

No one gets a housing allowance.

Medical benefits?

The medical benefits a minister gets is similar to what civil servants who joined after 1994 get. That is, a maximum of $1,190 is paid into his Medisave account each year to buy medical insurance. Outpatient subsidy is capped at $350 a year. Dental benefits are capped at $70 a year.

Some new office-holders who used to be civil servants find that their medical benefits are now less than what they had when they were civil servants.

The Government keeps talking about a 'clean wage'. What exactly is this?

This means a salary without hidden perks and privileges - such as a personal plane like Air Force One for the President of the United States, or expense accounts like in some European countries.

Why is there a need to link ministerial pay to the pay of the top 1,000 earners?

This is to reflect the calibre of the people that the Government hopes to attract. It is to make sure that people of calibre are not deterred from becoming ministers.

The Government is not saying that people who are top earners in the private sector will make good political leaders, nor that good political leaders will necessarily earn top dollar in the private sector.

The main message from the benchmarking exercise is that while money should not be the motivation for anyone becoming a politician, the financial opportunity cost should not be so large as to discourage capable Singaporeans from entering politics.

My own view is that the committee could easily have recommended a similar benchmark salary without referring the 1,000 top earners. It could have got a consulting firm to do a survey of capable professionals and ask them what they think ministers should be paid. Anecdotally, most people who fall into this category think $1 million or so is fair.

Are the latest pay figures for all time?

This is already the third review since the approach of pegging ministerial pay to that in the private sector started in 1994. It is unlikely to be the last.

The committee has recommended that there be regular reviews and that the Prime Minister should appoint an independent committee to do it. It adds that the review should be done every five years.

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