Thursday 5 January 2012

Ministers' Salary Review 2011 Key Recommendations

Ministers' starting pay cut to less than $1 million
Committee also proposes: Halving President's salary;
Scrapping pensions, several allowances and bonuses
By Lydia Lim, The Straits Times, 5 Jan 2012

THE starting pay for ministers at the entry grade may now be under $1 million, down from $1.58 million last year.

The committee to review ministers' salaries has also recommended cuts in the salaries of the President, Prime Minister, Speaker of Parliament and other political office-holders, and in the allowances of Members of Parliament.

The President's annual salary is to be cut by 51 per cent to $1.54 million, the Prime Minister's by 36 per cent to $2.2 million, and that of entry-grade ministers by 37 per cent to $1.1 million.

The percentage drop in annual pay takes into account the removal of pensions, as recommended by the committee.

With the changes, a minister at the bottom end of the entry MR4 grade may start at an annual salary of $935,000.

The Government intends to accept the recommendations and will table them as a White Paper for debate in Parliament on Jan 16, the Prime Minister said in a letter to the committee.

On May 21 last year, Mr Lee Hsien Loong announced the appointment of a committee to review 'the basis and level' of political salaries.

Yesterday, after seven months of deliberations, the eight-member committee, chaired by National Kidney Foundation chairman Gerard Ee, made public its recommendations.

Other members of the committee are Mr John De Payva, former president of the National Trades Union Congress; Mrs Fang Ai Lian, chairman of the Charity Council; Mr Stephen Lee, president of the Singapore National Employers Federation; Mr Po'ad Mattar, a member of the Public Service Commission; Mr George Quek, boss of BreadTalk; Mr Lucien Wong, a top lawyer; and Mr Wong Ngit Liong, boss of Venture Corporation.

In his opening remarks at the press conference, Mr Ee said the committee had considered feedback from the public as well as comments made in both mainstream and online media. The committee also interviewed political appointment holders both past and present, and MPs from the ruling and opposition parties.

He painted the backdrop for the committee's deliberations, stressing that 'an honest, capable and committed political leadership' had helped build the Singapore of today.

The committee kept three principles in mind in determining political salaries: competitive salaries to attract people of good calibre; the ethos of public service which entails sacrifice; and a clean wage with no hidden perks.

It recommended that political salaries still be pegged to top private-sector pay, but that there be a new benchmark based on a larger pool of top earners who are Singapore citizens.

The new benchmark for MR4 is the median income of the top 1,000 Singaporean earners, with a 40 per cent discount. That contrasts with the current MR4 benchmark, based on the median income of the top eight earners in six professions, with a one-third discount.

On the new benchmark, Mr Ee said: 'We have enlarged the pool across all professions, from the 48 to 1,000, but covering only Singapore citizens. This will actually reflect the pool from which our political leaders could be from.

'It makes it simple, transparent and easy to understand.'

After applying the 40 per cent discount, the reference salary for a minister at the entry grade of MR4 is $1.1 million. That places him in 1,400th spot among top Singaporean earners.

By comparison, chief executives of publicly listed companies are paid on average $2.2 million a year, Mr Ee, a retired accountant, said.

The committee has also recommended a new National Bonus to replace the controversial GDP (gross domestic product) Bonus which has been in place since 2000.

The National Bonus of between zero and six months will be paid out according to how well the Government meets targets for GDP growth, the unemployment rate, and real income growth of average and poorer citizens.

Mrs Fang said the National Bonus indicators measure ministers' performance according to their contribution to Singaporeans' well-being.

Ministers and office-holders will also be paid individual performance bonuses of up to six months, to be decided by the Prime Minister.

The committee has also recommended that the Prime Minister appoint a committee every five years to review the salary framework.

Asked if the salary cuts would make it even more difficult to draw top private-sector talent into political service, Mr De Payva acknowledged it would be a 'serious challenge'.

However, Mr Wong of law firm Allen & Gledhill said pressure 'has been there all along' as successful professionals who choose to enter politics make a big financial sacrifice even under the old benchmark: 'Going forward, would we find similar persons who are prepared to make the sacrifice? The answer must be yes.'

MPs and political observers said the recommended pay cuts would help appease public unhappiness over high ministerial pay. Chua Chu Kang GRC MP Alex Yam said the cuts are in line with public expectations.

But the opposition National Solidarity Party expressed disappointment that ministers' salaries are still pegged to that of top earners, not general wage levels.

As announced by PM Lee last May, the new salaries arising from the review will take effect from May 21 last year, when the new Government took office.

President will earn less than PM
Committee cites limited executive role of the head of state
By Elgin Toh, The Straits Times, 5 Jan 2012

IN LINE with his role and duties, the President's annual salary will no longer be higher than the Prime Minister's salary.

It will be cut by half to about $1.54 million, giving him a pay packet that is 30 per cent less than the Prime Minister's.

In justifying the steep cuts to the head of state's pay package, the committee reviewing political salaries yesterday pointed to his limited executive role, even as it acknowledged his 'significant custodial powers'.

'Unlike the Prime Minister, he does not set national policies and does not have direct executive responsibility for governing the country, except as it relates to his custodial role,' it said in the 47-page report it released yesterday.

Committee chairman Gerard Ee also considered the relationship between President and Prime Minister to be analogous to that between chairman and chief executive officer in a company.

'If you look at even public companies, the chairman usually is non-executive and the CEO is executive. So it's not unusual for the CEO to be paid more than the chairman,' he reasoned.

However, in recognition of the fact that the President holds the highest office in the land, his monthly salary has been pegged to that of the Prime Minister's, said Mr Ee.

The 30 per cent discount in the President's annual package vis-a-vis that of the Prime Minister's is a result of cuts to his bonuses.

The President will still receive a 13th-month Bonus and an Annual Variable Component (AVC) Bonus that can vary between zero and 1-1/2 months, depending on Singapore's economic performance.

But all his other bonus components have been done away with. These are the Fixed Service Bonus and the Gross Domestic Product Bonus, which, put together, could go up to 17 months under the old pay structure.

Like ministers, the President will continue to enjoy medical benefits under the Medisave-cum-Subsidised Outpatient scheme. Every year, the scheme credits to his Medisave account up to $1,190, which can be used to purchase Medisave-approved medical insurance. He may also be reimbursed half of all dental expenses, capped at $70 a year.

The President, furthermore, will be provided the use of an official car, subject to relevant taxes.

He enjoys no other perks.

The committee also chose to address a legal technicality with regard to pensions for the President.

Under the Civil List and Pensions Act, Parliament may resolve to grant the President a pension - the sum of which is also decided by Parliament. This legal provision, however, has never been exercised in practice and no President has ever received a state pension.

The committee recommended that the law be amended to remove the possibility of a presidential pension - in line with the removal of pensions for all other political appointment holders.

The changes will be retroactively implemented from Sept 1, the first day of President Tony Tan Keng Yam's term of office.

They will also apply to the last three months and 11 days of former president S R Nathan's term, as the latter volunteered in May last year to accept the revised salary from May 21. Mr Nathan declined to comment yesterday.

The estimated 51 per cent reduction in the President's salary is expected to go some way in addressing public displeasure over what has been perceived as unreasonably high pay.

When it was revealed in last year's annual Budget that the amount set aside for the President's pay was $4.27 million, up from $3.38 million, netizens and newspaper forum writers questioned the need to pay that amount.

The Prime Minister's press secretary had to respond, explaining that the President occupies the highest office in Singapore, and that it was appropriate to pay him a salary 'higher than ministers' and just above the Prime Minister's'.

A survey by the Institute of Policy Studies late last year found that 55 per cent of Singaporeans think the President should not be paid more than the Prime Minister, compared with 25 per cent who think he should.

At the committee's press conference yesterday, committee member Po'ad Mattar, who is also a member of the Council of Presidential Advisers, described the revised salary package as fair.

'That would reflect the duty of his office and the job scope that he performs,' he said.

Mr Inderjit Singh, MP for Ang Mo Kio GRC, agreed.

He said: 'Having the President being paid the same as PM is not realistic. PM really has the top responsibility. That he gets less than PM is appropriate.'

Speaker's pay reduced by half to $550,000
By Janice Heng, The Straits Times, 5 Jan 2012

THE annual pay of the Speaker of Parliament will be halved to $550,000, according to the recommendation of the ministerial salary review committee.

The Speaker, who performs his role on a part-time basis, was paid $1.17 million in 2010.

But in the proposed pay structure, several bonuses and allowances will be excluded. Also, the pay is pegged at half of the MR4 benchmark, which is the typical salary of an entry-level minister.

Currently, the Speaker receives the 13th-month bonus, an Annual Variable Component based on Singapore's economic performance, as well as a Speaker's Fixed Service Bonus of about nine months' pay.

He also gets a Special Allowance of one month's pay, a Public Service Leadership Allowance of two months' pay, and a Gross Domestic Product (GDP) Bonus of between zero and eight months' pay.

The committee wants the removal of the Fixed Service Bonus, the GDP Bonus and both allowances.

Also, the Speaker should not enjoy the new National Bonus recommended for political office-holders, 'as the Speaker does not have an executive role in decisions that contribute directly to national outcomes', said the committee in its report.

The Speaker presides over parliamentary sittings, enforces the rules of conduct and maintains order in the House. He also represents the House in its relations with other parliaments and bodies.

Though the Speaker is eligible for a pension, the committee has recommended its removal. This means the current Speaker, Punggol East MP Michael Palmer, will not receive one.

Smaller cuts of 15 per cent have been recommended for the Deputy Speakers, who cover the Speaker's functions when he is not available.

Their monthly allowance is now 15 per cent of the Speaker's basic monthly pay. The committee wants the Deputy Speaker's annual allowance to be 15 per cent of the Speaker's salary. This works out to $82,500, about 15 per cent less than the 2010 allowance of $96,500.

The cut is smaller in proportion because Deputy Speakers do not currently receive the Fixed Service Bonus or the two allowances recommended to be removed. They also receive a smaller GDP Bonus now.

The two Deputy Speakers are Joo Chiat MP Charles Chong and Marine Parade GRC MP Seah Kian Peng.

'I was quite prepared to accept whatever they came up with,' Mr Seah told The Straits Times.

There are many factors behind going into politics, he added. 'To me, money is not the most important factor.'

Salaries to be based on larger pool of top income earners
Enlarged group more representative, reduces volatility of benchmark
By Janice Heng, The Straits Times, 5 Jan 2012

THE pool of top earners on whose incomes ministerial salaries will be based has been expanded considerably - from the present 48 to 1,000.

The enlarged group will more accurately reflect where potential political leaders are likely to be drawn from, the chairman of the ministerial pay review committee, Mr Gerard Ee, said at a press conference yesterday.

Expanding the pool 'will reduce the volatility of the benchmark, while maintaining a link between salaries and the market', said the committee's report.

One other significant change: Only the pay of Singapore citizens will be counted, in contrast to the existing formula which also includes the pay of top permanent residents and Malaysians working in Singapore.

The existing formula is two-thirds of the median income of the top eight earners in each of six sectors: banking, law, engineering, accountancy, multinational corporations (MNCs) and local manufacturing.

The new formula is instead based on the median income of the top 1,000 Singaporean earners. Because this is the middle value, not the average, it will not change even if the salaries of the top 499 people rise, said Mr Ee.

To reflect the ethos of political service and sacrifice expected of political leaders, a 40 per cent discount will be applied to this median income.

Based on 2010 data obtained from the Inland Revenue Authority of Singapore, this works out to $1.1 million, a 31 per cent reduction from the current benchmark of $1.58 million.

This annual pay of $1.1 million, known as MR4, would make an entry grade minister the 1,400th highest-paid Singapore citizen in 2010.

From this MR4 benchmark, the salaries of all other political appointments are derived, from the lowest-ranking parliamentary secretary to the Prime Minister.

Under the committee's recommendations, the PM gets twice this amount, or $2.2 million, while a parliamentary secretary will get 38 per cent of the benchmark, or $418,000.

Overall, political office-holders will take pay cuts of between 9 per cent and 33 per cent, or deeper cuts of between 20 per cent and 39 per cent if the removal of pensions is taken into account.

But the committee emphasised that the size of the cuts was not the point. Questions of how much ministers were paid before, or how much salaries should be cut, had no relevance, said Mr Ee.

'The past is the past, we make no reference to it. We just look at what we thought, moving forward, should be the case.'

The committee first deliberated on the basis for the MR4 benchmark and arrived at their proposed formula.

The chosen formula 'gave us a figure that we felt is reasonable to reflect the ethos, and enough not to be a serious deterrent for someone from the talent pool that we're thinking about to consider coming forward to serve,' said Mr Ee.

Based on the resulting $1.1 million figure, the committee then worked out the fixed and variable salary components of their annual pay package, said committee member Stephen Lee.

Major changes have been made to the way the variable component or bonuses are calculated, and the size of the bonus.

On the size of the bonus, the absolute maximum a minister can get has been reduced from 23.5 months to 13.5 months.

Two fixed allowances were removed: the one-month Special Allowance and the two-month Public Service Leadership Allowance.

One of three variable components remains untouched. This is the Annual Variable Component, which ranges from zero to 1.5 months' pay, depending on Singapore's economic performance.

The performance bonus which used to be up to 14 months has been cut, with a new maximum of six months.

Replacing the gross domestic product (GDP) Bonus of zero to eight months, which varies with GDP growth, is a National Bonus of zero to six months, based on four indicators (see other story).

As a result, the fixed component will be a larger percentage of total pay, at 65 per cent. The committee checked with consultants and found this proportion to be the norm, said Mr Ee.

The committee also emphasised that actual salaries vary.

Within each pay grade, salaries may range from about 15 per cent lower than the reference monthly salary, to about 10 per cent higher, said Mr Lee.

The reference monthly salary for an MR4 minister is $55,000.

A minister's starting pay could thus range from $935,000 to $1.21 million, assuming a 20-month pay package.

Furthermore, the reference salaries assume an Annual Variable Component of one month's pay, three months' performance bonus, and three months' national bonus.

If these bonuses are smaller, total pay could be less than $935,000.

New bonus linked to citizens' incomes and employment
By Lydia Lim, The Straits Times, 5 Jan 2012

A NEW National Bonus replaces the GDP Bonus that ministers now receive.

It is to be decided based on four measures, three of which link ministers' bonuses to the employment and incomes of Singapore citizens.

In its report, the committee explained its selection of these four measures from a wide range of indicators:

Real growth rate of citizens' median income. This tracks the income of the average Singapore citizen. The use of the real growth rate, as opposed to the nominal growth rate, factors in inflation.

Real growth rate of incomes of the bottom 20 per cent of citizens. This tracks the income growth of vulnerable citizens, and addresses calls to peg ministers' salaries to that of lower-wage earners.

Unemployment rate of citizens. A key role of government is to ensure that citizens have jobs.

Real GDP growth rate. Gross domestic product measures the value of goods and services produced in a country. It is a key indicator of national performance. Overall, economic growth provides the resources needed for citizens' well-being.

Ministers and other political appointment holders will receive between zero and six months in National Bonus, depending on whether the targets for these four indicators are met.

Now, they are paid between zero and eight months in GDP bonus, with the maximum payout kicking in if GDP growth hits 10 per cent of more.

The new National Bonus comes with new targets recommended and set by the committee.

The target for the real median income growth rate and the real income growth rate of the bottom fifth is 2 per cent to 3 per cent.

According to Manpower Ministry figures for the 10 years up to 2010, real median incomes grew by an annualised rate of 0.1 per cent from 2001 to 2006, and 2.6 per cent from 2006 to 2010.

As for the real incomes of the bottom fifth of citizen wage earners, these fell by an annualised rate of 2.4 per cent from 2001 to 2006 but grew 3.1 per cent a year from 2006 to 2010.

That does not include the Government's transfer payments to low-wage earners, such as the Workfare Income Supplement.

The target unemployment rate for the National Bonus is 4 per cent to 4.5 per cent. Since 2001, the unemployment rate among citizens has hit 4.5 per cent or more in four years: 2002, 2003, 2004 and 2009.

As for real GDP growth, the target rate set by the committee is 3 per cent to 5 per cent. The Government has said that, going forward, slower GDP growth of 1 per cent to 3 per cent will not be uncommon.

The committee has recommended that each of the four indicators accounts for one-quarter of the national bonus.

When the targets are reached, the National Bonus will be three months. When the targets are far exceeded, a higher National Bonus may be paid, up to a maximum of six months.

'Over time, these targets will need to be reviewed as the environment and situation change,' the committee said in its report.

It decided against having inflation as a separate indicator as three of the four indicators selected already take inflation into account.

The committee also decided against having a measure of income inequality known as the Gini co-efficient, as an indicator. The income indicators it settled on 'focus more directly on raising the incomes of both average and vulnerable Singaporeans', said the report.

Besides the National Bonus, the other variable components of ministers' pay are the performance bonus of up to six months, to be decided by the prime minister, and the annual variable component of up to 1.5 months.

Asked for his view on the National Bonus, Associate Professor Neo Boon Siong said the four indicators made sense and were an attempt to address concerns about 'lopsided growth and inequality'.

But the National Bonus accounts for only 15 per cent of the total salary package.

The indicator for social inequality, as represented by real income growth of the bottom fifth, accounts for only 3 per cent or 4 per cent of the total pay package, he said, and that is 'quite low'.

Pension system for political office-holders to be scrapped
By Elgin Toh, The Straits Times, 5 Jan 2012

THE pension system for political appointment-holders will be abolished, according to the committee reviewing political salaries.

The proposed move effectively places these office-holders on the Central Provident Fund (CPF) scheme, like most ordinary Singaporeans.

Explaining its decision, the committee noted in its report, released yesterday, that the CPF scheme is the national savings programme to provide for retirement.

While it appreciated the reasons office-holders in other countries draw pensions, the committee believes doing away with pensions 'strengthens the principle of clean wage by adequately paying them during their time in office'.

The 'clean wage' principle - one of three central ideas that underpin the ministerial salaries review - argues that paying competitive salaries with no hidden perks and privileges is better because it is more transparent.

'This is in contrast to systems where salaries appear to be low but are in fact coupled with allowances, benefits and perks. Such systems have come under criticism in several countries because of their non-transparent nature and difficulties in control and accountability,' said the report.

The no-pension rule will affect office-holders from parliamentary secretaries to full ministers appointed on or after May 21 last year.

Those appointed before May 21 will have their pensions frozen at the level on May 20.

Since political appointment-holders are eligible for pensions only after eight years of service, pension is now effectively available only to those appointed before May 21, 2003.

They include Cabinet ministers Lee Hsien Loong, Teo Chee Hean, Tharman Shanmugaratnam, Lim Hng Kiang, Lim Swee Say, Yaacob Ibrahim, Khaw Boon Wan, Ng Eng Hen and Vivian Balakrishnan, as well as Senior Parliamentary Secretary Hawazi Daipi.

The committee also recommended reversing the 1982 decision to let office-holders start collecting pensions on turning 55, even if they are still holding office.

The argument then was that if they were not allowed to do so, office-holders would not stay long in public service.

Since pensions stop rising after 18 years of service, they would be better off financially if they retired from politics and joined the private sector, as they could then start collecting pensions on top of their private-sector salaries, argued then Finance Minister Hon Sui Sen.

The committee did not give a reason yesterday for recommending that pensions be paid only 'when they step down or retire from office'.

Ministerial pensions became the subject of public discussion after the general election last May.

Netizens speculated that former foreign minister George Yeo may continue to receive a seven-digit annual pension, despite being voted out of office.

It led the Prime Minister's Office to set the record straight, saying that a retired minister who serves 18 years or more receives a maximum annual pension roughly equal to one-tenth of his last-drawn salary.

The move from pension to the CPF scheme was introduced in the public service by the Government in the 1970s. Most junior public servants were taken off pensions by 1986.

With political office-holders now also off the pension list, very few groups continue to be eligible.

They include civil servants in the elite Administrative Service and intelligence service officers. Administrative Service officers, for example, are eligible for pension after working for 15 years.

All eyes will now be on these groups, to see if they will keep their pensions.

Deputy Prime Minister Teo Chee Hean said last May, when the Government was dispelling mistruths about ministerial pensions: 'There's a very specific reason for a small group of officers to still be on pensions, because there is a premium in this case for long-term service in order to provide consistency of policy and implementation.'

At least one office-holder said yesterday he did not feel any disappointment at the proposed change.

Said Mr Teo Ser Luck, MP for Pasir Ris-Punggol GRC: 'Honestly, I've never given any thought to my pension, since all my working life in the private sector before entering politics, I've not been eligible for it. So I have no particular feeling about it.'

He was appointed Parliamentary Secretary in the Ministry of Community Development, Youth and Sports in 2006, and was promoted to his current post of Minister of State (Trade and Industry) last year.

Still no car perks, and no change to medical benefits
By Toh Yong Chuan, The Straits Times, 5 Jan 2012

THE review committee on ministerial pay wants the existing arrangements on medical benefits and car perks to be retained.

This means ministers and MPs as well as their dependants will continue to pay their own hospital bills.

They also will not get any car perks.

While the President, Prime Minister and Speaker of Parliament have cars that they can use for official duties, they pay car-related taxes to the Inland Revenue Authority of Singapore for this perk.

The committee said continuing the arrangements is in keeping with the principle of having a clean wage with no hidden perks.

The President, Prime Minister, House Speaker, political office-holders and MPs currently receive the same medical benefits as civil servants under the Medisave-cum-Subsidised Outpatient (MSO) scheme.

The scheme, introduced in January 1994, does not pay for any hospitalisation.

Instead, an extra 1 per cent of salary is paid to an officer's Medisave account, up to $70 a month or $1,190 each year.

This payment helps the officer buy Medisave-approved medical and hospitalisation insurance for himself and his dependants.

The officer and his dependants also receive subsidies for outpatient treatment, up to $350 per year.

The officer pays 15 per cent of the bill for outpatient treatment at government polyclinics and restructured hospitals, while his dependants have to pay 40 per cent of it.

For private clinics, the subsidy is up to $10 per visit for everyone.

The unused outpatient subsidy at the end of each year is credited into the officer's Medisave account.

Public servants also get half of their dental expenses reimbursed, up to $70 each year.

How benchmark model is picked
Factors include pool size, relevance to talent and local conditions
By Rachel Chang, The Straits Times, 5 Jan 2012

HAVING decided that political salaries should continue to follow a benchmark so as to be competitive and respond to market conditions, the question remained: What benchmark to use?

The Committee to Review Ministerial Salaries said that it considered several benchmarking models before settling on its final recommendation of 60 per cent of the median income of the top 1,000 Singaporean earners.

In its report released yesterday, the committee explained why it rejected four other benchmarking models:

The current benchmark:

The committee could have modified the existing benchmark, which is two-thirds of the median income of the top eight earners in six professions.

While it agreed with the principles behind this model, it has 'turned out to be complex and difficult for the public to understand', said the report.

Due to its small pool of 48 earners, it is also highly volatile. In fact, the ministers' salaries have never actually reached the benchmark. The committee therefore preferred a benchmark that would provide a pay level more closely linked to how actual salaries will be adjusted.

30 times the median income of Singaporeans (or a larger multiple of the lowest 10th, 20th or 30th percentile income):

This suggestion was given 'considerable attention', said the committee, but was ultimately deemed to have no direct link to the talent pool of potential political appointment holders.

That is, for this benchmark to yield an actual salary commensurate with the 'calibre' of potential ministers, a multiplier would need to be arbitrarily set.

For these reasons, the committee believed that total pay of ministers should not be linked to the incomes of Singaporeans.

But part of its recommended bonus package will be contingent on reaching goals to boost median incomes of Singaporeans and the wages of the lowest-earning Singaporeans.

Median salaries of chief executive officers of Singapore companies with a market capitalisation of at least $1 billion: This benchmark was rejected because the pool of such chief executives is small. This would make the benchmark volatile: Any shift in salaries, even among a small number of chief executives, would have a large impact on the benchmark.

In fact, the committee felt that this benchmark would be inferior to the existing benchmark as it focused on one alternative profession - chief executive - rather than six others.

What foreign governments pay:

This option was studied in detail by the committee, but several downsides emerged.

First, what politicians are paid in each country depends on domestic political, social and economic conditions. Local political salaries should be structured in line with local conditions, so that domestic indicators like employment level and Singaporeans' incomes can be brought to bear.

The committee also argued that many countries do not adopt the principle of 'clean wage'. Low salaries are topped up with large perks.

In the United States, the committee said, the annual value of pensions, benefits and other allowances is close to or exceeds actual salaries. 'This contradicts the clean wage approach which we believe fosters transparency and is the right one for Singapore,' said the report.

Finally, it argued that there are fundamental differences between Singapore's political system and others.

In Singapore, the main focus in on getting competent people to join politics in their 'prime years'. This makes competitive salaries necessary. 'We cannot afford to have a system where people enter politics only after they have accumulated sufficient wealth or leave it to chance that there will be enough top talent who will step forward despite the opportunity cost,' the committee wrote.

'If we do this in Singapore, we will have a very limited pool of competent people to draw from.'

Pay package must be...
Competitive to attract people of the right calibre. Discounted to reflect sacrifices involved. A clean wage with no hidden perks.

THREE principles used in determining ministers' pay packages over the years continued to guide chairman Gerard Ee and his salary review committee.

They are: ensuring competitive salaries so people of the right calibre are not deterred from stepping forward; a discount to reflect the sacrifices involved in political service; and a transparent system with no hidden perks.

An additional factor taken into account this time was the public furore in the lead-up to last year's general and presidential elections over one component of political appointment holders' bonuses, and how this was linked solely to gross domestic product (GDP) growth.

The committee recommended that the GDP Bonus be replaced with a National Bonus, which uses four socio-economic outcomes as measures.

These are: real median income growth; real growth of the lowest 20th percentile of income-earners; the unemployment rate; and real GDP growth.

At a press conference yesterday, committee member Fang Ai Lian called the new system 'a lot more Singapore-centric'.

'When you look at the benchmarks and their indicators pertaining to National Bonus, it is about the well-being of Singaporeans,' she said.

Elaborating on the three principles that influenced its review, the committee said in its 47-page report that for a country to succeed, talented people need to step forward to serve when they are in their prime.

'In designing salaries, it is important to consider the quality of talent that we desire to lead our country and the opportunity cost faced by this group in deciding to enter politics,' the report said.

It noted that promising leaders need time to develop experience and build rapport with the people, and Singapore cannot afford to wait until after they have earned and set aside enough cash for personal and family needs before they enter politics.

Still, given the nature of political service, some element of financial sacrifice must be expected, the report added.

But such a sacrifice should not be so large that it discourages outstanding and committed citizens from devoting the best part of their lives to political office, it emphasised.

Mr Ee said at the press conference: 'Looking back historically at what are the type of people that have contributed towards making a piece of rock into what we have today, you got to make sure there is no disincentive for some of the talents to want to consider... coming into political office.'

There is no scientific method for striking a balance between paying competitive salaries and taking a discount to signify the political service ethos, though, said the committee.

A judgment call was needed, and it recommended a 40 per cent discount off the median salary of the top 1,000 Singaporean earners, in determining the salary of a minister who enters service at the MR4 grade.

With this discount, the proposed MR4 grade pay is $1.1 million, compared with $1.58 million in 2010.

Using the current benchmark, with a smaller discount, an entry-level minister's annual pay is pegged to two-thirds of the median salary in a group made up of the top eight earners from six professions.

One final point noted by the committee is that many countries cannot provide competitive political pay because of public opinion or political constraints.

Salaries are then supplemented by a higher level of benefits and allowances.

But to be more accountable, Singapore sets a 'clean wage' at a competitive level, with no hidden privileges, said the report.

In Singapore, ministers do not receive perks such as housing and cars for personal use. They must also pay income tax like anyone who works here, the report noted.

Mr Ee said: 'You will find that a couple of pages (of the report) actually summarise everything they receive. If it's not there, you can take for certain that they are not going to get it.'

MPs' allowance to be cut by 3%
This comes mainly from taking away bonus pegged to GDP growth
By Rachel Chang, The Straits Times, 5 Jan 2012

MEMBERS of Parliament should receive a minor 3 per cent reduction in their allowance, said the Committee to Review Ministerial Salaries yesterday.

This will come mainly from taking away a bonus pegged to gross domestic product (GDP) growth, as MPs do not play an executive role in governance, the committee said.

This bonus, capped at two months, is given out when GDP growth is above 2 per cent. Its removal will bring MPs' allowance down by $6,700 to $192,500 a year. This works out to an allowance of $16,041 a month. The small adjustment, compared with the cuts ministers will take, is because the committee believes that the current level of MP allowance is 'roughly correct'.

Speaking at a press conference yesterday, committee chairman Gerard Ee said that there is 'quite a lot of outlay for an MP carrying out constituency work'.

'As you know, every week they have the Meet-the-People session. After which they take all the helpers out for supper. (Then there are) all the events from Lantern Festival to Deepavali to Hari Raya, everything they always have to make a contribution, plus a whole lot of things.

'Apart from their attendance in Parliament, we appreciate that there's quite a substantial outlay for them in order to be effective at the constituency level,' he said. 'And we felt $192,500 is reasonable.'

Non-Constituency MPs and Nominated MPs will continue to receive 15 per cent of MPs' allowances. This works out to a 4 per cent reduction in their allowances, to $28,900 a year.

MPs contacted yesterday expressed surprise that the cut in allowance was not bigger, and were happy to forgo the GDP Bonus.

'Most of our work is in the constituency, so we don't have a direct role in national policies,' said Tampines GRC MP Baey Yam Keng.

'I can accept that the National Bonus doesn't go to MPs. The personal bonus would be the votes that residents give us, that would be the best.'

Sembawang GRC MP Vikram Nair said: 'It wasn't as deep as what I had in mind... But MPs' allowances overall are smaller than in other countries, because we don't have expense accounts or housing allowances.'

MPs said that a large portion of their allowance goes to party contributions and constituency priorities anyway. They also have day jobs and do not depend on their allowance for income, they said.

'To be frank, I don't know how much they pay me,' said Nee Soon GRC MP Lee Bee Wah. 'They deduct contributions to party and some other expenses and then bank in an amount every month.'

People's Action Party MPs are required to give about a tenth of their monthly allowance to party use. Officeholders and ministers give a larger proportion, of close to half, according to MPs.

MPs also put a substantial proportion of their allowance into 'facilitating community-building', as Nee Soon GRC MP Muhammad Faishal Ibrahim called it.

'Whenever we are approached by various organisations, we do our fair bit to support them as long as it is a good cause. In the constituency, if they need money, for example to sponsor prizes, we would normally do that,' noted Ms Lee.

Ang Mo Kio GRC MP Inderjit Singh said that his contributions to organisations and annual dinners for grassroots leaders add up to tens of thousands of dollars each year.

Buying supper for branch activists after a late-night Meet-the-People session, or kick-starting fund-raising with a contribution of their own is par for the course, MPs said.

Chua Chu Kang GRC MP Alex Yam gave $12,000 to his Yew Tee ward's community development welfare fund last month to 'get the ball rolling'. In the same month, he donated $8,000 to the building fund of one of the neighbourhood schools.

'We don't aim to shout about it,' he said. 'We want to help our residents to the best of our abilities and sometimes it involves monetary contributions.'

$1.1 million ministerial pay includes bonuses, clarifies committee
By Janice Heng, The Straits Times, 12 Jan 2012

The committee to review ministerial salaries has clarified several aspects of its report 'that have been misunderstood', in a post on its official blog on Wednesday.

One is the question of whether bonuses are included in the much-publicised $1.1 million salary recommended for entry-level ministers.

Though the committee did not state it, some netizens have misunderstood the figure to be the basic salary of an entry-level minister.

But this is not so.

The committee clarified in its post that the $1.1 million figure includes both basic pay and bonuses amounting to seven months.

Without bonuses, the basic pay is 13 months, totalling $715,000.

In its report released last Wednesday, the committee recommended salary cuts of up to a third for political office-holders - more if its proposed removal of pensions is taken into account - and a 3 per cent cut to MPs' allowances.

In its blog post, the committee said it has since 'noticed that there are points in our Report that have been misunderstood or not clearly understood'.

The committee grouped these points into questions, giving brief answers to each one and referring readers to the relevant sections of the report for details.

Apart from clarifying factual details, such as the composition of the $1.1 million salary, the committee also explained the rationale behind some of its recommendations.

One issue was the proposed wage benchmark, which links ministerial pay to the salaries of 1,000 top Singaporean earners.

In its post, the committee reiterated why it decided to link salaries to top earners.

This was to reflect 'the level of talent we hope to attract and the need to pay competitive salaries to minimise the opportunity cost for these people to come forward to serve', it said.

The committee also explained why it had not chosen to peg salaries to foreign leaders' pay instead.

Though this was an option 'studied in detail', it was not adopted 'as the conditions in other countries are different and so are the compensation principles'.

Doing so would not allow the committee to 'follow the principles of paying competitive salaries and clean wages'.

Questions about the existing pay system were also addressed.

One is why political appointment holders receive the MP allowance on top of their political salary.

This is because appointment holders have the dual role of also being MPs, which involves looking after their constituents' needs and raising their concerns in Parliament, said the committee.

It noted that this was the international practice in Westminster parliamentary systems like Singapore's.

Prime Minister Lee Hsien Loong has said that the Government intends to accept the committee's recommendations, which will be debated in Parliament on Monday.

The report has already sparked discussion both online and offline - though, as the committee discovered, not all such discussion was informed.

Committee chairman Gerard Ee told The Straits Times that the committee decided to make the blog post after following public reactions to its report.

The list was compiled based on questions and misunderstandings that they have seen in both social and traditional media, he said.

'We just based it on what netizens are talking about, and what we have seen people say in the press,' said Mr Ee.

He added that the blog post is meant to provide clarification and not to determine the debate.

'As long as it's not a point that needs clarification, everyone is entitled to their view.'

Both the blog post and the full report can be viewed at

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