More of ministers' pay to be linked to performance

Variable part of their salary to go up from a third to nearly half


THEIR salaries may be going up, but a larger proportion of ministers' pay packages will be linked to performance.

Almost half their salaries will be made up of a variable portion, based on two factors: performance on the job, and how well the economy does.

This variable portion is up from 34 per cent or one-third previously.

Mr Teo Chee Hean, the minister-in-charge of the civil service, announced yesterday that the pay package of ministers and senior civil servants at the grade known as MR4 and above will be restructured.

Salary components that are no longer relevant will be removed and those parts linked to performance will be built up, he told Parliament.

There are three main changes.

Gone is the car allowance - a legacy from when the civil service stopped providing senior officers with an official car. They instead got an amount that was 21/2 times their monthly salary.

In its place will be increases in the GDP (gross domestic product) and performance bonuses - which will make up 20 per cent and 27 per cent of salaries respectively.

The GDP bonus depends on how well the economy does.

Mr Teo explained that ultimately, 'every senior civil servant and appointment holder plays a role in ensuring that Singapore continues to thrive and prosper'.

Currently, the normal bonus payout is two months if the economy grows by 5 per cent. This will go up to three months.

But if GDP growth reaches 10 per cent or more, the maximum they will get will be eight months.

This will be up from the maximum of four months previously if the economy expanded by 8 per cent or more.

As was the case previously, if the economy grows by 2 per cent or less, there will be no GDP bonus.

As for the performance bonus, it will be increased by two months, to a norm of seven months.

Mr Teo said that a quarter of ministers' salaries will be dependent on performance.

How much a minister receives is decided by the Prime Minister, he added.

The exceptions are the President, the Prime Minister himself, and the judiciary and statutory appointment holders who receive a fixed service bonus. This will go up from five to seven months.

The changes affect all appointment holders, the Administrative Service, and senior officers in all ministries and statutory boards, said Mr Teo.

The changes come amid the move to increase public service salaries and narrow the gap between what top earners in the public and private sectors are getting.

Currently, salaries at the MR4 grade are at $1.2 million, the same as that in 2001.

This is 55 per cent of what they should be getting, according to the benchmark against salaries of top jobs in the private sector.

But given that the gap is large, Mr Teo said that 'it is not realistic to close the gap fully in one go'.

So it will take place in two steps: to 77 per cent of the benchmark by end of this year, and to 88 per cent by end of next year.

As a starting point, annual salaries will increase by 33 per cent - from $1.2 million to $1.6 million.

On the need for the move, Mr Teo said it was because those considering a political career were enjoying good prospects in the private sector.

'Some of those in their late 30s or 40s are at or near the top jobs in their companies or field of work,' he said.

He noted that the Government's philosophy was to pay competitive salaries to facilitate the recruitment and retention of talent needed for the government and public sector.

To do so, it had to benchmark salaries against those of comparable jobs in the private sector, he said.

Mr Teo acknowledged that there was no perfect method for carrying out such benchmarking.

But he pointed out that the methodology for establishing the two market benchmarks in use, SR9 and MR4, had been set out in a 1994 White Paper on Competitive Salaries for Competent and Honest Government.

'The White Paper was thoroughly debated in this House,' he said yesterday.

He also pointed out that in 2001, the Government had reviewed and modified the benchmark for ministers' salaries to make it more robust.

The change was in the form of expanding the base of top private sector earners against which ministers' pay was pegged, from the top 24 earners in six specially selected professions, to the top 48.

The benchmark was also set at the median, rather than the average, and stock option gains discounted by 50 per cent.

Before this round of salary revisions, the Government studied the benchmarks once again, Mr Teo said.

'We have looked at the benchmarks again, and have found that they remain sound. They follow economic and employment market conditions up and down.'

The benchmark was also checked against the incomes of top private sector earners and found to be stable with no wide fluctuations.

Mr Teo added that all the salary revisions would not be pensionable.