Committee releases Report

Ministerial salaries review committee proposes:

Pension scheme to be removed

President sees 51% cut and PM sees 36% cut;
Minister’s salary to be cut by 37%

Minister’s salary to start at $935,000

The Committee to Review Ministerial Salaries recommends cutting the salaries of the President, Prime Minister, Speaker of Parliament, Deputy Speaker of Parliament, and political appointment holders; as well as the allowance of Members of Parliament (MP).

The Committee also recommends removing the pension scheme.

The President’s annual salary should be cut by 51% to $1,540,000. The Prime Minister’s annual salary should be cut by 36% to $2,200,000.

A Minister at the MR4 grade (i.e. entry-level grade) should be paid an annual salary of $1,100,000, a cut of 37%. A Minister at the lower end of this grade will start at an annual salary of $935,000.

As is the current practice, the Prime Minister can also appoint a newly appointed entry level Minister to be an Acting Minister on a lower grade and thus go below the MR4 range, ie Acting Minister who is placed on a Senior Minister of State grade.

The Committee also made recommendations on a new benchmark. A new salary framework and National Bonus linked to the socio-economic progress of average and lower income Singaporeans is also proposed.

New Benchmark

The new salaries are based on our recommendation to benchmark the MR4 Minister’s salary to the median income of the top 1,000 earners who are Singapore citizens and with a 40% discount to signify the ethos and sacrifice that comes with political service. This benchmark is based on a larger pool that does not specify occupations and covers only Singapore Citizens, the pool of talent that our political leaders will be drawn from.

Based on the IRAS Year of Assessment 2011 income data, the new benchmark figure is $1,100,000.

See page 21 of the Committee’s Report for the reasons why we did not choose other benchmark methods.

Pension scheme to be removed

While we appreciate the reasons for pension payment and note that political appointment holders in other countries do draw a pension, our recommendation is to remove the pension scheme for all political appointment holders, and adopt only the Central Provident Fund system which is the basic retirement scheme for Singaporeans. The CPF payments will be subject to the usual contributions cap.

With this recommendation, political appointment holders appointed on or after 21 May 2011 will not receive any pension. For office holders who were appointed before 21 May 2011, they will have their pension frozen, ie they will only be eligible for pension accrued up to 20 May 2011. The frozen pension will be paid when they step down or retire from office [1] .

Medical benefits

We recommend that the current medical benefits for political appointment holders, which are the same as for civil servants (i.e. Medisave-cum-Subsidised Outpatient (MSO) scheme), be retained. Under the MSO scheme, political appointment holders do not receive any hospitalization benefits. They receive $70 per month (capped at 17 months ie $1,190 per annum) in their Medisave account which can be used to buy Medisave-approved medical insurance. Outpatient subsidy (including co-payment of medical expenses at restructured hospitals) is capped at $350 a year. They are also reimbursed 50% of their dental expenses, up to a maximum subsidy of $70 per year.

No hidden perks

In keeping with the principle of clean wage, the current practice of not having hidden perks will remain.

New salary framework and formula

In addition to choosing a new benchmark, we also recommend a salary formula that features fixed and variable pay components which are linked to individual performance and national outcomes, ie

Annual Salary = Fixed (13 months [2] )
+ Annual Variable Component (typically 1 month)
+ Individual Performance Bonus (3 months for good performance)
+ National Bonus (3 months if targets are met)
= 20 months.

So for an MR4 Minister, his total annual salary will be $1,100,000 (20 months) ie the fixed salary is $715,000 and the rest is variable.

For the national bonus, four indicators with equal weightage (as indicated in brackets below) have been chosen:

• Real median income growth rate of Singapore Citizens (25%);
• Real growth rate of the lowest 20th percentile income of Singapore Citizens (25%);
• Unemployment rate of Singapore Citizens (25%); and
• Real GDP growth rate (25%).

This means the National Bonus has a strong link to the socio-economic progress of average and lower income Singapore Citizens.

New MR4 Minister Salary

Based on the above salary structure, an MR4 Minister who achieves good individual performance when the targets of National Bonus indicators are met and the government decides to pay 1 month Annual Variable Component (AVC), will get a fixed pay of 13 months, a variable pay of 1 month AVC, 3 months Performance Bonus and 3 months National Bonus, making the total annual salary $1,100,000.

In addition, a Minister at the lower end of this grade will start at an annual salary of $935,000. As is the current practice, the Prime Minister can also appoint a newly appointed entry level Minister to be an Acting Minister on a lower grade and thus go below the MR4 range, ie Acting Minister who is placed on a Senior Minister of State grade.

New Salaries for Prime Minister and other Political Appointment Holders

PM’s salary

The Prime Minister’s annual salary should be pegged to two times the MR4 annual salary, ie $2,200,000, or a drop in salary of 36%. As there is no one to decide on the annual performance bonus for the PM, the PM’s bonus will be based only on the National Bonus. Where the targets for the indicators are met, his National Bonus will be 6 months.

Salaries of other political appointment holders

The total annual salary for all the other political appointment holders will be set at a ratio to the MR4 total annual salary, as shown in the Table A in attachment 1. The salary reductions for these appointments will range from 20% to 39%.

Salary Ranges

In line with good HR practice, at each grade, the salaries should have a range, subject to a ceiling of 110% of the reference salary for that grade. The salary for the PM should however be at a fixed point of two times the MR4 salary without a range.

Only one pay for more than one portfolio

We recommend to keep the current practice of paying a political appointment holder only one pay package regardless of the number of appointments held.

The President

The President is Head of State and has significant custodial powers. However, 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. Taking all factors into account, we recommend that the President be paid the same monthly salary as the Prime Minister, with 13th month bonus and AVC, but without the Performance Bonus and National Bonus ie the President will receive an annual salary of $1,540,000 (assuming 1 month AVC), which is a cut of 51%. His total annual salary will be 70% that of the Prime Minister,

The possibility of a pension for the President is provided for under the Civil List and Pension Act. Parliament may determine the quantum of the President’s pension by resolution. This provision has not been exercised and no President has ever received a State pension. We recommend that the Government remove this provision, in line with the proposed removal of pensions for political appointment holders. As for benefits, we recommend that the President continue to be on the MSO scheme, be accorded the use of an official car that is subject to tax, and receive no perks.

Speaker of Parliament / Deputy Speaker of Parliament

We recommend that the salary of a full-time Speaker be pegged to the MR4 benchmark and structured as a 14-month package, ie it includes the 13th month bonus and AVC but excludes Performance Bonus and National Bonus. We also recommend that the Deputy Speaker’s allowance continue to be pegged to 15% of a full-time Speaker.

We note that Parliament currently applies a 50% discount to both positions as they are not full-time positions. This means that the Speaker’s annual salary package will be $550,000, a 53% cut from the 2010 salary, while the annual allowance of the Deputy Speaker will be $82,500, a 15% drop from the 2010 allowance.

We recommend that the pension scheme be removed for the Speaker, ie the previous Speaker will only accrue pension up to 20 May 2011 while the new Speaker will not be entitled to pension.

We also recommend that the Speaker and the Deputy Speaker remain on the MSO scheme, and that the Speaker continue to have the use of an official car that is subject to tax, and receive no perks.

Members of Parliament

Members of Parliament (MPs) are paid an allowance for the time and expenses incurred in serving in that capacity. Our MPs serve dual roles – they have a community-based role, ie looking after the needs of their constituents and raising their concerns in Parliament, and also a legislative role in Parliament where they can influence decisions on Government budgets, and enact or amend legislation, including the Constitution.

We have assessed that the current level of the MP monthly allowance is about right. As MPs play a political role, their allowance should be pegged to that of the political appointment holders. But since MPs do not have an executive role, we recommend that MPs be given only a monthly allowance, a 13th month bonus and AVC. The current GDP Bonus (0 to 2 months) should be removed. Hence, an MP’s annual allowance will be 17.5% of the MR4 benchmark, i.e. a drop of 3% from the 2010 allowance. The annual MP allowance will be $192,500

As is the international practice in Westminster Parliamentary systems, the Prime Minister, Speaker (if he is an MP), Deputy Speaker (if he is an MP) and political appointment holders will continue to receive MP allowances as they have the dual role of being MPs as well.

Currently, only MPs elected before 1995 are eligible for pension. Just like the political appointment holders, we recommend that these MPs have their pension frozen as at 20 May 2011. They will receive the frozen pension when they step down from their MP positions.

We recommend that MPs continue to remain on the MSO scheme. There are no other perks.

Non-Constituency MPs (NCMPs) and Nominated MPs (NMPs)

NCMPs and NMPs have smaller roles than MPs. They do not have a community role as they do not have constituents. They also have a reduced legislative role in that they cannot vote on government budgets and changes to the Constitution. Hence we recommend that the annual allowance of an NCMP / NMP be pegged to 15% of the MP’s annual allowance, as is the current practice ie the annual allowance of an NCMP / NMP will see a drop of about 4% from the 2010 allowance. An NCMP/NMP’s annual allowance will be $28,900.

We recommend that NCMPs and NMPs continue to remain on the MSO scheme.

Table B in attachment 2 shows the salary packages of the President, Speaker, Deputy Speaker, Members of Parliament, Non-Constituency MPs and Nominated MPs before and after the review.

Table C in attachment 3 provides a comparison of the salary frameworks before and after the review for all the appointment holders, President, Speaker, Deputy Speaker, Members of Parliament, Non-constituency MPs and Nominated MPs.

Regular review

We recommend that the PM appoint a committee every five years to review the salary framework.

Implementation

As announced by the PM earlier, the new salaries arising from this review will take effect from 21 May 2011, the date when the new Government took office.

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Background

Committee’s Report

On 21 May 2011, the Prime Minister announced the appointment of a committee to review the basis and level of political salaries. The findings and recommendations on the salaries of the President, Prime Minister, Speaker, Deputy Speaker, political appointment holders and allowances for Members of Parliament are detailed in a Report “Salaries for A Capable and Committed Government”, released today (4 January 2012) by this Committee.

Meeting some 10 times in seven months, we studied the feedback from MPs and the public as well as interviews with several past and present appointment holders and MPs from both ruling and opposition parties. Taking all the feedback into consideration, we worked on a new benchmark, as well as a new salary framework and formula to come up with the new salaries.

Mercer (Singapore) Pte Ltd, a leading global provider of human resource consulting services and an international expert on remuneration issues, supported our work with technical expertise in job evaluation, and pay benchmarking and design.

During the review, we kept these principles in mind: 1) Salaries must be competitive so that people of the right calibre are not deterred from stepping forward to lead the country; 2) Political service ethos entails making sacrifices and hence there should be a discount in the pay formula; and 3) There should be a “clean wage” with no hidden perks. Taking into consideration, the feedback from the public, the salaries should also be linked to individual performance, and the socio-economic progress of the average and lower income Singapore citizens.
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Footnotes
[1] This is a change from the current system where an office holder can begin to draw pension from age 55 years if he has served at least 8 years as an appointment holder by the time he reaches that age.
[2] The fixed component comprises 12 months of salary and the 13th month bonus.


See additional attachments:

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Issued by the Committee to Review Ministerial Salaries
4 January 2012
Singapore

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