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Monday, 24 November 2008

Pay cut for civil service?

THE Public Service Division (PSD) will make an announcement soon about year-end bonuses and salaries for civil servants, Finance Minister Tharman Shanmugaratnam said yesterday.
'The principles underpinning civil service pay as well as the pay of political leaders...are well known and you can just wait for the announcement before long on that,' he told reporters at a press conference held to announce measures to help businesses and workers.

A panel of ministers was asked if senior officers and leaders in the public sector would lead by example and take pay cuts in difficult times. 'We're not here to grandstand,' Mr Tharman said.

The response from labour chief Lim Swee Say, also a Minister in the Prime Minister's Office, suggested a wage cut might be in the offing: 'From the labour movement, I think we will not be surprised (if) the public sector sees a wage cut because with the GDP declining, that must factor into the flexible component of wages.'

A significant part of the annual pay for a senior civil servant or minister takes the form of a GDP Bonus, which is linked to growth in the gross domestic product. The bonus is paid in March each year, with the amount linked to GDP growth in the preceding year. Started in 2000, it was revised last year to form 20 per cent of the annual pay of top officials. It comes to three months if the economy grows by 5 per cent, and can go up to eight months if growth hits 10 per cent or more. It is not paid if growth is 2 per cent or less.

The civil service is also expected to make a related announcement on the third phase of previously disclosed salary adjustments for top civil servants and ministers. This concerns raising pay packages from the current 77 per cent of a salary benchmark to 88 per cent. The benchmark is set at two-thirds of the median pay of the top eight earners in each of six sectors.

Mr Lim said yesterday the labour movement has long advocated the adoption of a flexible wage system. Under the system, senior management would take more of its pay in the form of a variable component than lower-ranking staff would. Over the years, more organisations have heeded the call to switch over, he said.

'In the private sector, we expect to see many in senior management take a bigger cut in total wages than rank-and-file workers. In the public sector, likewise, I think flexibility has been enhanced over the years.'

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