IMPACT OF RETRENCHMENTS AND PAY CUTS ON CPF CONTRIBUTIONS

IMPACT OF RETRENCHMENTS AND PAY CUTS ON CPF CONTRIBUTIONS

36.

Mr Terry Lee asked the Minister for Manpower how adversely affected are the CPF contributions of workers due to retrenchments, shorter work weeks and pay cuts.

Mr Gan Kim Yong: Faced with the global economic downturn, some companies have to introduce shorter work weeks, pay cuts and even retrenchments to stay competitive. These measures will affect the salaries of workers and their CPF contributions. The total gross CPF contributions in the fourth quarter of 2008 were 2.1% lower than the same period in 2007, despite a 4.5% increase in the number of active members. For the first and second quarters of 2009, the contributions dropped further by 0.4% and 0.9 % respectively, year-on-year.

The Resilience Package introduced by the Government has helped to save jobs and shore up CPF contributions. In particular, the Government avoided cutting the employers’ CPF contribution rate by introducing the Jobs Credit scheme, which is equivalent to a 9% CPF cut. If the Government had cut CPF contribution rates by 9% instead, CPF contributions could have dropped by about 25%.

Besides Jobs Credit, other initiatives such as SPUR and the Tripartite Guidelines on Managing Excess Manpower have helped workers stay employed and therefore able to

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continue contributing to their CPF savings. A recent survey conducted by MOM showed that around three in four companies which had earlier planned to lay off workers reported they would postpone or reduce the number of affected workers, as a result of the measures introduced by the Government.

Our measures to save jobs have mitigated the impact of the downturn on CPF contributions. Without them, CPF contributions would have been even more severely affected by the downturn, as was seen in the previous recession. Nonetheless, to build up CPF savings over the longer term, we must continue to up the employability of our workers, raise our productivity and sharpen our competitiveness so that we can create good jobs for our workers and keep them employed.

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