CENTRAL PROVIDENT FUND (AMENDMENT) BILL

Order for Second Reading read.

4.01 p.m.

The Minister for Labour (Mr Ong Pang Boon): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Mr Speaker, Sir, the Central Provident Fund Act was enacted in 1955 to provide employees in Singapore with a compulsory savings scheme so that they will have some savings when they retire from active work. Since then, the Fund has grown from a membership of 180,000 with accumulated savings of $9 million to more than 911,000 members whose total balance amounts to $1,500 million at the end of June 1973. The Fund is also fulfilling two important social functions. Firstly, under its approved housing scheme introduced in 1968, members are permitted to use their CPF credits to purchase Housing and Development Board fiats. At the end of June 1973, 32,727 members have withdrawn $119 million for this purpose. Secondly, it is an institution for national savings and is one of the most important sources of funds for Government development projects.

There is, however, one unhealthy and unfortunate development that accompanies the growth of the Fund, namely, a corresponding increase in the number of infringements and offences under the Act. This is especially true whenever the rate of contribution is raised. In 1968, when the employer/employee combined rate of contribution was 13 per cent, only 42 employers were successfully prosecuted for non-payment of contributions and more than $114,000 collected as interest on late payments. In 1972, when the combined rate of contribution was raised to 24 per cent, the number of employers prosecuted increased to 653 and interest on late payments also jumped to $642,000. For the first six months of this year, 314 employers have been successfully prosecuted and $790,000 collected as interest on late payments. As the rates of contribution have been further increased from 1st July this year, it is envisaged that the number of infringements and offences will also increase, unless steps are taken to check this tendency. This is one of the main objectives which the Bill hopes to achieve.

Mr Speaker, Sir, the aims of this Bill are given in the Explanatory Statement. I will, therefore, only concentrate on the more important provisions.

The Central Provident Fund Board is facing some difficulties in enforcing the provisions of the Central Provident Fund Act because of its limited powers. At present, officers of the Board are unable to deal effectively with the problem of evasion of CPF contributions, as the Act does not provide specific statutory powers to require employers to produce contracts of service, salary account books, registers and such other documents relating to the employment of their employees. Clause 4 of the Bill, therefore, seeks to provide officers of the Board with the necessary statutory powers to deal with this problem and to strengthen the Board's enforcement machinery.

The Board is also concerned over the problem of late payments which is mainly due to the existing low penalties. Currently, an employer who pays CPF contributions late can be charged interest of 1 per cent per month on the amount of contribution due or $1 whichever is greater. This rate of interest of 1 per cent per month is not sufficiently deterrent to encourage prompt payment, while the minimum penalty of $1 is administratively unenforceable since a simple registered letter of demand costs 75 cents in postage alone, and many employers simply refuse to pay, knowing that the Central Provident Fund Board is unlikely to take criminal proceedings for such a small sum. Clause 7 of the Bill will, therefore, increase the rate of interest on late payment to 1 1/2 per cent per month with a minimum penalty of $5. This interest will be charged on a daily basis instead of on a monthly basis in order to encourage employers to pay up promptly as, under the existing provision, an employer is penalised the same amount irrespective of whether he is late by one day or one month.

A more serious problem is where an employer has deducted CPF contributions from the wages of his employees but fails to pay them to the Fund. Currently, the maximum penalties for such an offence are $500 for a first offence and $2,000 for a second and subsequent offence. Though considered to be sufficiently deterrent when the Act was first introduced in 1955, when the combined rate of CPF contribution was only 10 per cent subject to a maximum of $50 per month, these penalties are now manifestly inadequate especially when the combined rate of contributions has just been raised to 26 per cent from 1st July, 1973, in respect of employees earning more than $200 per month. The maximum monthly contribution payable by both employers and employees has also been increased to $225 and $165 respectively, and there is no limit on CPF contributions on bonuses. Large employers of labour will be very tempted to delay payment of CPF contributions which have been deducted from employees' salaries, and utilise this money for other purposes. This, in fact, happened in the case of four Chinese bus companies prior to and immediately after the reorganisation of the public transport system in April 1971.

Clause 6, therefore, provides that where an employer has deducted CPF contributions from the wages of his employees but fails to pay such contribution to the Fund within the stipulated time, the employer is liable on conviction to a maximum fine of $10,000 or to imprisonment up to seven years, or to both such fine and imprisonment. The interest of the employees will be further protected by clause 16 which enables the Board to lay claims on the proceeds from the sale of any property of an employer seized under a writ of seizure.

Mr Speaker, Sir, the amendments proposed in clauses 5 and 10 are significant as they will empower the Board to make rules prescribing the manner in which interest should be calculated. This will enable the Board to take into account late payments of contributions as though they were not late so that the employees concerned would not suffer a loss of interest. The amendments also enable the Board, if circumstances permit in the future, to credit interest to members of the Fund at half-yearly or quarterly intervals instead of the present yearly intervals.

Another amendment that deserves mention is contained in clause 11. At present, a member who has withdrawn from the Fund at the age of 55 and carries on working cannot withdraw again until five years later. This may cause some hardship especially if the member is subsequently out of job. Clause 11 will now permit him to withdraw again if he has been unemployed for a period of six months immediately preceding the date he makes an application for a further withdrawal.

Sir, to ensure that all employees enjoy the benefits of CPF and employers are prompt in making CPF payments, it is necessary to arm officers of the Central Provident Fund Board with sufficient statutory powers to carry out their duties effectively and to provide for stiffer penalties against recalcitrant employers.

Mr Speaker, Sir, I beg to move.

Question proposed.

4.14 p.m.

Mr N. Govindasamy: Mr Speaker, Sir, as I see it, this Bill which seeks to amend the Central Provident Fund Act is intended to give more teeth to the principal Act. As such, the amendments can benefit workers in general. I have no hesitation in giving my support to it. However, there are some provisions upon which I wish to comment on in some detail.

Clause 4 of the Bill, introducing a new section 4A into the principal Act, is, in my opinion, a timely and necessary provision, as the persons charged with enforcing the principal Act have apparently encountered unnecessary difficulties in the absence of the proposed provisions. Human nature being what it is, it is probable that officers of the CPF Board, or the Ministry of Labour for that matter, may have received either downright evasive replies or outright hostile silence from persons to whom their enquiries have been directed. Under the prevailing law, there is no legal obligation for such persons to produce documentary records or to be frank with the investigating officers. In that respect, the proposed provisions should, by helping to make it more difficult for employers to evade their obligations under the principal Act, be of great service to workers.

Some of the proposed provisions, however, may pose a threat to the peace of mind of small employers, particularly the employers of domestic help, whether on a full-time or part-time basis. But before some snide remarks are made about the affluence of Singapore workers who are able to afford domestic help, let me hasten to add that a working couple with one or two children, living completely on their own in a Housing Board fiat, without the benefit of the service of in-laws or the cheap service of a creche, have to employ domestic help out of sheer necessity - that is, work permits from the Ministry of Labour permitting. In such a case, even though the husband may be the official employer in the sense that he may be so described for the purpose of the principal Act or any other statutory enactment, the actual or real employer may be the wife in the sense that she may be the one who deals with the remuneration and decides the terms and conditions of service for the domestic help. I trust that the intention of the proposed provisions is to catch out employers of large labour force rather than to capitalise on any misunderstanding between husband and wife in relation to the employment of their domestic help.

In clause 6 of the Bill, a new subsection (3) has been added to section 6 of the principal Act, which provides that a heavy penalty is liable to be imposed on an employer who, after making the requisite deductions from the pay packet of his employees, forgets or refuses to remit the same to the CPF Board. A vital distinction is made from the employer who fails to pay his own contribution under the principal Act within the prescribed period, as dealt with in clause 7 of the Bill, which I will comment upon later. The distinction is necessary, as the Minister has pointed out just now, as the sums of money deducted from the wages of the workers for payment to the CPF Board do not belong to the employers but are only held in trust by them. As such, the sums so deducted should not be retained by employers for any period longer than is necessary, and any provision discouraging them from doing so is undeniably in the interest of workers.

In the same clause 6 of the Bill, the proposed subsections (1) and (2) of section 6 of the principal Act are substantially a rehash of the existing provisions and are apparently intended to accommodate new circumstances which may arise from any implementation of such recommendations of the National Wages Council as the Government may have accepted. One difficulty, however, is posed by the time-lapse between the effective date of the increase of CPF rates that is, in the case of this year I per cent on 1st July, 1973 - and the actual date of payment of NWC's recommendations, even though with retrospective effect. The result is that a worker may suffer a cut in his take-home pay because of the increased CPF's rate of contribution based on his salary without the benefit of any NWC's increment. An obvious retort from the Minister would be that, even without any NWC's increment, he would have received an increase in pay by way of a higher sum credited to his CPF account and that, if he is a member of a trade union, he should press his union not to procrastinate in the hope of a greater increment than what the NWC has recommended. Sometimes, however, the delay in implementing the NWC's recommendations is not occasioned by either the trade union or the employer but by complexities or peculiarities of terms and conditions of service not considered by the NWC.

But the point I want to make is to relate clause 6 of the Bill to clause 10 of the Bill amending section 10 of the principal Act which governs the payment of interest on contributions credited with the CPF. I believe that the purpose of this amendment is to enable the CPF Board to compute interest on a more conscionable basis than the present yearly basis, which is manifestly unjust. Charge them interest every month. We welcome it. On the other hand, if the Post Office Savings Bank is able to compute interest on voluntary savings on a monthly basis. I should think the CPF Board should be able to do so similarly on compulsory savings of workers. With the additional consideration of clause 7 of the Bill, amending section 7 of the principal Act, which provides for the payment of an enhanced penalty in respect of contributions which are belated by even one day, any decision by the CPF Board to compute interest at an interval longer than one month clearly smacks of profiteering under the guise of bureaucratic inefficiency. The CPF wants to collect 1 1/2 per cent every month from the employer. Pay some to the employees as well.

Lastly, clause 11 of the Bill has introduced a new paragraph (c) to subsection (2) of section 11 of the principal Act by providing for the large category of Malaysian workers who are employed in Singapore and who have CPF contributions credited to their respective accounts while so employed in Singapore. The proposed provision enables the Board to permit such workers to withdraw their contributions in certain circumstances on their departure from Singapore for good. Co-ordination perhaps with the Work Permit Office and other relevant departments would serve to ascertain whether the departure of such workers from Singapore is permanent or otherwise. Difficulty may he met by the CPF Board in trying to trace the whereabouts of such workers twenty or thirty years after they have left Singapore.

With the above comments, I repeat that I am wholly in favour of the proposed amendments to the Central Provident Fund Act but would request the Government to compute interest on a more conscionable basis, and that is, on a monthly basis like the Post Office Savings Bank is doing.

4.25 p.m.

Mr Teong Eng Siong: (In Mandarin): Mr Speaker, Sir, the purpose of the Central Provident Fund (Amendment) Bill is to make the implementation of the principal Act more effective in order to benefit all the workers. This is a very good amendment.

Sir, the Minister in his speech mentioned that the total deposit in the CPF has now reached $1,500 million with a membership of 911,000. This is very significant. I would like to ask the Minister a few questions. Firstly, since the CPF Board has this large sum of money totalling $1,500 million, in what way will the CPF invest this money and what benefit or interest will be derived from the investment every year?

Secondly, is the CPF Board prepared to raise the interest rate so that all the 911,000 members can enjoy better benefits?

Thirdly, as we all know, the CPF Board is now constructing a new building. I would like to ask where does the money for this building project come from. Does it come from the Government or from the Fund itself?

I have a suggestion to make to the Minister. For a long time, the rules of the CPF stipulate that only members of the Fund who read 55 years of age and retiring are qualified to withdraw their contributions from the CPF. But in my constituency there are certain people who are faced with financial difficulties because they have been retrenched and have retired before reaching 55 years of age. So they have a great need for funds. Therefore, they applied to the CPF for a withdrawal of funds or at least part of their contributions to repair their houses which are dilapidated, and for other purposes.

Mr Speaker: Mr Teong, can you confine your debate to the principle of this Bill and not go outside its scope, please?

Mr Teong Eng Siong: (In Mandarin): Sir, I would like to suggest to the Minister that those members who retire before reaching the age of 55 should be allowed to withdraw their CPF contributions for valid reasons.

4.29 p.m.

Mr Ong Pang Boon: Mr Speaker, Sir, I would like to assure the Member for Telok Blangah that it is not the intention of this amendment Bill to catch the small employers, the employer of a domestic servant, for instance. The intention is really to catch the big employers of a large labour force. I am quite sure the CPF inspectors will be able to exercise a certain amount of discretion when dealing with employers of domestic servants who fail to pay CPF contributions for a genuine reason.

Mr Speaker, Sir, the CPF Board has, in fact, considered the possibility of computing interest monthly, but there are certain technical difficulties which it cannot overcome as yet at present.

Mr N. Govindasamy: But the Post Office can do it.

Mr Ong Pang Boon: Yes, but the Post Office is probably somewhat different from the CPF. The Member may be aware that the CPF has a new computer with a larger capacity. It is hoped that when the computer is fully installed and functioning, it may he possible in the near future to compute the interest at shorter intervals than yearly as at present.

All the monies collected by the CPF are invested in Government bonds. The CPF is not permitted to invest in other more profitable commercial securities. As the Government bond only pays an interest of about 6 per cent, the CPF therefore cannot pay an interest of more than 53/4 per cent. Much as the CPF would like to pay more, I do not think it is possible. The quarter per cent earned by CPF is used to pay for administrative expenses and staff salaries. I think this probably answers the question of the Member for Sembawang regarding the use of the CPF contributions.

The CPF building is built out of funds accumulated by the CPF over the years.

As for withdrawal before reaching 55 years of age, I do not think the present law permits that, unless the member is leaving Singapore for good or is unable to work indefinitely. So I am afraid the Member for Sembawang will have to be satisfied with the answer at the moment.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill.-[Mr Ong Pang Boon].

Bill considered in Committee; reported without amendment; read a Third time and passed.