OVERTIME PAY (Exemption from CPF)

Mr Chiam See Tong asked the Minister for Labour whether he will exempt Central Provident Fund contributions on overtime pay.

The Minister for Labour (Mr Lee Yock Suan): Mr Speaker, Sir, payment for over- time work will not be exempted from Central Provident Fund contributions. Workers who are required to work overtime should be paid the full benefits that they are entitled to, including CPF. As CPF contributions form part of workers' wages, exempting overtime pay from employers' CPF contributions would tantamount to cutting the workers' wages. As it is, the employer's CPF contribution rate has already been cut from 25% to 10% to reduce wage cost.

Some workers may prefer a lower employee's CPF contribution rate for overtime pay or, for that matter, all categories of pay. The question here is what the total CPF rate should be to meet the basic objectives of the CPF Scheme. Exempting overtime pay from CPF contributions would require the contribution rate for basic pay to be raised to compensate for the reduction. This could lead to distortion of the labour market and the way work is structured. It is therefore better to apply the same rate of CPF contribution to all categories of pay. Administratively, it would also be very difficult for the CPF Board to differentiate between the various categories of pay to apply different rates of CPF contribution.

Mr Chiam See Tong: Sir, would not the Minister agree with me that one of the problems of Singapore's economy was the high wage costs? So in not allowing this exemption of CPF from overtime pay, would it not be against that policy?

Mr Lee Yock Suan: The question of the high wage cost has already been addressed last year when the cut was made in the employer's CPF contribution rate from 25% to 10%. I think that is sufficient and the experience over the last 12 months or so and the economic recovery since then bear out the adequacy of the measures taken. So there is no need for us to go further and cut the workers' pay. Is the Member for Potong Pasir so keen that we should constantly cut into workers' wages?

Mr Chiam See Tong: Mr Minister, it is for you to answer the question. It is not for me. My duty is to ask questions. Would the Minister agree with me that, in fact, if there is no exemption of Central Provident Fund from overtime pay, it would hurt our local businessmen more than the multi-nationals?

Mr Lee Yock Suan: The same overtime rate of pay is applicable to all the employers, ie the employer has to pay 50% over the normal pay for overtime work. Normally when companies require their workers to work overtime, it means they have good business. There are orders to be filled. So in general there is really no need for us to give further incentives either to the employers or to the employees for overtime work.

Mrs Yu-Foo Yee Shoon (Yuhua): Question No. 12, please.

Mr Lim Boon Heng (Kebun Baru): Would the Minister not agree ---

Mr Speaker: Question No. 12 has been asked.