CENTRAL PROVIDENT FUND CONTRIBUTIONS (Reduced rates for part-time workers)

Mr Chia Shi Teck asked the Minister for Labour if he will consider reducing the Central Provident Fund contribution rates for part-time workers, particularly students who are not yet ready for full-time employment, so that take-home pay of part-time workers will be more attractive.

Dr Lee Boon Yang: Mr Speaker, Sir, my Ministry is against reducing CPF contribution rates for part-time workers. Under the CPF system, the employee's contribution to his CPF savings is proportional to his earnings. Currently, workers earning less than $200 per month are exempted from contributing to CPF. Only their employers are required to contribute 18% on their behalf. For those earning between $200 and $363, they contribute from 7% to 22% over and above their employer's 18% contribution. Only those earning more than $363 are required to contribute a flat rate of 22%.

Whether a worker earns the amount working full-time or part-time does not affect how much he should put aside. The CPF is thus neutral in its treatment of both full-time and part-time workers. This is the right policy. Part-time workers need to save for retirement and Medisave as much as full-time workers need to do. The CPF scheme, as presently structured, helps them to do so.

Sir, to lower the CPF rate for part-timers would create anomalies. A person working part-time but earning more may end up paying less CPF than another person working full-time but earning less. This could encourage employers to break up full-time jobs into part-time jobs and may even give rise to collusion between employers and employees to declare full-time workers as part-timers.

Sir, there is also no need for a special lower CPF rate for students who are not yet ready for full-time employment. The graduated scale of CPF contribution already ensures that part-time workers with low incomes take home a larger portion of their salaries. About 3,000 students work part-time, small compared to the 46,000 part-timers in Singapore. Requiring students to contribute to CPF also helps to inculcate the habit of saving from young. Nevertheless, I would like to add that the CPF Board does exempt students working during school vacations from having to contribute to CPF.

Mr Robert Chua Teck Chew (Nominated Member): Sir, will the Minister consider revising upwards the $200 limit since it was set a long time ago?

Dr Lee Boon Yang: Mr Speaker, Sir, the main reason to revise the floor wage requiring CPF contribution by the employee is that such workers are experiencing difficulties in making ends meet and you want to increase their take-home pay by setting aside less money in the CPF. The situation may not be as bad as it appears, because employees in this lower income group, those earning $200 and below, are mainly young people and the majority of them are still single. Such low wages in many cases are transitionary. It has been estimated that only about 2,000-3,000, ie, about 8% of those earning between $200 and $400, are sole breadwinners of their families. Therefore, if you raise this minimum wage, you are not going to benefit a great number of people. On the other hand, even those who are earning a low income need to be encouraged to save some of their income for their future retirement needs. I think it would be contrary to this basic and important principle of CPF to exempt even a small number of people from having to contribute to their old age requirement.

Mr Chia Shi Teck: Is the Minister happy with the number of part-timers presently? And does the Minister want to encourage more people to take up part-time jobs, in addition to their present jobs?

Dr Lee Boon Yang: Mr Speaker, Sir, during this year's debate in the Committee of Supply, I did explain that my Ministry is in favour of encouraging more part-time employment in Singapore. But this must be done in a proper manner without jeopardising the principle of CPF, which is that all working Singaporeans should set aside a certain portion of their income to meet their old age retirement needs.

Mr Chia Shi Teck: Sir, the Minister has been explaining that the lower income earners would not benefit, but we are talking about encouraging more to take up second jobs, like doing week-end jobs or night work for several nights a week. Because of the high CPF, the take-home pay is low, and that prevents many from stepping forward. It is granted that they must have enough CPF for old age. If they do have enough contribution, could we not encourage them with a lower CPF contribution?

Dr Lee Boon Yang: Mr Speaker, Sir, the Member says he is concerned with those who are taking on a second job as a part-time work. But he has to bear in mind that if they are taking on part-time employment to supplement their income, then this necessity to lower CPF to increase their take-home pay becomes even less relevant because they already have a principal source of income.

Mr Chng Hee Kok: Sir, will the Minister say that there is a general perception in the Singapore public that CPF contributions form part of the wages of employees and most employees are in fact quite comfortable with having more money in the CPF?

Dr Lee Boon Yang: Mr Speaker, Sir, it is correct that Singaporeans do consider their CPF contribution as part of their wages, including the employer's contribution to the CPF. The fact that most CPF members are using their CPF saving to meet their housing cost, I think, gives concrete expression to this acceptance that CPF is part of their income.

Mr Chia Shi Teck: Sir, in addition to those who want second jobs, we have a big pool of housewives. And with the foreign maid levy so high, it is not enough for them if you deduct such a big amount into the CPF. So it is the take-home pay that we are talking about, not just the people who are not earning enough. They would not come out to work because they are not taking home an attractive sum. So we are not encouraging people to take up part-time work.

Mr Speaker: What is your question, Mr Chia?

Mr Chia Shi Teck: My question is: why do we not reduce the CPF rate for this group of people so as to attract them to work?

Dr Lee Boon Yang: Sir, the ability to attract more people to join the part-time work force is not just the CPF contribution rate alone. There are many other factors such as the terms and condition of employment for part-time workers, the kind of benefits offered by the employers to part-time workers, and also the scheduling of the part-time work for the convenience, in particular, of the housewives. So I disagree with the Member in his viewpoint that lowering the CPF contribution rate for part-time workers will make a significant difference.