CIVIL SERVICE SALARY REVISION

1.22 pm

BG Lee Hsien Loong: Mr Speaker, Sir, Government will revise salaries of civil servants, judges and ministers with effect from 1st January 1994.

In successive revisions, the Government has established the principle that it will pay civil servants and ministers the rate for the job. Two factors make this an urgent imperative. Firstly, while Singaporeans are prepared to serve the Government, they expect to be paid fair wages, commensurate with their responsibilities, as determined by the market. Unless we pay civil servants and ministers market rates, the quality of the Civil Service and the political leadership will deteriorate rapidly. Secondly, the Civil Service has been shifting from pensions to CPF, in line with private sector practice. This makes it easier to hire civil servants, but also makes it easier for them to leave for other jobs.

The Government cannot match private sector incomes dollar for dollar. On average Civil Service incomes can be somewhat lower than the private sector, because the Civil Service offers more certain and less volatile careers. However, we cannot allow this margin to grow too wide. Civil Service salaries must keep pace with the private sector, although they will not lead the private sector.

The last general salary revision was in 1989. Since then private sector incomes have grown considerably faster than civil service incomes. This revision is to enable the Civil Service to catch up with the private sector, and restore the relativity between the two.

Over and above catching up with the private sector, we are further increasing salaries to offset the impact of the revised medical benefits package on serving officers. The additional amount averages 0.5% for Division I and II officers, and 1% for Division III and IV officers and DREs. This is sufficient as PSD estimates that the higher co-payments will amount to only an extra 0.2% of Division I and II salaries, and 0.5% of Division III, Division IV and DRE salaries. This adjustment will ensure that taking the revised salaries in total, serving officers will be better off after 1st January 1994 than before, despite having to make higher co-payments for medical services.

The 1989 revision was based on private sector incomes in 1987, because of the lag in gathering income tax data. This revision is based on 1991 data. This two- to three-year lag makes the comparisons conservative.

The Civil Service has a wide and complex range of jobs. Thus the salary revision cannot be uniform across the Civil Service. We will make separate and distinct adjustments for each service as determined by appropriate private sector benchmarks. Actual increases will vary considerably across services and even between different grades in the same service.

For example, the Executive Service needs a major salary adjustment. It is far out of line with its private sector benchmarks. In addition, it needs to be restructured to keep up with changes in expectations and recruitment. The Clerical Service will also have significant adjustments, particularly for the recruitment grade.

Salaries of ministers, judges and senior Administrative Officers are pegged to earnings of top executives in the private sector. These government salaries have increased only by 6.5% since the last salary revision, compared to a 46% increase in private sector salaries over the corresponding period. We therefore need major adjustments to top public sector salaries.

Overall Increases

Overall, Civil Service salaries will be raised by an average of 7.1%. The average increase for officers in Division I is 7.8%, Div II is 6.3%, Div III is 7.1% and Div IV/DREs is 8.4%.

Administrative Service

The Administrative Service is one of our key institutions. It comprises the top administrators in the Civil Service. Administrative Officers formulate and implement Government policies under the direction of the political leadership. They play a vital role in running the country and the economy. They must maintain the highest levels of commitment and integrity. In terms of ability, Administrative Officers must be equal to, if not better than, the best private sector executives.

The private sector knows the quality of the Administrative Service, and is willing to pay a premium to get promising Administrative Officers to join their firms. Whenever the salary gap with the private sector has widened, the Administrative Service has lost many good officers. These losses are difficult to make up, because the Service cannot easily recruit officers mid-stream from the private sector.

Since the 1989 revision, private sector benchmark salaries have outpaced the Administrative Service by between 25% and 50%. Substantial adjustments will therefore be made to Administrative Service salaries. On average Administrative Service salaries will increase by 20%.

Can I now ask the Clerk to distribute Annexes (Cols. 1277 - 1282) A, B and C? These give the new basic salary ranges for the Administrative Service. [Copies of Annexes distributed to hon. Members.] Annexes - ADMINISTRATIVE SERVICE, POLITICAL, JUDICIAL AND OTHER STATUTORY APPOINTMENTS (Cols. 1277 - 1282)

The new basic salary ranges for the Administrative Service are in Annex A. However, this represents only part of the adjustment. We are also increasing the maximum quantum of the performance bonus. This will strengthen the link between pay and performance.

a. Basic salary increase for Superscale C and above will average 15%. The performance bonus will increase the present 0 - 2 months to 0 - 6 months. The total increase will average 34%.

b. Other Superscale grades will have a 10% basic salary increase. Their performance bonus will go up from 0 - 2 months to 0 - 4 months, bringing their overall increase to 21%.

c. Timescale officers will average 9% basic salary increase. Upper Timescale officers, who previously did not receive performance bonuses, will now receive performance bonuses of 0 - 3 months. The total increase for Timescale officers will average 15%.

The adjustments are larger for Superscale officers than for Timescale officers, because Superscale officers do not have annual increments, unlike Timescale officers. In the 4 years since the last salary revision, between 1989 and 1992, the Annual Group Increment for Timescale officers has averaged 3% per year, or 12% in total. Timescale officers have therefore received 12% basic wage increase, while Superscale officers have had basic wages frozen.

These adjustments, while substantial, will still not be enough to restore the relativity between Administrative Service and private sector salaries which prevailed after the last salary revision in 1989. For example, immediately after the 1989 revision, the salary of a Superscale C Permanent Secretary ranked behind 360 wage earners in the private sector. Since then, the ranking of Superscale C has fallen to 1,000. This revision will only restore it to 500.

The other Designated Services, i.e. the Administrative Service (Foreign Service Branch), Intelligence Service and Police (Senior) have similar salary terms as the Administrative Service. They will receive similar salary adjustments, and the same changes to their performance bonus.

Salaries of Political, Judicial and Other Statutory Appointments

Government is also adjusting the salaries of political, judicial and other statutory appointments. The need to match salaries with job responsibility and with the going rate in the private sector applies equally to political as to civil service appointments. It is crucial to attract honest, committed and competent men and women to become Ministers, MPs and Judges. The competence and integrity of the whole system of government depends on them.

Political and judicial salaries are pegged to Superscale salaries in the Administrative Service. Their revisions will hence be of the same order, i.e. between 20% and 35%. As with the Administrative Service, the revisions will be divided between salary increases and higher performance bonuses. MPs_ allowance will be increased by 13%. The new salaries are shown in Annex B.

Judges have hitherto received a fixed bonus of one month in lieu of a performance bonus. After the revision, they will receive a variable performance bonus of between 0 and 6 months, like Ministers and Administrative Officers. The amount of the bonus will be determined by the Chief Justice. The Chief Justice has been consulted and supports this change.

In addition, the Government is revising the allowance payable to Legislative Assistants (LAs) and Secretarial Assistants (SAs) to MPs. LAs are presently paid $500 per month, and SAs $250 per month. These will be increased by 10%, to $550 for LAs and $275 for SAs.

Professional Services

Superscale salaries in the Professional Services will be increased by the same amount as that for the Superscalers in the Administrative Service.

Performance bonus rates for superscale officers will go up to 0 - 2 months from the current 0 - 1.5 months. Performance bonuses will also be extended to the Upper Timescale grade, but only for officers at the maximum salary point. The range will be 0 - 1.5 months. This will serve as an incentive for continuing good performance.

Finally, the Professional Services will have faster promotions based on the same progression guidelines as for the Administrative Service. The overall total increase for the Professional Services averages 8%.

Executive Service

The Executive Service suffers from high turnover. Recruits are leaving in alarming numbers: half to two-thirds of each cohort is lost within 3 to 4 years of recruitment. The fundamental reason is that the Service is still structured as a non-graduate Service, even though for over a decade Executive Service recruits have been almost exclusively graduates. Drastic changes are necessary.

The present career salary track of the Executive Service is comparable to only the income of the lower quartile of Pass graduates in the private sector. We cannot hope to get the better graduates with such terms. We will therefore raise the career benchmark for the Executive Service to median private sector incomes of Pass graduates, in the first instance. A salary structure nearer the Professional Services salary scales will be adopted. Performance bonus rates will also follow the Professional Services. The apex grade will be raised to Superscale G from the present Upper Timescale.

The graduate recruitment grade of the Executive Service will have the largest increase of 20% as it is furthest out of line with the private sector. Pass (Merit) graduates will have a higher starting salary than Pass degree graduates. All graduates will henceforth be recruited into Division I. The overall increase for the Service is 15%.

The Departmental Services such as the Labour Service and Welfare Service, which have similar structures and problems, will get similar adjustments.

Education Service

In the Education Service, Superscale salaries and performance bonuses will have the same revisions as the Professional Services. Overall increase for the Education Service is 7%.

New grades will be introduced to give teachers better promotion prospects. Progression guidelines comparable to those in the Professional Services will be worked out for graduates in the Education Service, so that officers with high potential will not be held back.

Uniformed Services

Salaries for the Uniformed Services will be adjusted using internal relativities as they have no equivalent in the private sector. Relativities between these services and the rest of the Civil Service will be maintained. Uniformed officers will continue to enjoy a premium over their counterparts with similar qualifications in the rest of the Civil Service.

The SAF will be making its own adjustments in line with the Civil Service revision.

Clerical Service

The Clerical Service faces a shrinking pool of "O" and "N" level school leavers. This has driven starting salaries in the private sector up, not only for clerks, but also for salespersons and factory operators. Salary adjustments are thus only interim measures to alleviate the chronic shortage faced by Ministries.

Starting salaries are raised about 19% to facilitate recruitment. Overall increase is 8%. A new apex of Senior Clerical Officer (Special Grade) is added to cater to the career development of outstanding Clerical Officers.

Division IV and Daily-rated Employees

All Civil Service Division IV and DRE salary scales, except those in the Uniformed Services, are covered by Collective Agreements (CAs). Generally, our starting salaries are above the median compared to approximate equivalents in private sector CAs (1991/92). Average salary adjustments for this group will be 5% to 13%. However, the unions have pointed out that their concern is not just with average salaries, but also with the maximum points. PSD has confirmed that Division IV and DRE maximum salaries are below private sector levels by between 20% to 30%. We are therefore adjusting the maximum salary points by 8% to 28%.

Limiting Pension Liability

In previous salary revisions, increases went into pensionable emoluments. This raised the pension liability of Government proportionately, and resulted in civil servants enjoying less of the benefits of the increase while in service rather than after retirement. Government has decided to make salary increases in this and subsequent revisions non-pensionable. Salary increases will be paid as a Non-Pensionable Component (NPC). This NPC will, however, attract full CPF, even for pensionable officers. Civil servants will therefore not lose out.

The public sector unions have expressed to the Government their concern that the new scheme should not disadvantage officers who are nearing retirement age, and had expected to retire with the old medical benefits. This group may not accumulate sufficient extra CPF on the Non-Pensionable Component of their salaries before they retire to cover their expected higher co-payment for medical services after retirement. To address this problem, the Government will pay in-service pensionable officers who retire after 1st January 1994 and receive medical benefits in kind an additional 1% of their salary into their Medisave accounts each month after their retirement, as for officers on the Medisave cum Subsidised Outpatients (MSO) scheme. PSD calculates that this will be sufficient to cover the additional co-payments of most pensioners and their dependants.

Officers in the five Designated Services are recruited on pensionable terms, even though all other civil servants are now recruited on full CPF. We do not intend to erode the margin which pensionable officers in these five services enjoy over non-pensionable officers who are earning the same salaries but are on full CPF. We are reviewing the superannuation terms of the Designated Services to bring them up to date and in line with these changes.

Statutory Boards

This revision does not apply automatically to Statutory Boards. As established in the last revision in 1989, Statutory Board salaries should also be in line with overall market levels. Statutory Board revisions, if any, should be settled in consultation with their controlling Ministries.

The Leader of the House (Mr Wong Kan Seng): Mr Speaker, Sir, since Members have only heard this statement for the first time, and to allow Members time to prepare to debate this subject, I propose that we have a short suspension. When we resume after suspension, I shall move an adjournment of the House to enable Members to debate this Statement.

Mr Speaker: Order. I suspend the sitting and will take the Chair again at 2.45 pm.

Sitting accordingly suspended at 1.43 pm until 2.45 pm. Sitting resumed at 2.45 pm