The Recession and Adjustments in Salaries…

I was catching up on my reading of the Singapore Straits Times when I came across the news that “Senior Civil Servants’ Pay to Fall (ST, 24 October 2008). As part of the bonus for senior civil servants come in the form of a GDP bonus, a slower economic growth this year (i.e. lower GDP growth rate) will lead to a lower bonus payout. 

But wait! Look at the last part of the article! It says that there will be an “adjustment” in the salaries of top civil servants and ministers by year’s end. Again, for Ministers (political appointees), the benchmark is set at two-thirds of the median pay of the top eight earners in these 6 sectors (banking, law, engineering, accountancy, multinational corporations and local manufacturers). 

Now, given the near collapse of the global financial sector and countries, including the US, putting out proposals to limit the earnings of top bankers, I wonder how the salary adjustment in the year-end will be.

One thing’s for sure, it’s unlikely to be an adjustment downwards. Assuming I’m right, does this mean that even with a cut in bonus, pay for senior civil servants (and ministers) are still going to be adjusted upwards? So where’s the cut?

Wow, we sure need to pay them more to get us out of the technical recession, don’t we? 

PS: Talking Cock has 2 related articles on this! Hilarious, I must say. Do read “Leaked: This Year’s O Levels Math Paper” and “Singapore in recession: Minister to get pay raise”

Senior civil servants’ pay to fall 

Part of their annual pay is linked to growth rate of gross domestic product

(Straits Times, 24 October 2008)

SENIOR civil servants can expect their annual pay package to shrink next year, because a significant portion of it is tied to how well the economy is doing.The inevitable decline was indicated by the Public Service Division (PSD) yesterday when it responded to media queries on whether the civil service would be making a salary revision.

No decision had been reached on any revision, it said in a statement, as data on private-sector salaries was still being compiled.

‘Given the recent turmoil in the financial markets and revised economic forecasts, the PSD will need some time to study the data and salary trends before coming to a decision,’ it added.

The PSD, a department in the Prime Minister’s Office that oversees civil service matters, said the salaries are reviewed and revised regularly to keep them in line with the private sector’s.

It noted that a ‘significant part of a senior civil servant’s annual pay’ is in the form of a GDP Bonus, which is linked to the gross domestic product’s growth rate.

‘If the GDP growth rate falls, the GDP Bonus will also fall, resulting in a reduction in the annual salaries of senior civil servants,’ the PSD said in a statement.

The bonus applies to administrative officers, senior civil servants and political, judicial and statutory appointment holders.

It is paid out in March each year, based on the GDP growth rate of the preceding year.

It was introduced in 2000 and, last year, was revised to form 20 per cent of the annual pay of top officials.

This bonus is three months if the economy grows by 5 per cent and can go up to eight months should growth hit 10 per cent or more.

However, it is zero if the economy grows by 2 per cent or less.

Given the official forecast of an economic growth rate of around 3 per cent this year, top officials are likely to get a GDP Bonus of one month.

This year will also see an adjustment in the salaries of top civil servants and ministers by year’s end.

This third round of pay adjustments was announced in April 2007.

The Government said then that it planned to make further changes to bring annual salaries of ministers at the entry-level grade of MR4 to 88 per cent of the benchmark by the end of this year.

The benchmark is set at two-thirds of the median pay of the top eight earners in each of six sectors: banking, law, engineering, accountancy, multinational corporations and local manufacturers.

 

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