We have grouped them into questions and would like to refer the reader to the relevant sections of the Report for the answers and details. We hope that readers will read the sections for the explanation on why we made our recommendations, and what they comprise.

Why link salaries to top earners?

This reflects the level of talent we hope to attract and the need to pay competitive salaries to minimise the opportunity cost for these people to come forward to serve. See paras 1 to 3, and paras 32 to 35.

Why have “clean wage”? Why not give perks?

Unlike many countries, Singapore has chosen a transparent system where salaries are fully accounted for through a ‘clean wage’ with no hidden perks and privileges. See paras 15 and 16, and paras 37 and 38.

Why not peg to foreign leaders’ pay?

We studied in detail whether we should peg the salaries to those of foreign leaders. In the end, we decided not to adopt it as the conditions in other countries are different and so are the compensation principles. More specifically, doing so would not allow us to follow the principles of paying competitive salaries and clean wages. See paras 66d.

Why not simply have a fixed salary, with no bonuses?

We decided on a total salary pegged to an annual benchmark. Without bonus, the entire sum would be in the form of a higher fixed salary. We decided against this as there was strong feedback that some elements of the politicians’ pay ought to be pegged to their performance and outcomes linked to the well-being of Singaporeans. So we took a balanced approach of reducing the quantum of bonus to a level that we think is still substantial enough to ensure that the pay packages of the office holders move in accordance to the well-being of Singaporeans. See paras 67 to 71.

Why is there a need to have two bonus components?

The salary formula provides for a Performance Bonus which reflects a person’s work in leading a Ministry or helming a portfolio, as well as contributions at Whole of Government level. The National Bonus is a reward for team effort to raise the socio-economic well-being of the people, especially the middle and lower income earners. See paras 70 to 73.

 What are the components of the National Bonus? Why not have deferred payments since results of policies take time to be seen?

The National Bonus has four socio-economic indicators with each accounting for 25% ie the National Bonus has a strong link to the social-economic progress of average and lower income Singapore Citizens. The Committee did not recommend deferred payments as this would remove the direct link to actual performance in any one year. See paras 72 to 74 and footnote 11 as well as Annex C.

What is in the new MR4 Minister salary? Are there bonuses on top of that?

An entry level MR4 Minister will receive an annual salary of $1.1m if 1 month AVC is paid, he is a good performer and targets for the National Bonus indicators are met ie Annual Salary = fixed pay + variable pay (AVC, Performance Bonus and National Bonus). In line with the “clean wage” principle, this is all the appointment holder gets. In a minimum bonus situation, he gets 13 months ie $715,000. In a maximum bonus situation, he gets 26.5 months ie $1,457,500. See worked examples at paras 82 to 83.

Why do appointment holders also get the MP allowance?

As is international practice in Westminster Parliamentary systems, all political appointment holders will also receive MP allowances as they have the dual roles of being MPs which involve looking after the needs of their constituents and raising their concerns in Parliament. See paras 106 to 109.

We hope this has helped to clarify any misunderstanding of our recommendations.

We note that our recommendations will be discussed in Parliament on 16 January 2012.

Pension scheme to be removed

President sees 51% cut and PM sees 36% cut;
Minister’s salary to be cut by 37%

Minister’s salary to start at $935,000

The Committee to Review Ministerial Salaries recommends cutting the salaries of the President, Prime Minister, Speaker of Parliament, Deputy Speaker of Parliament, and political appointment holders; as well as the allowance of Members of Parliament (MP).

The Committee also recommends removing the pension scheme.

The President’s annual salary should be cut by 51% to $1,540,000. The Prime Minister’s annual salary should be cut by 36% to $2,200,000.

A Minister at the MR4 grade (i.e. entry-level grade) should be paid an annual salary of $1,100,000, a cut of 37%. A Minister at the lower end of this grade will start at an annual salary of $935,000.

As is the current practice, the Prime Minister can also appoint a newly appointed entry level Minister to be an Acting Minister on a lower grade and thus go below the MR4 range, ie Acting Minister who is placed on a Senior Minister of State grade.

The Committee also made recommendations on a new benchmark. A new salary framework and National Bonus linked to the socio-economic progress of average and lower income Singaporeans is also proposed.

New Benchmark

The new salaries are based on our recommendation to benchmark the MR4 Minister’s salary to the median income of the top 1,000 earners who are Singapore citizens and with a 40% discount to signify the ethos and sacrifice that comes with political service. This benchmark is based on a larger pool that does not specify occupations and covers only Singapore Citizens, the pool of talent that our political leaders will be drawn from.

Based on the IRAS Year of Assessment 2011 income data, the new benchmark figure is $1,100,000.

See page 21 of the Committee’s Report for the reasons why we did not choose other benchmark methods.

Pension scheme to be removed

While we appreciate the reasons for pension payment and note that political appointment holders in other countries do draw a pension, our recommendation is to remove the pension scheme for all political appointment holders, and adopt only the Central Provident Fund system which is the basic retirement scheme for Singaporeans. The CPF payments will be subject to the usual contributions cap.

With this recommendation, political appointment holders appointed on or after 21 May 2011 will not receive any pension. For office holders who were appointed before 21 May 2011, they will have their pension frozen, ie they will only be eligible for pension accrued up to 20 May 2011. The frozen pension will be paid when they step down or retire from office [1] .

Medical benefits

We recommend that the current medical benefits for political appointment holders, which are the same as for civil servants (i.e. Medisave-cum-Subsidised Outpatient (MSO) scheme), be retained. Under the MSO scheme, political appointment holders do not receive any hospitalization benefits. They receive $70 per month (capped at 17 months ie $1,190 per annum) in their Medisave account which can be used to buy Medisave-approved medical insurance. Outpatient subsidy (including co-payment of medical expenses at restructured hospitals) is capped at $350 a year. They are also reimbursed 50% of their dental expenses, up to a maximum subsidy of $70 per year.

No hidden perks

In keeping with the principle of clean wage, the current practice of not having hidden perks will remain.

New salary framework and formula

In addition to choosing a new benchmark, we also recommend a salary formula that features fixed and variable pay components which are linked to individual performance and national outcomes, ie

Annual Salary = Fixed (13 months [2] )
+ Annual Variable Component (typically 1 month)
+ Individual Performance Bonus (3 months for good performance)
+ National Bonus (3 months if targets are met)
= 20 months.

So for an MR4 Minister, his total annual salary will be $1,100,000 (20 months) ie the fixed salary is $715,000 and the rest is variable.

For the national bonus, four indicators with equal weightage (as indicated in brackets below) have been chosen:

• Real median income growth rate of Singapore Citizens (25%);
• Real growth rate of the lowest 20th percentile income of Singapore Citizens (25%);
• Unemployment rate of Singapore Citizens (25%); and
• Real GDP growth rate (25%).

This means the National Bonus has a strong link to the socio-economic progress of average and lower income Singapore Citizens.

New MR4 Minister Salary

Based on the above salary structure, an MR4 Minister who achieves good individual performance when the targets of National Bonus indicators are met and the government decides to pay 1 month Annual Variable Component (AVC), will get a fixed pay of 13 months, a variable pay of 1 month AVC, 3 months Performance Bonus and 3 months National Bonus, making the total annual salary $1,100,000.

In addition, a Minister at the lower end of this grade will start at an annual salary of $935,000. As is the current practice, the Prime Minister can also appoint a newly appointed entry level Minister to be an Acting Minister on a lower grade and thus go below the MR4 range, ie Acting Minister who is placed on a Senior Minister of State grade.

New Salaries for Prime Minister and other Political Appointment Holders

PM’s salary

The Prime Minister’s annual salary should be pegged to two times the MR4 annual salary, ie $2,200,000, or a drop in salary of 36%. As there is no one to decide on the annual performance bonus for the PM, the PM’s bonus will be based only on the National Bonus. Where the targets for the indicators are met, his National Bonus will be 6 months.

Salaries of other political appointment holders

The total annual salary for all the other political appointment holders will be set at a ratio to the MR4 total annual salary, as shown in the Table A in attachment 1. The salary reductions for these appointments will range from 20% to 39%.

Salary Ranges

In line with good HR practice, at each grade, the salaries should have a range, subject to a ceiling of 110% of the reference salary for that grade. The salary for the PM should however be at a fixed point of two times the MR4 salary without a range.

Only one pay for more than one portfolio

We recommend to keep the current practice of paying a political appointment holder only one pay package regardless of the number of appointments held.

The President

The President is Head of State and has significant custodial powers. However, unlike the Prime Minister he does not set national policies and does not have direct executive responsibility for governing the country, except as it relates to his custodial role. Taking all factors into account, we recommend that the President be paid the same monthly salary as the Prime Minister, with 13th month bonus and AVC, but without the Performance Bonus and National Bonus ie the President will receive an annual salary of $1,540,000 (assuming 1 month AVC), which is a cut of 51%. His total annual salary will be 70% that of the Prime Minister,

The possibility of a pension for the President is provided for under the Civil List and Pension Act. Parliament may determine the quantum of the President’s pension by resolution. This provision has not been exercised and no President has ever received a State pension. We recommend that the Government remove this provision, in line with the proposed removal of pensions for political appointment holders. As for benefits, we recommend that the President continue to be on the MSO scheme, be accorded the use of an official car that is subject to tax, and receive no perks.

Speaker of Parliament / Deputy Speaker of Parliament

We recommend that the salary of a full-time Speaker be pegged to the MR4 benchmark and structured as a 14-month package, ie it includes the 13th month bonus and AVC but excludes Performance Bonus and National Bonus. We also recommend that the Deputy Speaker’s allowance continue to be pegged to 15% of a full-time Speaker.

We note that Parliament currently applies a 50% discount to both positions as they are not full-time positions. This means that the Speaker’s annual salary package will be $550,000, a 53% cut from the 2010 salary, while the annual allowance of the Deputy Speaker will be $82,500, a 15% drop from the 2010 allowance.

We recommend that the pension scheme be removed for the Speaker, ie the previous Speaker will only accrue pension up to 20 May 2011 while the new Speaker will not be entitled to pension.

We also recommend that the Speaker and the Deputy Speaker remain on the MSO scheme, and that the Speaker continue to have the use of an official car that is subject to tax, and receive no perks.

Members of Parliament

Members of Parliament (MPs) are paid an allowance for the time and expenses incurred in serving in that capacity. Our MPs serve dual roles – they have a community-based role, ie looking after the needs of their constituents and raising their concerns in Parliament, and also a legislative role in Parliament where they can influence decisions on Government budgets, and enact or amend legislation, including the Constitution.

We have assessed that the current level of the MP monthly allowance is about right. As MPs play a political role, their allowance should be pegged to that of the political appointment holders. But since MPs do not have an executive role, we recommend that MPs be given only a monthly allowance, a 13th month bonus and AVC. The current GDP Bonus (0 to 2 months) should be removed. Hence, an MP’s annual allowance will be 17.5% of the MR4 benchmark, i.e. a drop of 3% from the 2010 allowance. The annual MP allowance will be $192,500

As is the international practice in Westminster Parliamentary systems, the Prime Minister, Speaker (if he is an MP), Deputy Speaker (if he is an MP) and political appointment holders will continue to receive MP allowances as they have the dual role of being MPs as well.

Currently, only MPs elected before 1995 are eligible for pension. Just like the political appointment holders, we recommend that these MPs have their pension frozen as at 20 May 2011. They will receive the frozen pension when they step down from their MP positions.

We recommend that MPs continue to remain on the MSO scheme. There are no other perks.

Non-Constituency MPs (NCMPs) and Nominated MPs (NMPs)

NCMPs and NMPs have smaller roles than MPs. They do not have a community role as they do not have constituents. They also have a reduced legislative role in that they cannot vote on government budgets and changes to the Constitution. Hence we recommend that the annual allowance of an NCMP / NMP be pegged to 15% of the MP’s annual allowance, as is the current practice ie the annual allowance of an NCMP / NMP will see a drop of about 4% from the 2010 allowance. An NCMP/NMP’s annual allowance will be $28,900.

We recommend that NCMPs and NMPs continue to remain on the MSO scheme.

Table B in attachment 2 shows the salary packages of the President, Speaker, Deputy Speaker, Members of Parliament, Non-Constituency MPs and Nominated MPs before and after the review.

Table C in attachment 3 provides a comparison of the salary frameworks before and after the review for all the appointment holders, President, Speaker, Deputy Speaker, Members of Parliament, Non-constituency MPs and Nominated MPs.

Regular review

We recommend that the PM appoint a committee every five years to review the salary framework.

Implementation

As announced by the PM earlier, the new salaries arising from this review will take effect from 21 May 2011, the date when the new Government took office.

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Background

Committee’s Report

On 21 May 2011, the Prime Minister announced the appointment of a committee to review the basis and level of political salaries. The findings and recommendations on the salaries of the President, Prime Minister, Speaker, Deputy Speaker, political appointment holders and allowances for Members of Parliament are detailed in a Report “Salaries for A Capable and Committed Government”, released today (4 January 2012) by this Committee.

Meeting some 10 times in seven months, we studied the feedback from MPs and the public as well as interviews with several past and present appointment holders and MPs from both ruling and opposition parties. Taking all the feedback into consideration, we worked on a new benchmark, as well as a new salary framework and formula to come up with the new salaries.

Mercer (Singapore) Pte Ltd, a leading global provider of human resource consulting services and an international expert on remuneration issues, supported our work with technical expertise in job evaluation, and pay benchmarking and design.

During the review, we kept these principles in mind: 1) Salaries must be competitive so that people of the right calibre are not deterred from stepping forward to lead the country; 2) Political service ethos entails making sacrifices and hence there should be a discount in the pay formula; and 3) There should be a “clean wage” with no hidden perks. Taking into consideration, the feedback from the public, the salaries should also be linked to individual performance, and the socio-economic progress of the average and lower income Singapore citizens.
.

Footnotes
[1] This is a change from the current system where an office holder can begin to draw pension from age 55 years if he has served at least 8 years as an appointment holder by the time he reaches that age.
[2] The fixed component comprises 12 months of salary and the 13th month bonus.

See additional attachments:

• Attachment 1 - Table A: Current annual salaries vs. Revised annual salaries under the new framework
• Attachment 2 – Table B: Current annual salaries vs. Revised annual salaries under the new framework
• Attachment 3 - Table C: Current annual pay components vs. Revised annual pay components under the new framework
• Committee’s letter to the Prime Minister dated 30 December, 2011 and the Committee’s Report “Salaries for A Capable and Committed Government”.
• The Prime Minister’s letter to Mr Gerard Ee, Chairman of the Committee to Review Ministerial Salaries, dated 2 January, 2012.

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Issued by the Committee to Review Ministerial Salaries
4 January 2012
Singapore

We thank everyone for your continued interest in our work. We have completed our deliberations and are finalising the Report. We plan to submit it by 30 Dec 2011.

We were commissioned by the PM and it is only right that we submit the Report to him. As to how and when the Report will be made public, we will stand guided by the PM.

We take this opportunity to wish everyone “Merry Christmas and a Happy New Year”.

GERARD EE

We would like to thank members of the public and media for their continued interest in this review.

We received more than 500 suggestions through emails and letters at the close of the public feedback on 20 June 2011. We are carefully looking through all the inputs, including views and proposals, some of which were very detailed. We want to repeat that we appreciate all the ideas and suggestions submitted to us and the Committee will consider every one of them for their suitability and appropriateness. We are doing all these with the help of a HR consultant, Mercer (Singapore) Pte Ltd.

We are getting comments from both retired and current politicians. We want to do a thorough job. The Committee expects to complete the task before the end of the year.

Just to reiterate, the Committee is reviewing the basis and level of salaries for the President, Prime Minister, political appointment holders and Members of Parliament to help ensure honest and competent government

The Government has said that it will base the new salaries on the Committee’s recommendations, and the Prime Minister earlier announced that the new salaries arising from this review will be backdated to 21 May 2011, the date when the new Government took office.

As announced earlier by PM Lee Hsien Loong, the revised salary for the President will commence from the new term of the President ie 1 September 2011. The former President, Mr S R Nathan, has earlier informed PM Lee that he would adopt the new salary from 21 May 2011.

GERARD EE

Altogether, we received some 500 emails and letters from members of the public as well as Members of Parliament by the end of 20 June 2011, the deadline for submissions.

We received feedback and suggestions on salaries for the President, Prime Minister, political appointment holders and Members of Parliament.

Even as we sort out the suggestions and seek to understand them, we want to say that we are impressed that some of the proposals are rather detailed with involved explanations on why this and why that.

We also have feedback on pensions, and whether to have “clean wage” ie just salaries or to have benefits.

While some contributors gave their views, there are others who also offered proposals, articulating the pros and cons of various approaches. Some even offered formulae for calculation.

It is not possible to list all the suggestions, but we have noted the range of views, from recommending drastic cuts to salaries to those who cautioned against going overboard.

We will get down to analysing all inputs in detail as well as work with HR advice. We want to repeat that all the ideas and suggestions are valued and the Committee will consider every one of them for their suitability and appropriateness.

Just to reiterate, the Committee will review the basis and level of salaries for the President, Prime Minister, political appointment holders and Members of Parliament to help ensure honest and competent government.

The Government has said that it will base the new salaries on the Committee’s recommendations, and that the new salaries for political appointment holders will take effect from 21 May 2011, i.e. the date when the new Government took office.

Although the salary for the President will in-principle commence from the new term of the President, the President has informed Prime Minister Lee Hsien Loong that he will adopt the new salary from 21 May 2011.

Lastly, we want to thank all contributors for sharing their ideas and suggestions. We are very grateful that contributors have been very constructive in their comments. This has helped tremendously for us to start looking through the ideas.

GERARD EE

Each of us has been poring over the sea of suggestions, whether received personally or forwarded by others. We have also sought to understand the history and background on the whole matter, examining the facts and reasons for various proposals considered over the decades.

An understanding of the history is important so we are aware of the fundamentals. But we intend to start on a clean slate and consider all angles in search of answers to two questions: what fair compensation would accord due recognition for the contributions of our political office holders? And then, what discount would signify the value and ethos of political service?

To determine how much to pay for the job, we will look at it from the HR perspective, in terms of appropriate salary for the individual grade, job size, scale and impact of the work. We will look at the entire package, including bonuses, pensions and benefits, and work with the benefit of HR expert advice to ensure that there is rigour in the analysis.

The second question is more subjective. But we will try to find an answer even though there is no silver bullet.

To get us started on our task, we have attempted to summarise the suggestions offered so far:

• Have a performance-based system, looking at a set of key performance indicators, national and individual
•  Have a fixed component and variable component based on performance of the individual
•  Compare with salaries of leaders of developed nations
•  Look at indicators such as median salaries, Gini coefficient, GDP growth as a basis
•  Use private sector best practices but factor in the calling for public service
•  Peg salaries at a level that will attract the best talents to serve
•  Peg salary to the job size
•  Pay more only after the person has proven himself
•  Keep the formula simple and easy to understand
•  A combination or permutation of the above

These ideas have been gleaned from mainstream and online media, emails and letters. The Committee will consider every one of them for their suitability and appropriateness. As we will not have the resources to keep track of every idea, we would really appreciate it if you could help us by sending in your additional suggestions by 20 June 2011.

Please send to Mr Gerard Ee at 
Email: reviewcommittee2011@gmail.com or 
PO BOX 539, Singapore 910504

We have also written to all Members of Parliament to likewise seek their views and inputs.

While the Prime Minister has not given us a timeline to deliver on our recommendations, we do want to get down to work as soon as possible, hence the deadline for sharing your ideas.

You have our assurance that we will consider all inputs. We would appreciate it if contributors not flame, even though we fully understand the need to vent.

Lastly, as all the committee members are volunteers, we are grateful that we have a small secretariat of civil servants supporting us as resource persons with background, history and fact finding, as well as logistical and administrative work. This will help us get down to our work faster.

We thank everyone for helping us make the best of this assignment.

GERARD EE