MINISTERIAL STATEMENT BY MR TEO CHEE HEAN, MINISTER-IN-CHARGE OF THE CIVIL SERVICE, ON CIVIL SERVICE SALARY REVISIONS, AT PARLIAMENT 9 APRIL 2007

April 9, 2007

Approach

22. The last major salary revision for the Civil Service was in 2000, seven years ago. During the recession years, civil service salaries were cut, and restored recently in 2005. In recent years, we have made adjustments to specific schemes that have fallen behind their benchmarks.

23. For this review, we have taken a comprehensive look at all the schemes, assessed the attrition rates and wage levels relative to their respective market comparisons, and identified the underlying issues affecting the schemes. Let me explain the approach we have taken and the principles behind this round of revision.

24. First, we are not making a uniform across-the-board revision, where everyone receives a standard ‘x%’ increase. Adjustments are made according to individual scheme’s needs. Where the salaries are severely lagging the market, and there are high attrition rates, we will make larger adjustments. Where the lag is smaller, we will make smaller adjustments. Some schemes have been reviewed recently, and are already being paid close to market salaries.

25. Second, we will bring our salary structures more in line with our philosophy of linking pay to performance. Many of the adjustments will not be in the monthly salaries but in the form of a performance-related payment. Only those civil servants who have performed beyond the satisfactory level will receive this performance-based payment, with those performing very well receiving a higher amount. These payments allow us to close wage gaps quickly this year. For subsequent years, these payments are likely to be incorporated into the performance bonus structure of the officers, if the market salary levels are sustained, so that those who are consistently good performers will continue to enjoy the higher salaries. For schemes which are lagging severely behind the market, we would have to adjust both monthly salaries and annual components in order to close the gap.

26. Third, we recognize that salaries alone are not the panacea to our problems. We need to look at the whole career proposition, such as sense of purpose, job scope, interesting assignments, exciting career prospects, and developmental opportunities. These issues have to be addressed so that a career in the Civil Service will remain attractive not just to young people fresh out of school, but also to serving officers.

27. That is why, in conjunction with the pay increases, we will continue with our reviews to address the fundamental issues for specific services. Let me give a recent example. The Education Service was reviewed in August last year. We raised the starting salaries and increased the retention bonuses for the teachers. But the review went beyond pay. MOE solicited feedback from teachers and made changes beyond salaries: the study leave scheme was enhanced to allow teachers to take longer periods of study leave, a special fund was set up for teachers to use for learning and developmental needs, and promotional grades were added for classroom teachers. This year, some 10,000 teachers have been promoted, many of whom to the new promotional grades introduced in the restructured scheme of service.

28. I will now brief the House on the pay revisions for the different groups of civil servants. The revisions will apply to the Civil Service. Statutory Boards will review their salaries concurrently and make adjustments, where appropriate. A number of Statutory Boards (EDB, MAS) have already adjusted their salaries earlier this year.

Starting salary revisions

29. As I mentioned earlier, at the entry level, the competition for fresh university graduates is getting more intense. The recent surveys by SMU, and preliminary indications for NUS and NTU show that pay offers for fresh graduates have been rising. For example, the average salary offer for a SMU graduate is about $2,800. One graduate reportedly received a $12,000 salary offer!

30. The Civil Service has adjusted starting salaries annually to keep in step with the market, both upwards and downwards. We dropped starting salaries by 10% during the recession years, and increased them when the economy recovered in recent years. With effect from June this year, we will raise starting salaries to keep pace with the market. For a graduate with a Good Honours degree who is appointed to the Management Executive Scheme, the starting salary will be raised by about 10%. Starting salaries of other graduate schemes will be adjusted according to their market benchmarks. We will also adjust the salaries of officers who have been appointed recently, to maintain relativities with the incoming batch of fresh graduates. We will continue to monitor our salaries at the entry grades and make adjustments as necessary to maintain competitiveness.

Schemes with In-Built Market Adjustment Components

31. Some Civil Service professional schemes such as accountants, economists and statisticians have an in-built “market adjustment component”. The market salaries of these professions tend to be volatile – with large bonuses in boom times, but falling sharply during a recession. The market adjustment component allows the annual salaries of these schemes to be adjusted rapidly, up or down, without affecting the monthly salaries.

32. We will raise the market adjustment components of these schemes according to their individual benchmarks. There is no further need to make other forms of adjustment for this group.

Schemes which are at or close to market - “Basic tier payment”

33. According to Mercer HR Consulting, private sector salaries are projected to increase by 4% in 2007. For the officers in the Civil Service, we will make a basic payment amounting to 3-5% increase in the annual salaries. This payment will be performance-based. and will be in the range of 0.5 – 0.75 months. Good performers will receive up to 0.5 month whilst better performers will receive up to 0.75 month.

34. This payment will apply to schemes which are currently at or close to their market benchmarks. It will ensure civil service salaries are competitive. On top of this payment, civil servants will continue to receive their annual increment and the mid year annual variable payment. Like other Singaporeans, they will also enjoy the 1.5% increase in the employer CPF contribution from July this year.

35. The payment will apply to the Education Service, the Corporate Support Scheme and the Operations Support Scheme.

36. The Education Service completed its review last year, but there are still issues to be addressed. MOE will be adjusting starting salaries, and making corresponding adjustments for teachers who were recently appointed. We must also identify high-calibre teachers who have the potential to make it as our future leaders in education and develop and reward them in a timely manner.

37. Corporate Support Officers and Operations Support Officers will also receive this basic tier. The payments will be made next month, in May. If the economy continues to do well and the higher market salaries are sustained, these payments will be incorporated into the annual performance bonuses of these officers.

38. We will also be looking into re-designing the jobs and upgrading the skills of our officers in the Corporate Support, Operations Support and similar schemes. Traditionally, these schemes have been designed with rather narrow job scopes. We will work together with the public sector unions to prepare our officers to take on a wider scope of work and responsibilities, and provide more opportunities for progression.

39. These schemes of service, which will receive the basic tier for officers who have shown more than satisfactory performance, account for approximately two thirds of the officers in the civil service.

Schemes which are lagging the market

40. There is a group of schemes which is lagging the market, for which we will make larger increases than the basic tier to close the gap. I will highlight the key services, namely the Management Executive Scheme, the Management Support scheme, the Home Uniformed Services, and the Foreign Service. Collectively, these schemes account for almost one-third of the officers in the civil service.

41. Graduate officers on the Management Executive scheme work across all ministries performing a wide range of jobs, including policy development and implementation, corporate services and operations work. Salaries for this group of officers have fallen behind the market. We need to make an upward adjustment of 16% this year in order to level up. As a first step, we will halve the gap through a 5-8% adjustment. This will be in the form of a performance-based payment of 0.75-1.25 months of salary. Good performers will receive up to 0.75 month, which is equivalent to a 5% increase, and the better performers will receive up to 1.25 months.

42. A more fundamental review of the Management Executive scheme is also ongoing. The review will look into all aspects, including pay, career advancement and progression, job challenges as well as training and development of officers. We want to make the scheme more attractive, both to fresh graduates, as well as to mid-career entrants to the Civil Service. In particular, we will need to identify, develop, and reward more substantially, those among the Management Executive officers who are performing very well and have demonstrated the capability to take on greater responsibilities. The review will be completed in the second half of 2007. There will be a second round of adjustment later this year when the review is completed. The form of the adjustment will depend on the findings of the review.

43. In the same vein, we are making changes to the Management Support Scheme and Technical Support Scheme, which employ officers with diploma qualifications. These schemes are also lagging their benchmarks, and we will make a performance-based payment of 0.5 – 1 month. Good performers will receive up to 0.5 month, and the better ones, up to 1 month. Similarly, a more fundamental review of the Management Support Scheme is ongoing, and we will make a further adjustment before the end of the year.

44. The Home Affairs Uniformed Services, comprising the Police, Prisons, Civil Defence and Narcotics services, are lagging their benchmarks by up to 26% in certain grades. As the gap is large, these services require major adjustments. These services are now dealing with more complex and challenging tasks given the threat of terrorism and the increased security measures required. We need to pay our home team officers competitively, so that the uniformed services will be well-staffed, and able to address any emergency. The first step of this adjustment will be carried out now, amounting to 10-13%.

45. Senior officers in the Home Uniformed Services will receive a performance-based payment of 1 – 1.5 months, with the higher quantum going to better performers. Junior officers will also receive performance-based payments ranging between 0.75 to 1.5 months. In addition, to address the market pay gap, we will increase their monthly salaries by 4% - 5%.

46. Beyond pay, the Ministry of Home Affairs will also be looking at other aspects to better attract and retain their officers. There will be more opportunities for junior officers to progress into the senior ranks. The Ministry is also streamlining its promotion and ranking process, and reviewing benefits and other terms, to make the Home Uniformed Services a mo,, , , ,, ,, , , ,, re attractive career. After the review is completed, a second adjustment will be made later this year to close the remaining gap.

47. The Singapore Armed Forces will make similar salary adjustments.

48. The Foreign Service is also l, ag, ging the market substantially. , Our diplomats are a small but critical group of officers who promote and safeguard Singapore’s interests in the international arena.

49. Foreign Service officers will receive a market adjustment of 0.75 months. In addition, the performance bonus structure has been revised to identify and reward the top performers better. Annual increments have also been increased and tied to performance. Other adjustments include a revision of the monthly salaries at the entry grades and a revamp of the retention bonus framework. On average, Foreign Service officers can expect an 8% salary increase.

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