Managing Healthy and Sustainable Wage Bills
The Singapore Experience
Conference on Improving Public Service Performance in the OECS
Countries in Times of Crisis
2-3 Nov 09
Wage Bill Management
• Block Budgeting concept
– Ministries are given a “block budget” and have
the autonomy to allocate resources
– The block budget tracks the GDP growth
• 2-pronged approach to wage bill management
– Headcount management
– A competitive and flexible wage system
Ensuring Sustainable Wage Bills
Sustainable Wage Bills
Headcount Management
Flexible Wage System
Tripartism
Benchmarking
PerformanceDriven
GDP-linked
Headcount
Tax
Headcount
Control
Job Evaluation
Headcount Management
• Manpower Management Framework
– Allow manpower growth in line with labour force
growth
– Flexibility for additional manpower requirements
• Re-prioritisation of existing functions for emergency
manpower needs
• Request to MOF for additional manpower as last resort
– Manpower surcharge mechanism (Headcount Tax)
• S$10,000 per excess staff
Headcount Management
• Job Evaluation & Creation of Posts
– Ministries may create posts subject to budget
constraints
– Job grading exercises are conducted to size jobs &
the revised staff structure is evaluated based on
• Increase in posts
• Affordability
• Availability of talent
Flexible Wage System
• 4 key principles
– To have a flexible wage system that can
respond to economic conditions
– To keep pace with market rates to attract and
retain a fair share of talent
– To strengthen link between pay and
performance
– To pay clean wages (“pure cash”), i.e. to avoid
hidden perks
Prime Minister’s Office
Public Service Division
Structure of Flexible Wages
Pre-1987
Today
Monthly
components
Annual
components
NPAA/13th month
Annual Variable Component
Fixed components
Performance Bonus
Dependent on economic
performance
Dependent on individual
performance
Variable components
Variable component (only
affected in major economic
downturn)
Growth Bonus
Up to 50% of annual salaries
are variable today with
stronger links to economic
and individual performance
Dependent on individual and
economic performance
Structure of Flexible Wages
• Key Salary Components
– Basic monthly salary: 12 mths
– Non-Pensionable Annual Allowance (13th-mth): 1 mth
– Annual Variable Component
• Linked to economic performance
• Overall wage growth should not exceed GDP growth
– Growth Bonus
• One-off payment made in times of exceptional economic
performance
• Performance-based
– Performance Bonus
Flexible Wage System and Tripartism
• Tripartism
– Key to success in wage restructuring efforts
– Key competitive advantage for Singapore,
underpinning economic competitiveness and
harmonious labour-management relations
Government
Employers
Unions
Flexible Wage System and NWC
• National Wages Council (NWC)
– Tripartite committee with Government, Employer
and Union representatives
– Advisory body to the Government
– Reviews wage trends in relation to the economy’s
performance, and make recommendations on
wage adjustments
– Government has generally aligned its wage
decisions to NWC’s guidelines
Benchmarking Wages
• Competitive Salaries
– Annual salary review to compare with private
sector benchmarks
• Comparison based on equivalent qualifications and
job markets
• Monitor state of health of each service
• Annual review ≠ Annual salary revision
• May result in non-monetary revisions
• Consult Ministry of Finance on financial
implications
Prime Minister’s Office
Public Service Division
Performance-Driven Pay
• Performance Bonus
– Introduced to all officers in 2000
– Shift from rewarding seniority to rewarding ability
– Differentiate rewards between outstanding,
mediocre and under-performing staff
– Success depends on rigorous appraisal system
and good performance management system
– Cost neutrality maintained using concept of
Performance Bonus Dollar Pool
Performance-Driven Pay
• Merit Increments
– Available to all graduate schemes
– In the past, increments were fixed and not
differentiated between good and poor performers
– Currently, increments are variable, dependent on
the performance and potential of each officer as
well as market movements
– Increments are reviewed annually against private
sector norms
Flexible Wage System in Action
• Asian Financial Crisis (1998)
– Annual components cut in 1998
– Monthly salaries cut in 1999
– Monthly salaries restored in 2000
• September 11, the Iraq War and SARS
– Wage cuts for senior civil servants in Nov 2001, and again in Jul
2003
– Restored in 2004
• 2007 Civil Service Salary Revisions
• 2008-2009 Economic Recession
– Annual components cut in 2008 and 2009
– Merit increment reduced in 2009
– Starting salaries lowered in 2009
Challenges
• Tension between salary competitiveness and
maintaining a healthy wage bill
• Mindful of setting wage trend for private sector
• Need to be complemented by a robust
Performance Management System
Thank you