Salary components of Ministers and Prime Minister
Oral Reply to Parliamentary Question on salary components of Ministers and Prime Minister
Parliamentary Sitting: 1 October 2018
Mr Alex Yam: To ask the Prime Minister whether he can (i) list all the components of the salaries of the Ministers and Prime Minister (ii) state the amounts, in months of salary, paid for each component for each year from 2013 to 2017 and (iii) confirm that these components are fully included in the Ministerial salary benchmark established in the White Paper on “Salaries for a Capable and Committed Government” that was debated in Parliament in January 2012 and are not payments over and above the salary benchmark.
Oral Reply by Deputy Prime Minister Teo Chee Hean.
Mr Speaker Sir, the salary structure for Political Office Holders is clearly and transparently set out in the 2012 White Paper on “Salaries for a Capable and Committed Government”, submitted by an independent Committee after extensive consultation with members of the public and Members of Parliament.
The Committee had received more than 500 emails and letters from Members of Parliament and the public, including young people, CEOs, SME owners, retirees, overseas Singaporeans, professionals, academics, as well as representatives from Non-Government Organisations. So, there was extensive public consultation.
With your permission, Mr Speaker Sir, may I display some slides on the LED screen.
The Committee set out to first determine what the appropriate level of total annual salary should be.
In 2012, the Committee recommended a norm level of $1.1 million as the total annual salary for an entry level MR4 minister, based on a 40% discount to the market reference, to reflect the ethos of public service. The Committee then recommended how this total amount should be divided between fixed pay and variable pay – so that was the next step.
The fixed pay comprises the monthly salary and 13th month Non-Pensionable Annual Allowance. The Committee recommended that a significant part of the total annual salary should be variable, and the quantum linked to individual performance and national outcomes. The variable components of the annual salary comprise individual Performance Bonus, National Bonus and the Annual Variable Component.
And together, these variable components constitute 35% of the total norm annual pay, and this is quite usual for executives and senior people at this level. The fixed pay is 65% of total norm annual pay.
All the components added up – fixed pay plus variable pay, including any and all bonuses – make up the norm level of $1.1 million for an entry level MR4 minister.
I underline this point, Mr Speaker, all the bonus components form part of, and are not in addition to, the $1.1 million salary norm.
The salary structure is totally transparent. There are no hidden salary components or perks. The Prime Minister’s salary does not have an individual Performance Bonus as there is no individual who can assess his performance. But to keep to the principle of making a significant part of the PM’s total pay subject to performance (i.e. 35%), the PM’s variable pay has twice the national bonus compared to other ministers, linking it to national outcomes, in place of the individual Performance Bonus.
The independent Committee recommended that the Prime Minister’s total norm annual salary should be two times that of an entry level MR4 minister, i.e. $2.2 million. Again, this includes all components, including his National Bonus, and there are no salary components or perks beyond this.
I have prepared a handout on the range and average of each of the variable pay components received by Political Office Holders over the past 5 years.
Mr Speaker Sir, may I request the Clerk to distribute the handout, please.
If members can refer to the handout, Table 1 reflects the actual variable pay components received by Political Office Holders over the past five years.
Between 2013 to 2017, for the National Bonus the range was between 3.4 and 4.9 months, with the average over the 5 years being 4.1 months; for Performance Bonus the range was from 3 to 6 months each year, with the average across all the Political Office Holders over 5 years at 4.3 months; for the Annual Variable Component, the range was 0.95 to 1.5 months over the period and the average over the 5 years was 1.3 months.
All these variable components are in accordance with the framework I earlier described, and not on top of it. The bonuses can be higher than the norm in the framework, or lower, depending on the actual performance of individual Political Office Holders and the national outcomes in each year.
The National Bonus is determined equally by the four national indicators laid out in the White Paper: namely, the real median income growth rate of Singaporeans; the real growth rate of the lowest 20th percentile income of Singaporeans; the unemployment rate of Singaporeans; and the real GDP growth rate.
The Annual Variable Component is always the same amount that all civil servants receive.
The Performance Bonus is determined by the Prime Minister who consults the senior ministers in Cabinet in assessing the performance of Political Office Holders.
In determining the Performance Bonus for each individual, he takes into account the actual work that each Political Office Holder does in the specific responsibilities assigned to him, as well as his contributions in Cabinet when we consider broader national issues.
Many Political Office Holders hold more than one portfolio, in order to stretch them and to build depth and experience in the Cabinet. But I should emphasise that each office holder receives only one salary regardless of whether he holds one or multiple portfolios.
Emeritus Senior Minister Goh Chok Tong is not a member of the Cabinet, and has not received a ministerial salary since he retired from the Cabinet in May 2011.
Mr Speaker Sir, the Government has always been transparent with the salary structure for Political Office Holders. The 2012 White Paper on “Salaries for a Capable and Committed Government”, was submitted by an independent Committee after extensive consultation with Members of Parliament and the public. The paper was endorsed in full in January 2012, after a thorough debate in this House over two and a half days with 29 Members speaking on the matter, including 7 members from the opposition.
In determining the salary framework, the Committee was guided by the following 3 key principles:
a. First, salaries must be competitive so that people of the right calibre are not deterred from stepping forward to lead the country;
b. Second, the ethos of political service entails making sacrifices and hence there should be a discount (of 40%) in the pay formula; and
c. Third, there should be a “clean wage” with no hidden perks.
Members of Parliament, including those from the Workers’ Party, endorsed these principles.
I quote Mr Chen Show Mao – he is in the House, “We (the Workers’ Party) agree with the three principles that political salaries should be competitive, that political service is a calling that has its own ethos and their wages should be transparent.” During that parliamentary session, the Workers’ Party had proposed their own formula based on these same 3 principles.
Handout 2 is a Straits Times report on the 2012 debate in Parliament. The handout provides a succinct summary of the key points, and conveys a flavour of the debate.
It reports that there was, I quote, “Real progress in [the] ministerial pay debate”, and quoting my remarks that the “Opposition’s agreement on key points marks a breakthrough”, and the “Shift in the WP’s stance helps debate move forward”.
Mr Speaker Sir, there was convergence in this House on both the principles as well as the quantum for ministers’ salaries.
If Members could refer to Handout 3, the formula put forward by the Workers’ Party in 2012 would have resulted in essentially the same total annual salary level for the MR4 entry level minister as that recommended by the independent Committee.
But the Workers’ Party formula would have had a higher level of fixed component of 81%, amounting to roughly $880,000, compared to the White Paper’s proposal, and a smaller variable component of 19%
And this means the WP would have paid out a higher portion of the salary – about $880,000 out of $1.1 million – regardless of individual performance or national outcomes, and even if the outcomes were not achieved.
This would have made the link between salary and performance weaker, though both the WP’s and the White Paper’s proposals would have added up to the same norm annual salary.
Mr Speaker Sir, we recently carried out a second independent review of the salary structure and level.
At the Committee of Supply debate this year, I informed this House that the Prime Minister had formed a new independent Committee in 2017 to review the salary framework to ensure that it remains appropriate and valid. The 2017 Committee reaffirmed the 3 key principles and was of the view that the current salary structure for Political Office Holders remained relevant and sound.
Though the MR4 benchmark had increased by 9% since 2011, the Government decided to maintain the current salary structure and keep salary at the 2012 level. Significantly, no member of the Opposition sought clarification on my COS statement.
Mr Speaker Sir, I have answered all three parts of Mr Alex Yam’s question. Mr Leon Perera has also filed a similar Parliamentary Question for Written Answer on Ministerial salaries, which I believe Table 1 in my handout answers. Before I proceed to the concluding segment of my reply, with your permission Mr Speaker Sir, I would like to invite Members, in particular Mr Perera, to seek any clarifications that they may have.
Mr Speaker Sir, I think Mr Pritam Singh is being slightly disingenuous. I mean, Mr Perera asked for some data and the next day, the data was misinterpreted and became wide-spread basis for false information. I am delighted that Mr Pritam Singh and the Workers’ Party are all for transparency and for debunking falsehoods.
So perhaps, Mr Speaker Sir, allow me to clarify the position, and I hope that the Workers’ Party will help us to clarify the position by putting it on your website also, especially as Mr Pritam Singh has agreed.
So the key facts are these:
● First, all salary components, including the variable pay, are part of the salary structure, benchmarked in 2012 at $1.1 million for an entry level Minister at MR4.
There are no components beyond that.
● Second, the salary structure and benchmark have not changed since 2012. I reported earlier to Parliament earlier this year that the government had decided not to adjust salaries even though the MR4 benchmark had increased by 9%
● Third, in 2012, there was remarkable convergence in this House on the matter of Ministers’ salaries. Mr Pritam Singh has just said that the Workers’ Party agrees with the principles underlying the current salary structure and that the Workers’ Party’s alternative formula used a norm salary level that is also $1.1m. The proposals, Mr Speaker Sir, are really very close to each other – in principle, and in quantum. Indeed, Mr Speaker Sir, if there were a Workers’ Party government in power today, by their own formula, the Workers’ Party Minister would be paid essentially the same as what a Minister today is paid. Mr Pritam Singh would pay himself that same amount.
The subject of Ministers’ salaries, Mr Speaker Sir, is a difficult one to talk about. It is an emotional one. There are misconceptions, sometimes deliberately propagated. It is easily politicised. Even knowledgeable, well-meaning people who have a deep interest in politics are susceptible to this.
I read Mr Ho Kwon Ping’s extensive interview with CNA which was published yesterday. Among other things, he suggested pegging ministerial salaries to the median salary of Singaporeans. He also suggested an independent Commission to decide the actual quantum, and Mr Louis Ng in an earlier similar interview also suggested that there should be public consultations.
Sir, from my reply today, Members can see that there was an independent Committee, not one but two, the independent Committee did have extensive consultations in 2012; and a significant part of Ministers’ salaries are pegged not just to the growth of average salaries, but to the lowest 20th percentile of salaries, and to unemployment rate – issues which are important to every Singaporean.
But even Mr Ho, who is well-informed and has a deep interest in politics, has some serious misconceptions. He claimed, for example, that his salary is lower than the Ministers’.
Sir, fortunately, the interviewer had checked, done her homework, and pointed out to Mr Ho that his salary, including benefits and a bonus, I won’t mention the figure, but it is significantly higher than that of Ministers and certainly not lower than Ministers’ salaries, to quote the article.
Sir, otherwise the misconception would have been carried widely and spread more disinformation.
Sir, Ministers for example, are responsible for tourism development or air transport as just one of their many responsibilities, which contribute to the growth of the tourism industry in our region in which Mr Ho’s company operates.
Mr Speaker Sir, so if this is a difficult subject to talk about, why do we have to talk about this subject from time to time?
Because Sir, we need a fair, open, honest, transparent framework in place, so that we can continue to have able, committed and passionate people, with integrity, come to serve as our political leaders.
Sir, I am 64 this year, and have served more than 25 years in politics. My most important task now is to help Prime Minister Lee to prepare, not just the 4th Generation leadership; but also to make sure that we are able to have a 5th generation of leaders coming in, having the time to learn, to be tested, and to gain the trust and support of Singaporeans.
These are people in their late-30s and 40s. Many would be at the threshold, where they have a good chance of reaching the peak in their chosen careers and professions.
Sir the virtues of passion to serve the people is shared by members from both sides of the House. The PAP looks for people with integrity, who are capable, committed and caring. Who are prepared to put others before themselves.
All members of the House know that coming into politics entails many sacrifices, in privacy, continuous exposure to the glare of the public eye, in their careers, in family time, not always being there to watch your kids grow.
Sir, Ministers’ salaries have been studied and recommended by an independent Committee. They are fair minded people, who have the interest of Singapore and Singaporeans at heart. They have recommended a framework and a quantum that reflects all these things that we talk about. Sacrifice, commitment to service, working for the good of our fellow Singaporeans. All these factors are in there.
The government accepts their recommendations. The Workers’ Party accepts the principles and has come up with essentially the same quantum which Mr Pritam Singh and Mr Leon Perera just affirmed.
So, let us agree to agree. That is what politics is about also – not just opposing for the sake of opposing. This is a matter which, whether one is in opposition or in government we can agree on – that we need a fair framework to bring in the best team, to do the best for Singapore and Singaporeans.