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Managing Healthy and Sustainable Wage Bills The Singapore Experience

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

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Managing Healthy and Sustainable Wage Bills The Singapore Experience

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  1. Managing Healthy and Sustainable Wage BillsThe Singapore Experience Conference on Improving Public Service Performance in the OECS Countries in Times of Crisis 2-3 Nov 09

  2. 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

  3. Ensuring Sustainable Wage Bills Sustainable Wage Bills Headcount Management Flexible Wage System Job Evaluation Headcount Control Headcount Tax GDP-linked Performance- Driven Benchmarking Tripartism

  4. 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

  5. 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

  6. 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

  7. Dependent on economic performance Dependent on individual performance Dependent on individual and economic performance Structure of Flexible Wages Today Pre-1987 Monthly components Annual components NPAA/13th month Annual Variable Component Fixed components Performance Bonus Variable components Growth Bonus Variable component (only affected in major economic downturn) Up to 50% of annual salaries are variable today with stronger links to economic and individual performance

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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

  14. 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

  15. 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

  16. Thank you

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