Ministerial Salaries: Will a new cabinet bring about a new change? [Analytical Post]

Ministerial Salaries

**Article has been updated on 6 May 2016 in accordance to new changes or information provided in regards to salaries of Singapore’s politicians**

According to Remuneration for Ministers and Members of Parliament (Public Division Office Singapore, 2 May 2016)

What is the benchmark used to determine political salaries?
 

The new benchmark for an entry-level MR4 Minister is based on the median income of the top 1,000 Singapore citizens income earners, with a 40% discount to reflect the ethos of political service. 

The salaries of other political appointment holders will be determined based on their salary ratios to MR4. The salary ratios reflect the roles and responsibilities of the different political appointment holders. For example, the Prime Minister who is the head of the Executive will earn 2 times the salary of an MR4 Minister.

The salaries of political appointment holders will be adjusted according to the movement of the benchmark as it responds to market conditions.

Why benchmark to the top 1,000 Singapore Citizens income earners?
 

It is important to note that when considering potential candidates to take up political office, the first quality that the Government looks out for is a sense of public service. The Government looks for people who have their heart in the right place, who can empathise with Singaporeans from all walks of life, who want to contribute to the betterment of our Singapore and Singaporeans. This has been, and should always be, the important basic requirement for any Member of Parliament or Minister.

But having a passion for public service is not in itself sufficient to run a country well. The Government therefore wants people who not only have a sense of public service, but also have many other qualities: organisational and leadership capabilities, capacity to handle multiple responsibilities, ability to solve problems and take charge in a crisis, and the ability to hold his own with world leaders and further Singapore’s interests.

It does not mean that only people who are among the top 1,000 earners would meet all these criteria, or that the Government will only draw from this pool. Indeed, many top earners have the competencies but not the sense of public mission. But looking at the responsibilities of the jobs that these 1,000 hold, this is a reasonable level that reflects the quality and abilities of people that Singapore seeks to bring in as Ministers for continued good government.

Who are these people in the top 1,000 income earners list?
 

Based on Year of Assessment 2011 Income Data from IRAS, the top 1,000 Singapore citizen income earners consist of the following:

  1. Senior management positions including Chief Executive Officers, Chief Operating Officers, Chief Financial Officers, Chief Information Officers, Presidents, Chairmen, Directors, General Managers from a range of industries such as wholesale and retail, real estate and construction, manufacturing, communication, information and transport, healthcare and hospitality sectors (48%);
  2. Representatives from the financial services including bankers, asset managers, traders, Managing Directors, Senior Vice Presidents (38%); and
  3. Professionals including lawyers, accountants, doctors, engineers (14%).
 

The revised salary formula features fixed and variable pay components which are linked to individual performance and national outcomes, i.e.

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

A Minister may start at the lower end of the MR4 range with a monthly salary of $46,750. This works out to an annual salary of $935,000, of which $607,750 is fixed and the rest is variable.

At the benchmark level, the monthly salary is $55,000, which works out to an annual salary of $1,100,000. The fixed salary is $715,000 and the rest is variable.

The salaries of the appointment holders are performance-linked, to ensure that the leaders are accountable for their roles and responsibilities. The salaries are also linked to the socio-economic outcomes of Singaporeans.

Why have salary ranges? What are the grades and salary ranges? 
 

Consistent with HR practice in both the Singapore public and private sectors, each grade has a salary range to accommodate different monthly salaries. The salary range system for Deputy Prime Ministers, Ministers and other political appointment holders gives the Prime Minister the flexibility to adjust their salaries when necessary. This also provides for the award of increments so that political appointment holders do not need to be promoted to the next grade in order to get a salary adjustment.

The monthly salary of each grade will have a range of 0.9 to 1.1 of the mid-point of that range, except for the starting point of the entry level MR4 Minister which will be lower at 0.85 of the reference monthly salary. A Minister on the starting point of the MR4 salary range would therefore have 13 months of fixed salary amounting to $607,750. This represents the basic annual salary, without bonuses, which a Minister at the start point of the grade would earn. With variable bonuses in a typical year, this would come up to a total of $935,000.

 

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, i.e. 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.

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, MPs will be given only a monthly allowance, a 13th month bonus and AVC. 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.

Prior to 21 May 2011, only MPs elected before 1995 were eligible for pension. However, just like the political appointment holders, the pensions of these MPs have been frozen as at 20 May 2011. They will receive the frozen pension when they step down from their MP positions.

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 the annual allowance of an NCMP / NMP will be pegged to 15% of the MP’s annual allowance, as is the current practice. An NCMP/NMP’s annual allowance will be $28,900, which is a drop of about 4% from the 2010 allowance.

MPs will continue to remain on the Medisave-cum-Subsidised Outpatient (MSO) scheme. There are no other perks.

What is the President’s annual salary? What are the components?
 

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.

The President will be paid the same monthly salary as the Prime Minister, with 13th month bonus and AVC, but without the Performance Bonus and National Bonus. This will give a new salary of $1.54m, which represents a reduction of 51% from 2010 levels.

The possibility of a pension for the President was previously provided for under the Civil List and Pension Act. This provision has never been exercised and no President has ever received a State pension. This provision has been removed for the President, in line with the removal of pensions for political appointment holders.

The President will continue to be on the Medisave-cum-Subsidised Outpatient (MSO) scheme, be accorded the use of an official car that is subject to tax, and receive no perks.

 
What is the Prime Minister’s annual salary? What are the components?
 

The Prime Minister will receive a total annual salary package (inclusive of 13th month bonus, Annual Variable Component and National Bonus) that is twice the MR4 benchmark, or $2.2m, which represents a reduction of 36% from 2010 levels. 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.

Pensions for political appointment holders, including the Prime Minister, has been removed with effect from 21 May 2011.

The Prime Minister will continue to be on the same Medisave-cum-Subsidised Outpatient (MSO) scheme as civil servants.

 

*Older version of this post

According to Singapore Budget 2015: Ministerial salaries have not risen in past three years (Straits Times, March 10 2015), ministerial salaries have not risen in the past 3 years. Our level entry minister at a MR4 grade will receive $935000 in a year. Our President earns $1.4 million annually, and Singapore’s Prime Minister earns $2.2 million yearly – which also makes him the highest paid country leader in the world.

With the passing of GE 2015, and the new cabinet line-up was announced 2 weeks after – how many ministers in cabinet do we have as of now? 19. Prime Minister? 1. President? 1. If we calculate all these –  (19× $935000) + (2.2+1.4) million = $18 700 000 + 3.6 million = round up to $22.3 million. Since I’m only taking the minimal $935000 for calculation of the salaries of the ministers in cabinet, the total sum is most likely more. This means easily more than $20 million is set aside as salaries for our ministers annually.

Let us take a look at some government initiatives Singapore had in 2014 – 2015 which spent between $20-25 million:

$20m fund to profile Singaporean artists and promote our cultural assets overseas (MCCY, 22 April 2014)

New $20 Million Training Fund For Power Sector (Energy Market Authority, 27 Oct 2014)

Singapore launches $25m fund to boost energy storage technologies (Eco-Business, 27 Oct 2014)

S$20 Million in Government Infocomm Project Opportunities Created for Accredited Companies within First Year of Accreditation@IDA Programme (Straits Times, June 30 2015)

$20 million tie-up to boost Singapore’s tourism numbers (iDA Singapore,14 July 2015)

$25 Million for Mother Tongue Language Learning and Promotion Committees to Create Even More Impact over the Next Five Years (MOE, 5 Sept 2015)

S$20m pilot to transform domestic logistics: Tharman (CNA, 23 Oct 2015)

What Mr Lee Kuan Yew had to say about the ministerial salary:

  • Singapore must not be reduced to another ordinary country in the Third World by dodging the issue of competitive ministerial remuneration.
  • Singapore cannot underpay ministers and argues that their sole reward should be their contribution to public good.
  • Every family wants to provide the best for their children, to go to a good university. We were pragmatic and also paid competitive salaries in order to have a continuous stream of high calibre people to become MPs, and then ministers. They put their careers at risk and undergo an uncertain and unpredictable election process.
  • He pointed to the heavy responsibilities of ministers in making Singapore a success. A PM and his ministers carry heavy responsibilities for the nation. If they make a serious mistake, the damage to Singapore will be incalculable and permanent. Their macroeconomic policies will decide the GDP of the country, which was more than S$300 billion in 2010, with per capita GDP of S$59,000.
Lee Kuan Yew defends competitive ministerial salaries (CNA,18 Jan 2012)

What PM Lee had to say about the ministerial salary:

“In principle, we are not talking about high salaries, what we want are realistic and correct salaries,” Mr Lee said. “We want talent, we want morally upright people, and we want the right people for the right jobs. The most important job must be done by the most capable, the most trustworthy person. If we want the services of such capable and trustworthy people, then we must treat them fairly and equally. We must have a practical system – a realistic salary.”

We want “realistic and correct salaries” in government: Lee Hsien Loong  (TOC, Nov 11 2014)

Afterthoughts:

I think it’s a well-known fact that PM Lee salary is much higher compared to other world leaders, and our ministers in cabinet also earn slightly more than Mr Obama’s annual US $400,000 (SG $543,368.00). Yes, I agree high salaries are essential to attract the right people with the right qualifications for the ministerial job, as low salaries can become a demotivating factor to attract those who are capable but may turn it down the heavy role due, to the mediocre earnings for the amount of responsibility, commitment, time and effort they put in. 

However at the same time – if a minister honestly has the right attitude, heart, and mind to serve the people, they themselves would definitely be able to see that our current ministerial salaries are considerably excessive. And if we think deeper about it, could such a high salary unintentionally backfire, and become a motivating factor to attract politicians for the wrong reasons? e.g. driven by monetary gains, choosing to continue running for elections, or stay in power instead of retiring – even when there are better ministers out there to take over, or a new generation of leaders available to come onboard.

  • Imagine being able to use the same amount of money for a more purposeful mean? E.g. Benefiting the citizens instead of your own pocket. I hope our current batch of new ministers, or even elected members of parliament (MP’s) – from both PAP and oppositions, can discuss on having a more “realistic” salary that will be practical and just in the eyes of all citizens. If even an underage voter like me already view this as an important issue to be addressed, what more not to say for the many Singaporean adults out there who had voted in for the elected government during GE2015?

To check out more of our posts on GE2015, click HERE

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Photo Source: Prime Minister Lee Hsien Loong announces Singapore’s new Cabinet

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