Do we have the minimum wage to make ends meet?

Singapore does not have any minimum wage law and does not implement a minimum wage system. It postulates that wages should be determined by free market forces of supply and demand. Employers and workers should be allowed to negotiate and mutually agree on the wages to be paid before they enter into an employment contract.

The National Wages Council (NWC) was established in 1972 to advise the government on wage policies and also issue wage guidelines in line with long-term economic objectives. The NWC’s recommendations, when accepted by the government, serve as a basis for wage negotiations between employers and unions. NWC’s recommendations apply to both the public and public sectors

The key function of the NWC is to enhance Singapore’s competitiveness in global markets by adjusting wages in an orderly manner. With this as its purpose, the goal of the NWC is to recommend wage policies and guidelines that attract foreign direct investments into the country, and in its process provide jobs for its local and overseas residents.

A minimum wage is defined by International Labour Organization as:

The minimum amount that must be paid to the majority of the workers of a country, generally on an hourly, daily or monthly basis; and which is ideally fixed in such a way as to cover the minimum needs of the worker and his/her family, in light of the prevailing national economic and social conditions.

According to the conditions for work and employment information sheet published by the International Labour Organization, minimum wage laws are now enforced in more than 90% of all countries.

Adjustments to the minimum wage are driven by two criteria: social, and economic. The social criteria takes into account the needs of the workers and their families, the cost of living and / or inflation, general level of wages, and the level of social benefits. The economic factors are the economic situation and / or development of the country, the capacity of enterprises to pay, employment, and productivity.

There have been commentaries on introducing minimum wage legislation in Singapore. Many supporters of the minimum wage assert that it is a matter of ethics and social justice that helps reduce exploitation and ensures workers can afford what are considered to be basic necessities. Others, however, claim it hurts businesses by reducing profit margins, and also increases unemployment. While the discussion on minimum wage continues, Singapore (Incorporated) does not have a legislation on minimum wage.

The National Wages Council (NWC) has completed its deliberations on wage and wage-related guidelines for 2008/2009. In its deliberations, the Council took into account the prevailing national economic factors, such as its economic performance, labor market conditions, productivity, wages and inflation trends, Singapore's cost competitiveness, uncertain economic outlook, and high inflation.

The Singapore government has accepted the NWC’s recommendation covering the period from 1 July 2008 to 30 June 2009. As in previous submissions, the recommendations by NWC were driven mostly from an economics perspective such as affordability of employers, increase in productivity of workers, and wage flexibility.

In addressing the high inflation in Singapore, the council recommends a one-off special lump sum payment for rank-and-file workers with heavier weightage for low wage workers. The one-off lump sum payment has been hailed by main stream media as an innovation of NWC, and was reported to be widely received by both employers federations and union members.

Although the lump sum inflation buster payment is meant to assist rank and file workers to make ends meet, the council could not prescribe the quantum to be payable. Hence, the amount of the one-off lump sum payable and its implementation are left to the creativity of companies and perhaps the devices of compensation and benefits practitioners.

NWC recommendations on wage and wage-related guidelines did not, in my opinion, delve adequately into the social factors such as the ability of workers to pay for what are considered to be basic necessities. As inflation sets in, a higher benchmark in terms of pricing for a basket of food will be re-established, and the affordability of workers to purchase basic necessities threatened.

Why do workers work? At the basic level, rank and file workers work to bring bread (and rice) to the table for themselves and their families. With the price of food and commodities reaching dizzying heights, are they still able to bring bread crump to the table?

Singapore could introduce an inflation-indexed wage system for its rank-and-file workers. Inflation indexed wage system means that wages would automatically go up by the extent of consumer price index (CPI) increase. The idea of an inflation-index wage system is not far fetched because the CPI indicator may be embedded as a key performance measure for rewarding public service administrators. Perhaps, the amount of the one-off special inflation buster pay could be index to consumer price index, and made variable according to employee levels. After all, the one-off special lump sum payment recommended by the NWC is intended to fight inflation, or isn't it?

Will we have the minimum wage to make ends meet?

Paying for non-performance?

In a commentary dated 15 December 2007 on “money not enough?” the issues of pay for performance were explored. As discussed, compensation of chief executives and senior management of private enterprises have been under scrutiny by stakeholders. Stakeholders are utterly disgusted at the manner senior managers reward themselves regardless of company performance.

Although the westernised idea of paying for performance has been embedded as the reward strategy in many organizations, the question of paying for whose performance is pertinent. Are we paying company directors, chief executives and senior managers of organizations for their performance such that we may ultimately be “rewarded”? Or, are senior managers paying themselves handsomely for their own “performance”, even to the extent of behaving fraudulently to satisfy their greed addiction.

One need to go no further than to examine the classic case of Enron to understand why pay for (whose?) performance led to the collapse of the organisation. More recently, the collapse of Opes Prime in Australia wiped out millions of dollars of pension funds; First Capital suffered similar fate, and most recently, Victorian stock broking firm in Geelong, Australia has allegedly been behaving badly.

As the economy is flushed with more money and ready credit, greed had consumed some of us, allowing us to be extremely creative in feeding our greed addiction. As an example, the work performance of a loan officer is measured on the amount of credit that is booked for a given period. To secure higher book value, a bank credit officer may resort to unconventional means of earning performance bonus by offering higher credit to its customers, often ignoring their ability to service loans. Hence, many of us have continually been seduced by financial institutions offering pre-approved increases on credit cards limit, or re-financing homes with subsequent mortgages without much effort or difficulty.

For many years, organizations embrace pay for performance as the panacea for driving desired behaviours towards cash and more cash, often ignoring behavioural integrity, ethics or legal considerations. Edward Lawler III, an authority in compensation management once argued against the effectiveness of pay for performance in “why is pay no longer an incentive to better job performance".

Another commentator, Michael de Beer suggested that careful efforts to design an incentive system to make pay contingent on performance may be misguided, and raised questions on the worldwide trend towards the use of more executive incentives. However, many organisational practitioners are still paying extraordinary attention to pay for performance.

Perhaps, it is the idea of pay for performance, but whose performance? Are practitioners familiar with the notion of pay for non-performance?

The notion of performance based pay is rather complex. There are research conducted on pay and performance and on the causation between risks and rewards; the higher the risk, the greater the rewards.

For an economist, pay for performance is grounded on the theory of incentives known as the agency theory. Agency theory, also known as the principal-agent model presupposes the association between time and effort. The employee may influence the amount of work accomplished, by exerting himself, but he cannot control output entirely, because his work performance may not entirely under his control.

Under the agency model, the employee is assumed to be averse to both effort and risk. If an employee is effort averse, then incentives must be designed to get the employee to exert himself. As the employee is also risk averse, the question of tradeoffs between an employee and the employer sharing the risk is pertinent. Risk is in the balance.

As work performance may be beyond the control of the employee doing the work, pay for performance may perhaps be labeled appropriately as pay for effort. Hence, we find ourselves in a flurry of activities, as we are measured on the amount of noise we generate, and not on work related performance.

From a principle-agent perspective, the moral hazard of pay for performance is pertinent. Moral hazard is defined as the ‘‘actions or in-actions carried out by the agent that are unobservable by the principal’’ When the actions of the agent are unknown and cannot be evaluated by the principal, the principal’s ability to enforce the agency contract is hampered. Senior managers control organizational resources and know most about the organization’s activities; this allows them to act opportunistically to the detriment of shareholders.

Because of their superior information and shareholders’ lack of full observation, managers can take actions that will maximize their rewards; but their actions may harm organizational performance in the long run and result in losses to the principals.

In the words of Gordon Gekko, “greed is good, greed is right, greed works, greed clarifies, cuts through and captures the essence of evolutional spirit”. Based from the collapses of organizations involving billions of dollars, is greed really good especially if pensions are wiped out almost completely overnight. Fortunately, the Central Provident Fund of Singapore manages pension of Singaporeans. At least, our superannuation are bolted under lock and key. Otherwise, we may suffer the same fate as the Australians that invested with the likes of Opes Prime et al. Trust is definitely in the balance.

Perhaps, pay for performance may actually be misguided as it will fuel more corporate collapse.

Should we continue to pay for non-performance?

An employer's dilemma?

The question of “can we work anywhere we please so long as we get the work done” is pertinent for instituting a work-life balance policy in an organization. Are flexible working arrangements and unstructured work environments crucial for recruiting and retaining talented people? A recent report suggests that "shoo-ing workaholics out of office" may be the answer for a Singaporean mid sized law firm.

http://www.todayonline.com/pdf_main.asp?pubdate=20080314

In Singapore, the year 2007 ended with “money” talk. With an extremely competitive labour market, cash and more cash were thrown at people, particularly talented people to attract, and retain them. While this “old school” approach appears effective until greed consumes some of them, practitioners are focusing on non-cash compensation to engage talented employees to “keep you in business”.

It has been reported that organizations are pursuing non-cash compensation solutions. About 53 per cent of the organizations in a survey offer opportunities for continuous learning. Others cite improving work-life balance (49 per cent), improving staff engagement (31 per cent) and faster promotion (30 per cent).

Before we rush into creating innovative non-cash compensation solutions to attract and retain talented local and foreign people, it is important to realize that non-cash compensation solutions may be workable only if salaries are attractive and competitive.

From employees' perspective, cash compensation is normally not swappable with non-cash compensation. While we attempt to carve out current cash compensation to fund non-cash compensation items, employees perceive intangible benefits as entitlement. Carving out cash compensation to fund additional employee benefits are often perceived as a reduction in salary.

Should additional benefits to be introduced in organizations be carved out of their current compensation? Cognitively possible, but emotionally difficult to implement.


http://www.todayonline.com/pdf_main.asp?pubdate=20080315

Perhaps, the dilemma for employers is the spiraling wage costs. "Will spiraling wage costs scare away business?" An economist with the Singaporean UOB Bank did not think it will. Other advantages, according to the UOB economist, such as "a high quality of manpower, transparency and efficiency, and good infrastructure are what continues to attract businesses here.”

We assumed a causation between productivity and wages ; if productivity leads wages, there is no real cause for concern. But then, the concept of "productivity" is continually abused by government agencies to justify for spiraling wage costs, and increases in the cost of conducting business. Regardless, spiraling wage costs is still a cause for concern even if productivity leads wages.

An employer's dilemma is not so much as to offer innovative employee benefits to attract and retain talented people. What is most pertinent is the costs of providing for intangible benefits.

Human resource management practitioners may not be comfortable with the mathematics of actuarial science, financial modeling and life-choice simulations. Hence, the cost of non-tangible benefits may not be computed and thus, unaccounted for. We may be in for a rude shock if we compute the total costs of providing non-cash compensation to employees.

Where benefits are offered to employees, it may be difficult to swap them for other benefit items, or withdrawn from employees when dated. This is the main reason why organizations continue to "grand-fathering" dated benefits that were once offered to employees.

The dilemma of employers is the unseen costs of providing non-cash compensation to employees, talented or otherwise.

Never mind the rising rentals, really?

http://www.todayonline.com/articles/241170.asp

Will the public servants speak out?

In compensation terms, the year 2007 ended with “money” talk. As we recalled, there were debates of how we should throw more cash at people to attract, and retain them. There were also discussions on “are we paid our worth?” and perceived pay equity.

For the public servants, their salaries were revised significantly higher to reflect the amount of compensation they expect to receive if they hypothetically resign from public duty to take on their dream jobs in private enterprises.

The thinking behind compensating talented public servants with top private enterprise salaries is to induce and retain them in the civil service. Is such thinking flawed, and taken in the interest of the public, especially when the motivation of work of the private enterprises is significantly different from that of the civil service?

According to March & Simon (1958), pay, within the context of the employment exchange, is an inducement to work. Money is provided in return for work and is based upon some specified contingency relationship between work and pay. To the extent that pay is desired as a medium of exchange with instrumental value, money provides people, either as means or an end, with a purpose to work.

In addition, pay can be conceived in terms of symbolism. The concept of symbol, in this context, is defined as a sign which signifies something other than itself. Do you remember the first dollar you earned when you started work? The symbolic meaning of the first dollar you earned signifies more than the instrumental value of a dollar. Clearly monetary pay symbolizes instrumentality as a medium of exchange, but it may also be associated with outcomes such as status, security, and achievement and thus acquire symbolic value as well.

Pay and reward systems in general is symbolic of organization culture. Will there be a clash of cultures between hierarchical bureaucracies and the horizontal organizations of the private sector? Are we motivating our public servants to behave like mercenaries?

In presenting the rationale and justification for paying public servants market benchmarks, our leaders appear to discount the symbolic value of pay. In all respect, the symbolic value of the high office of the land is worth a lot more than several millions of Singapore dollars. If we cost the symbolic value of pay, our public servants’ pay may be placed beyond the red circle; a term used to denote salaries that exceeds the top pay range in their grades.

But then again, if we ask ourselves whether we are pay competitively, our answers invariably would be negative, because money is never enough. Perhaps, we should start the year of the golden rat by questioning why we are paid so much for doing what we enjoy. Should we also be asking why we are paid so much for doing so little?

In the brave new world of 2008, we hope to have less “money talk” and more on the intangible value of reward management. The GROW 2.0 initiative announced by the Ministry of Education, Singapore may be a start.

In its 2007-08 Global Strategic Rewards study, the global consultancy firm Watson Wyatt concluded that employers and employees rank attraction and retention factors differently. They commented that the first thing employers need to do is to recognise the factors that attract and retain talent, and to realise that their expectations, as employers, are sometimes different from those of their employees.

For example, the Watson Wyatt study on accounting and finance industry in the Asia-Pacific region revealed that employers ranked base pay, employer reputation and career development opportunities as the top three attraction factors. On the other hand, employees ranked the nature of work, then base pay and employer reputation as the top factors that attracted them to a job.

In addition, the recent Watson Wyatt WorkAsia study found that drivers for employee engagement are customer focus, compensation and benefits, and communication. Employees said they wanted to feel good about the products and services their employer offers. Employees also said pay, stress levels and promotion opportunities were the main factors affecting their decision to stay with a firm. The amount of respect employees received in the workplace was another important factor in their decision to join or stay with a company.

Can we ask the real public servants the factors that will drive them to commit and engage themselves with the Public Service Division of Singapore? Do they intend to leave for greener pastures now that they are paid according to the private sector? Are our talented people currently working in global corporations applying in doves to serve the Public?

If we are to stop throwing more cash to attract and retain employees, we may need to understand their expectations more fully. We certainly need to keep the people who keep us in business. What do our public servants feel most passionate about as they serve? Will the real public servants and our private sector employees please speak out?

Is Grow 2.0 the Growth Bonus?

Based on the response from the Singapore Teachers Union on the Ministry of Education's (MOE) announcement of its new renumeration scheme, Grow 2.0 may have the effect of attracting talented people to the education profession and positioning teachers and educators more than "a step child" to the other professions.


http://www.todayonline.com, 29 December 2007, More Apples For Teachers

From a reward management perspective, money is never enough. Simply throwing more cash at a problem may motivate teachers to behave like mercenaries. It may also have the undesired outcome of attracting more people into the profession for the wrong reasons, as semi-retired military officers and the unemployed may have once dream of becoming teachers in our schools.

The internet poll conducted by Channel News Asia (accessed on 31 December 2007, 0535 hr Singapore time) re-enforces the notion of "money for nothing" syndrome.

http://www.channelnewsasia.com/polls/index.php?action=vote&id=74&ranid=7757&voteNr=1

Perhaps, Grow 2.0 may address the "money not enough" mentality fueled by debates on ministerial salaries and pay hikes of public servants. The most significant change in Grow 2.0, in my opinion, is that public servants at the Singapore Ministry of Education may no longer be perceived as "money-grabbers" conducting the business of education.

Competitive salaries, as the Singapore Minister of Education commented, are "a necessary condition, even if they are not sufficient to ensuring a top-class teaching service.” He adds that “there is no trade-off between ensuring that we pay teachers competitively and sustaining the commitment and passion for teaching”.

More importantly, the Growth, Career Development, and Well-Being components of the MOE's reward program may be relevant in attracting and retaining people who have the passion to teach, to share knowledge, and to do something useful with their lives. After all, it has always been the non-tangible rewards that attracted the "people sculptors' into the teaching profession and education in the first place.

In addition, Growth 2.0 may be a breath of fresh air in an otherwise "Gordon Gekko" playground. Resource allocation, continuous learning, career mobility, balance in work life for teachers and their spouses regardless of gender, work performance differentiation, spot bonuses, and the refinements contained in the connect (gratuity?) program could spark an "education revolution" within the teaching profession. Whether it stays a revolution in the classroom remains to be seen as the devil is always in the details.

On a positive note, Grow 2.0 may not be contingent on the exceptionable growth (?) of the Singapore economy. Inspiring young people to be entrepreneurs through education is very different from motivating "bottom-line" results-oriented behaviours regardless of ethics, morality, and its undesired consequences.

An English teacher from a secondary school sums up the MOE reward initiative aptly, “Performance-based pay is a double edged sword because it benefits those who shine the most.” The teacher who declined to be named adds “But there are teachers who are more low-profile, yet doing very good work that might go unnoticed.” But then, if you are starving, it is better to be in the kitchen.

Regardless, the anonymous English teacher has a point. We want our teachers to mould our kids and young adults into thinkers, and reflective practitioners. In the realm of "Gordon Gekko", people may have substantial form and dubious substance. These are the extrovert "money-grabbers", and the highly successful players in the game. As we frame our performance indicators for teachers and educators, we should avoid the folly of "rewarding A while hoping for B".

Incidentally, GROW is an acronym for the MOE pay package for "the professional and personal Growth of education officers, through better Recognition, Opportunities, and seeing to their Well-being". What a mouthful !!! and how creative can our public servants at MOE get?

Version 1.0 was announced on 4 September 2006, and version 2.0 on Friday. Perhaps, our technocrats are migrating from Web 1.0 to Web 2.0 metaphorically. Can we stop dehumanizing people by digitalizing them with alphanumeric labels? Otherwise, we may get to GROW version 3.0, release 8A in quick time.

Tomorrow will be a brand new year. If there is a new year message, it would be a "keep it simple, stupid" (KISS) message. The success of a reward program lies in its simplicity, and the ability to communicate its value. Not many of us will comprehend the details of our hospitalization benefits or our insurance policy until we are warded, strapped to our hospital beds, and search frantically for that additional insurance cover presented in small prints.

Happy New Year and Good Health !!!

Money not enough?

This year has been rather eventful for reward management practitioners. Firstly, an upward pressure on salaries, amidst a tight labour market, caused numerous companies to match counteroffers of competitor firms to retain key employees. Secondly, the Singapore government revamped the salary management system of its civil service to keep pace with benchmark salaries of the private sector. To link rewards more closely to performance, the government increased the proportion of annual salary that is variable. At the senior levels, as much as 50 per cent of the annual salary is performance-based. According to a compensation consultant, “the civil service increasingly finds itself competing for talent against the private sector and as such, needs to ensure that its pay packages are competitive and aligned with its objective of attracting top talent’

Although the justification for paying public servants top salaries is to attract and retain key civil servants, it may have created a bridge that connects the stigmatised lowly paid public servants and the highly paid private enterprise executives. The dichotomy between public and private sector salaries will be blurred, and the traditional mindset of lowly salaried public servants may over time be eradicated. With the revised salary management system for public servants, the Singapore Government is setting the salary benchmarks that private enterprises will inevitably follow to stay competitive.

In the public sector, pay is symbolic. The perception of pay equity is an emotional topic. It is more so if the rewards of the political leaders of the country are intimately pegged to market pricing, benchmarked against the most successful chief executives of global corporations, and built on the public servant salary structures. It must be the dream of public servants to be rewarded as corporate entrepreneurs without the risks, responsibilities, accountability and/or competence to manage a business. As expected, ministerial salaries and bonuses created much attention and debate these past months.

In recent years, compensation of chief executives and senior management of private enterprises have been under scrutiny by stakeholders. At shareholders meetings, stakeholders are disgusted at the manner senior managers reward themselves regardless of company performance and returns on investments. In many instances, non-performing executives are offered golden parachutes amounting to millions of dollars as they are shown the back door. One need to go no further than to examine the classic case of Enron to understand why pay for performance and incentive schemes of the Anglo-Saxons led to the collapse of the organisation.

For more than twenty years, the Anglo-Saxons embrace pay for performance system as the panacea for driving employees’ behaviours towards the goals and objectives of organizations, often ignoring “the folly of rewarding A while hoping for B”. In his research on the mythology of management compensation, Edward Lawler III argued against the effectiveness of pay for performance in “why is pay no longer an incentive to better job performance". More recently, Michael de Beer conducted a survey on a sample of global senior executives examining “if incentives work?” Their results suggested that careful efforts to design an incentive system to make pay contingent on unit performance may be misguided, and raised questions about the worldwide trend towards the use of more executive incentives. Unfortunately, many organisational practitioners are still paying extraordinary attention to pay for performance. Are practitioners familiar with the notion of pay without performance?

The Singapore government may have embedded the cultural aspects of reward management by imposing Anglo-Saxon practices on its servants in predominant Singaporean Chinese work communities. As an example, the dimension of power distance as espoused by Hofstede, within the context of reward management, refers to the degree of inequality that is tolerable between salaries. Countries with a high power distance can have extremely wide salary gaps (income disparities) that would not be tolerated in countries with a low power distance. Within countries (as well as companies) with a high power distance, it is accepted both implicitly and explicitly that people at lower levels of the organization should be paid little, and people at the top should be paid a great deal. Under these circumstances, is there a sense of guilt at the boardroom where people at the top are compensating themselves with obscene salaries and bonuses and the lower levels of an organization are drawing minimal wages barely adequate to meet hygiene levels? In the context of a high power distance work environment of "Yes Minister", the ethics of performance reward should be taken seriously. Otherwise, pay and performance may arbitrarily be determined by a "few good men", regardless of corporate governance.

Although the government has announced the revised salary management system, many questions remained unanswered:

• Is the Anglo-Saxon’s pay for performance scheme designed on the premise of private sector enterprises, relevant and aligned to the Singapore civil service in terms of its purpose, its objectives, and the culture of public servants?
• Should the rejuvenated public service rewards scheme be a pay for (past?) performance, pay for competence, pay for (future?) contributions, or simply pay for service excellence?
• Are we encouraging public servants to be mercenaries as we throw more monies at them?

Soon, public servants, accustomed to higher salaries, will seek more salaries and bonuses so that they will not be dissatisfied with work. Seriously, is there a causal link between civil servants offering public service and an economy doing exceptionally well? Perhaps, we will experience Steven Kerr’s “folly of rewarding A while hoping for B?” in due course.

It is always convenient to justify salary increases with market pricing of benchmark companies. Inevitably, adopting salary surveys for competitive benchmarking purposes will result in upward spiraling salary costs, and intense pressure on companies to pay more. In addition, salary surveys are dated, and is an indication of pay for past performance. Do we really need to look back in order to move forward?

Reward management practitioners should go beyond the cash components of compensation and examine total rewards in the context of the industry the reward plan operates. Just as it is a folly to pay public servants private sector salaries, it will be a folly to pay volunteers and full time employees of charitable and/or non profit organizations private sector salaries, as a senior public servant suggested in his keynote speech at a recent charity dinner.

Regardless, money is never enough.

Are we motivating public servants to behave like mercenaries by throwing more money at them?

TodayOnline, 14 December 2007, Singapore

Will bonuses be pegged to (sub-prime) performance?

Singapore bankers upbeat about fatter bonuses
Business Times Singapore, 8 December 2007
By Chow Penn Nee
(c) 2007 Singapore Press Holdings Limited

(SINGAPORE) Despite market volatility stemming from the sub-prime crisis in the United States, Singapore-based bankers are counting on higher bonuses this year, and are optimistic about next year as well.

So says a worldwide survey of 20,270 employees working in financial services, conducted by eFinancialCareers.com, a global financial careers website.

The study found that slightly over half of Singapore bankers expect to receive higher bonuses than last year, and only about 17 per cent expect their bonuses to be lower than the bumper payouts of 2006.

Sarah Butcher, editor of eFinancialCareers.com, said: 'The expectation of swelling bonuses may be linked to the fact that Singapore-based bankers are paid less than their global counterparts. She added that the survey revealed that the average Singapore banker received a bonus equivalent to 44 per cent of salary last year, compared with 76 per cent in Hong Kong and 58 per cent in the US.

Hong Kong bankers share similar optimism about bonuses, with also slightly more than half of them expecting to receive higher bonuses than last year, and only 14 per cent anticipating lower bonuses.

In contrast, 60 per cent of UK bankers believe bonus levels will be down next year.

Globally, the survey showed that equity capital markets and M&A bankers are the most optimistic when it comes to predicting this year's bonuses. A BT report said investment banks in Singapore earned over 45 per cent more in the year to date than in the corresponding period last year, driven by growth in fees in mergers and acquisitions, equity capital markets and debt capital markets. Due to sub-prime woes, debt capital markets and credit-focused bankers are the most pessimistic, said the survey.

Bonuses are not the only thing Singapore bankers are upbeat about, as 42 per cent expect business to improve in the coming year. Bankers from China and Hong Kong are similarly upbeat, with 56 per cent and 41 per cent respectively, forecasting a better 2008.

By comparison, about 40 per cent of UK bankers expect business to worsen next year, while about one-third of US, French and German bankers also predict that conditions will deteriorate.

Ms Butcher explained: 'The notable optimism of finance employees in Asia is no surprise as the growth of industries amid China's economic boom has led to increased business activity and a climate of promise throughout the entire region.'

______________________________________

Asia Big Bonus Swindle

eFinancialCareer.hk, 3 December 2007

Asian bankers account for a growing proportion of bank's profit. But they are still short-changed at bonus time.

This year, the situation looks set to be worse than ever. Most US banks have lost packets through the US sub-prime crisis, meaning profitable local bankers are in danger of subsidising their struggling American colleagues.

Gary Lai, manager of front-office banking at recruiter Robert Walters Singapore, says Hong Kong and Singapore bankers employed at US and European houses are already prepared for the fact that their bonuses will be negatively affected as a result of the sub-prime fallout.

But is the situation really this dire? A recent study by international search firm Options Group found Asian bonuses are likely to rise by up to 5% this year. By comparison, payouts in the US and Europe are predicted to fall 10-15% and 5-10% respectively.

There are rumours that Asian bonus pools have been ring-fenced and won’t be reallocated to subsidise struggling divisions elsewhere. Nader Farahati, director at consultancy Oliver Wyman, told Financial News recently that Asian bonuses will not be reallocated.

John Jessen, the Singapore-based group CEO of headhunter Smith & Jessen, also doubts that Asian bankers will have to subsidise colleagues in the US and Europe.

Jessen says banks want to protect assets where they make the most money: “Asia is in such a build-out mode that no one wants to let their competition leave them behind.” He expects most hiring investments to flow eastwards in 2008, with trading floors in India set to double or even quadruple in size over the next two to three years.

The sentiments of bankers in other emerging Asian economies such as Indonesia, Thailand and Malaysia also remain positive, says Lai: “The general consensus seems to suggest that their bonuses will be healthier than previous years, as many of these economies started off from a low base and are experiencing strong domestic growth.”

Is Singapore still attractive to expats?

According to a Mercer Cost of Living (COL) survey, Singapore (SG) is the fifth most expensive city in Asia, after taking into consideration the costs of housing.
The COL Index for Singapore in March 2007 is 100.4, as compared to an index of 92 a year ago. The base city is New York, USA with a COL Index of 100.
The survey result reveals that it is cheaper for expats to live in the Big Apple (NY) than it is to live in the Tiny Red Dot (SG).

www.mercer.com/costofliving [accessed date: 4 Dec 2007]

On 1 July 2007, Singapore increased its goods and services tax (GST) rate from the current 5% to 7%.

Is Singapore still attractive to the global expatriate workforce even if it is ranked third best in terms of personal tax climate in the region?

------------------------------------------------

Business Times Singapore, 4 December 2007
Tax climate in S'pore ranked third best in region for expats
By Anna Teo, (c) 2007 Singapore Press Holdings Limited

UAE, Russia, HK are among world's most benign personal tax environments, says Mercer survey

FOR expatriates considering a posting to Asia, the personal tax climate in Singapore is third best in the region, behind Hong Kong and Taiwan. And unlike elsewhere, it makes little difference here whether the taxpayer is single or married, with or without kids.

According to Mercer's survey of 32 'expatriate hotspots', the United Arab Emirates, Russia and Hong Kong are among the world's 'most benign' personal tax environments, while Belgium, Denmark and Hungary are the most onerous.

The findings also show that in general, married employees are better off than single employees tax-wise, and married employees with two children fare the best.

But the difference in tax liability is not too great in a few countries, including Singapore, while employees in China and India pay the same tax regardless of marital status.

Says Guo Xin, deputy regional head of Mercer, Asia: 'Within Asia, Hong Kong and Taiwan have the most gentle tax systems regardless of marital status. The toughest personal tax regimes can be found in India and Australia, with Indians paying more tax than Australians if they are married with two children.'

And through its Central Provident Fund scheme, Singapore has one of the highest social security contributions - second only to Japan - at 11.4 per cent. Social security payments in Hong Kong, for instance, amount to barely 2 per cent.

'If you exclude the mandatory CPF contributions, Singapore's tax rate for middle managers would be 5 per cent, making it the lowest rate in Asia,' Wong Su-Yen, managing director of Mercer Asean notes.

Except for Russia, European countries fill the bottom rungs of the rankings.

Apart from taxation, other key considerations for expatriate allowances are housing, private schooling and local cost of living adjustments - all of which can add up to the high cost of a global expatriate work force.

The Growth Bonus: Is there a causal link between a civil servant offering public service and an economy doing exceptionally well?

In the design of a successful incentive plan, an obvious starting point is "what do we hope to achieve ?". In other words, "What is the objective of the proposed incentive scheme?"

As organisational practitioners, it is always challenging to frame the main purpose of an incentive plan and its competing agendas. Organisations may adopt SMART ideas in determining the goals and objectives of the plans. Performance standards and measures may be formulated using economic value added models or balanced (HR) scorecard templates. With performance measures aligned to the strategic intent of incentive plans and the goals and objectives of the organisation, the causal link between pay and performance may perhaps be forged in theory, and may not necessarily be forged in practice.

As its name implies, the primary purpose of incentives is to incentivise and reward behavioural change towards performance targets. A significant challenge in the design and implementation of successful incentive schemes (both long and short term plans) is the notion of line of sight. If we are unable to "set our sights and sight our targets", it will be problematic for us to achieve our goals regardless of our competencies and motivation. If the line of sight is remote or obscure, organisations would simply be offering us more money for nothing.

In an attempt to make the civil service careers more attractive, the public service division of Singapore announced it would provide extensive career development opportunities and performance based pay for its public servants. An aspect of the performance based pay is the concept of a "Growth Bonus".

According to its press release of 25 October 2007:
"A new Growth Bonus, to be paid in times of exceptional economic performance, will also be introduced. In line with the philosophy to link rewards to performance, this bonus will be tied closely to individual performance, with the better performers receiving more ... The Growth Bonus will only be paid when the Singapore economy has done exceptionally well, and is a reflection of the Civil Service’s contribution to the economic performance as well as the contribution of the individual officer"

With an expectation of a "Growth Bonus" for a stellar economic performance to be payable in March 2008, the public service division under the Singapore Prime Minister Office may be setting another quantitative benchmark on short term incentives for the private sector to follow.

As a tiny red dot, the economic performance of Singapore may be driven mostly by external factors, such as the growth economies of China and India, and may be beyond the grasp of our public servants. No matter how hard we may try, we are still a sampan in an ocean. Do we reward ourselves while we sail in calm waters, and blame the tankers for creating waves when they are in close proximity? What happens when the sea level raises?

As a servant of the public, performance standards and measures may be difficult to articulate. In addition, the line of sight between the performance and contributions of civil servants and the exceptional (?) economic performance of Singapore may be obscure, or even remote. Seriously, is there a line of sight between a high performing civil servant offering public service and the Singapore economy doing exceptionally well?

What about incorporating measures that go beyond economic performance to focus on the well-being of its residents such as income disparity and work-life expectancy in a knowledge-based Singapore. Should we include the Human Development Index (HDI) and its composite people dimensions of longevity, knowledge, and purchasing power parity, as well the Gini coefficient as key performance indicators for public servants. Surely, we should align the well-being of its residents to the economic growth of the economy, or shouldn't we?

While the public service division attempts to incentivise its civil servants through "a sharper link between pay and performance to recognise staff according to contribution", will the servants of the public run into "the folly of rewarding A while hoping for B?"

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TodayOnline, 11 April 2007, Singapore

Why the GDP link? Bonus peg a good indicator of how ministers, top civil servants have created wealth for all of Singapore, says Teo

Derrick A Pauloderrick@mediacorp.com.sg

FEW would probably take issue with the fact that a minister's pay - in fact anybody's pay - should be linked to his performance. But when his pay packet is also tied to Singapore's economic performance - the higher the gross domestic product (GDP), the bigger the bonus - even some ruling party MPs question the wisdom of such a link.

If Monday's parliamentary debate on pay revisions for ministers and civil servants focused mainly on that "benchmark thing", yesterday's session saw the spotlight being trained on the "GDP bonus".

This bonus is a component which ministers, parliamentary secretaries, top civil servants and MPs are eligible for.

Several of the 13 backbenchers who spoke yesterday had reservations about the GDP bonus, even as they expressed support for the tighter link between pay and performance in the public sector, a distinctive feature of the revisions compared to past exercises.

One common refrain heard in the House was whether it is a fair performance peg to use.

"We all know that a rise in GDP may not benefit all sectors of society equally. Some may even lag behind. I would suggest that the Government consider using indicators that directly impact the livelihood of all Singaporeans," said Dr Lim Wee Kiak (Sembawang GRC).

Nominated MP Loo Choon Yong, while "relieved" that a large part of the salary increases are not in the fixed salary component, said that relying on the GDP alone is "simple, convenient but inadequate".

He proposed one other indicator to be considered: That of the total cost of running the Government as a percentage of total revenue.

After all, CEOs in the private sector have to ensure profits are not eroded by increasing costs and expenses, Mr Loo said.

Other suggestions of alternative benchmarks included: The consumer price index and the inflation rate, as a way to keep cost of living affordable and protect savings; citizens' feedback to major public services; the number of jobs created for Singaporeans; and even the number of Singaporeans who migrate.

Based on the latest revisions, ministers will enjoy a GDP bonus of between three and eight months if the economy grows between 5 and 10 per cent or more. But they will not get any bonus if the economy grows by 2 per cent or less.

For example, the entry-level annual salary of a minister this year is expected to include a 5.9-month bonus based on Singapore's estimated GDP growth of between 4.5 and 6.5 per cent.

Mr Teo Chee Hean, Defence Minister and Minister-in-Charge of the Civil Service, heard them all. In his response midway through the debate, Mr Teo pointed out that the Government has to cater to all Singaporeans, not just individual groups.

"Therefore, the GDP is a good indicator of being able to create wealth for all of Singapore, and with that wealth, to make even those Singaporeans who may not benefit directly from the GDP growth better off as well ... through asset enhancement and wealth transfers."

In his hour-long speech, Mr Teo delved into each of the major talking points, raised by both MPs and the public, on ministerial and civil service salaries.

One of these is the question of comparing salaries to the private sector instead of a comparison with what politicians earn in other countries.

The latter would not be comparing apples with apples, said Mr Teo. "Our salaries are clean. Everything is there. You look at the salary of the Prime Minister of Britain or Australia or almost any other country in the world, you don't know what his total compensation package is."

More importantly, though, as civil servants or office-holders in Singapore cannot become office-holders abroad, there is no point in cross-country comparisons, he argued.

"You have to look at what a young man in his 30s or 40s is comparing himself to when he's deciding what he's going to do with his life. These are the relevant market comparisons - not what politicians in France, Finland or Denmark are being paid," said Mr Teo in response to points made by Opposition MPs on Monday.

Another comparison, between the civil service pay increases and the $30 monthly increase for those on Public Assistance, was raised in the House by both a backbencher and Mr Teo.

Said NMP Kalyani Mehta: "If we are going to be generous to civil servants, then let's be generous to the very poor." In response, Mr Teo said: "The needs of these individuals are quite different and we need to find more holistic and flexible ways of looking after their needs."

Commenting on salary revisions in the context of a widening income gap, he added: "Capping the salaries of ministers and top civil servants will not solve this problem. The problem can be best addressed by à sound policies and programmes, like those introduced in the Budget recently à but most importantly by creating jobs and the resources so we can help everyone in Singapore to lift themselves up."

One new issue that cropped up yesterday was the danger of concentrating too much power and money in the hands of top public officers.

MP Denise Phua (Jalan Besar GRC) said: "As responsible leaders, we must be careful not to leave behind a system or structure that combines power and monetary rewards to such high levels that incumbents are so handcuffed by this lethal combination that they find it hard to let go."

NMP Eunice Olsen argued that the coupling of political and financial power is more likely to lead to the creation of a rogue government.

On this issue, Mr Teo said that the checks are elections and the ruling party's selection process. "If (a person's) motivations are self-serving or to make money, we do not select him. And if we discover that's what he's about after he has come in, we drop him," he said.

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The Straits Times, Nov 27, 2007, Singapore
Two month year-end bonus for civil servants
Better performers' can also expect growth bonus of up to 0.8 months
By Li Xueying

SINGAPORE'S largest employer - the Government - will give its 60,000 civil servants a year-end bonus of two months.

Add on the half-month bonus they received in July and the total bonus civil servants will get this year amounts to 2.5 months.

Tuesday's bonus announcement is likely to be a guide for the private sector, as was typically the case in the past.

Although the payout is a dip from the 2.7 per cent given last year, most civil servants will still go home with more - thanks to the new 'growth bonus'. Introduced this year, it will be given in times of exceptional economic performance.

This year, the Government is forecasting the economy to grow by 7.5 to 8 per cent. For 'good performers', this new payout will bring another 0.5 month's bonus, and for 'better performers', up to 0.8 months, said the Public Service Division in a statement on Tuesday.

The payout comes in a year when the economy has 'performed better than expected', it added. Mr Teo Yock Ngee, general secretary of the Amalgamated Union of Public Employees, said he expects most civil servants - those banded in the top three of the four tiers - to receive the growth bonus. It is to be paid out in March.

This new bonus is in line with the Government’s policy to strengthen further the link between performance and pay.

And what's given this year is consistent with what the private sector companies are planning to hand out, the executive director of the Singapore National Employers Federation, Mr Koh Juan Kiat, told The Straits Times.

A survey it conducted among 276 companies in September shows that this year's bonus will range from two to 3.5 months. The median is 2.8 months.

This annual announcement of the bonus for civil servants is closely watched by the private sector, which often uses it as a guide for how much bonus to give out.

Is Singapore less attractive to its residents too?

TodayOnline, 27 November, 2007, Singapore
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The Straits Times, 2 Dec 2007, Singapore
Expats here are feeling the pinch too
By Mavis Toh & Shuli Sudderuddin

DOWNSIZING is one way of fighting soaring rents, but expatriate Diana Cloe and her husband moved downstairs instead, going from their 24th-floor condominium apartment to a similar-size unit on the fourth.

The step down came after their landlord raised the rent for their 2,900 sq ft Anderson Road flat by 40 per cent in April.

They moved down 20 floors to a flat that costs $8,200 in monthly rent - 20 per cent higher than what they were forking out.

Expats who have been complaining about rising rent are feeling vindicated by a recent global survey.

The ECA International survey showed Singapore rising 10 places to rank as the ninth-most-costly Asian city for expats.

Private home rentals have jumped by 32.2 per cent since January, compared with 14.1 per cent for the whole of last year.

Ms Cloe's American husband, a global development manager who did not want to be named, said: 'The rents are crazy. My housing allowance was $7,000 but my company was gracious enough to up it.'

Mr Ervin Scully, head of corporate leasing at Knight Frank, said soaring rents have prompted many multinationals to increase expat pay by up to 30 per cent.

Indian expat Sonya Madeira said her boss increased the pay of all 13 employees by 10 per cent after a discussion on the rising cost of living.

Ms Madeira, associate director of Eastwest Public Relations, said the rent for her 1,600 sq ft Pasir Panjang flat doubled to over $3,000. 'Prices are up but our salaries are not going up at the same pace, so it's still a bit difficult to manage,' she said.

Ms Madeira said her family might leave Singapore if rent hits $5,000.

The British and American chambers of commerce are concerned about the rise in rentals.

But Mr Terry O'Connor, president of the British chamber, said the Government's recent 'cooling measures' such as axing the deferred payment scheme has helped redress the situation. But this may not be enough to retain some expats.

Brand consultant Simon Faure-Field, 37, was hit by the doubling of both his office and home rents.

His High Street office now costs $10,000 a month but he renewed the lease as alternative locations were equally expensive.

However, when the rent for his 1,400 sq ft Bukit Timah apartment doubled to $5,000, he moved to a similar-size apartment in Pasir Ris for $3,000.

He said: 'I can live in Dubai for the same amount. But there, my company can charge up to thrice the price for our services.

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The Straits Times, 2 Dec 2007, Singapore
We can barely stay afloat, say low-income folk
Some MPs and social workers say pleas for financial aid from poorer residents are growing louder and more frequent with the rising cost of living
By Jamie Ee Wen Wei , Nur Dianah Suhaimi

ADMINISTRATIVE assistant Noor Zeen earns $1,350 a month and has not paid her utility bills for the past four months.

Prices of everyday goods have gone up and she finds that she no longer earns enough to cover household expenses.

The 28-year-old divorcee said her monthly utility bill alone has gone up by at least $20. The breadwinner in her family, she lives in a four-room flat in Hougang with her mother, her eight-year-old son and her late aunt's two children.

Cash-strapped and with unpaid utility bills of about $600, Madam Noor asked her MP, Madam Cynthia Phua (Aljunied GRC), for financial help last week.

After the soft-spoken woman poured out her financial woes, Madam Phua put her on short-term financial assistance that will provide her with $200 for the next three months.

The economy may be buoyant, but low-wage earners such as Madam Noor have been telling MPs and social workers that they can barely stay afloat because the cost of living has been going up.

These workers say that their wages are not rising as fast as inflation.

In October, inflation rose to a 16-year high of 3.6 per cent. Two months ago, prices of food staples such as bread and noodles went up by 20 per cent. Soaring oil prices have also driven up pump prices and electricity tariffs.

Median monthly starting pay for cleaners and labourers has in fact fallen by nearly one-third, from $860 to $600, between 1996 and last year.

Twelve MPs and social workers interviewed said pleas for financial help from residents are growing louder but most could not give figures.

In Jalan Besar GRC, MP Lily Neo said she sees about 60 hard-luck cases a week at her Meet-the-People sessions. In the past, she saw about 40 cases.

She said: 'Each week, I find myself busier and busier, staying longer and longer, because there are so many people asking for financial help.''

Madam Halimah Yacob, an MP for Jurong GRC, said some of the low-income residents are holding two jobs and doing overtime, yet they still ask for rations of basic items such as cooking oil and Milo because they do not earn enough to feed their families.

Mr Zaqy Mohamad (Hong Kah GRC) observed that those on financial aid schemes are showing up more often at Meet-the-People Sessions.

'They used to come once every three months. Now, some come back every couple of weeks to ask for food and utility vouchers,' he said, because their cash is running out faster.

Mr Charles Chong (Pasir Ris-Punggol GRC) said he was even told off by a retiree who had asked for financial aid.

The elderly man told the MP: 'I'm retired, in my 60s, have no job and living off my savings. But GST is up, food prices are up, inflation is up. The only thing that has not gone up is the banks' interest rates!'

Mr Sim Boon Choon, 68, is in the same boat as the retiree. He tries to stretch every cent of the $290 in public assistance that he receives every month.

A loaf of bread now costs 20 cents more and the price of a packet of 20 Milo sachets is up by 40 cents. Even chicken rice and kway teow soup at the hawker centre cost 50 cents more.

To save money, he has stopped eating out for all his meals. Dinner is a simple meal of bread and Milo. To save electricity, the bachelor does not switch on the lights in his one-room Telok Blangah flat.

Even then, he finds himself running out of money before the month is up. 'I'm already very thrifty but the money is still not enough,' he said in Hokkien.

In March, public welfare recipients such as Mr Sim had their monthly allowance raised from $260 to $290 to offset the impact of the GST hike and rising cost of living.

But social workers said the $30 increment is not enough, given that inflation has risen so high.

Ms Grace Lee, centre director of Care Corner Family Service Centre (Toa Payoh), said the centre has been receiving more requests for the monthly free food packages of rice, instant noodles and canned food.

At least 100 packages are handed out, compared to 80 a few months back.

Over at the Care Corner Seniors Activity Centre in Toa Payoh, programme executive Lim Siew Eng said the elderly poor who show up for free daily lunches are asking for larger portions to take home for dinner. A typical lunch consists of rice, mixed vegetables and meat.

MP Cynthia Phua said she has been advising the elderly in her ward to rent out the rooms in their flats to generate income.

She said: 'A can of luncheon meat used to cost $1.30. Now it's $2.50. Not everyone can afford that, especially the elderly who are not working and depending on handouts.'

MPs said that they try not to give cash to residents seeking aid because they cannot ensure that the money is spent on food. They prefer to give food vouchers.

While utility, service and conservancy rebates, and Workfare payouts have helped, the MPs hope that the Government would come up with schemes which help those without income cope with the rising cost of living.

Pasir Ris-Punggol's Mr Chong said: 'The current schemes that we have, such as Workfare, help those who work. But for the elderly who are retired and sickly, we need to find new schemes for them.'

The Government has said that it will not keep prices artificially low by controlling price increases to help people cope with the rising cost of living. Its aim is to get the basics right - housing, jobs and affordable necessities.

It also tops up the wages of low-income workers through Workfare and gives various cash handouts and rebates. A total of 2.4 million Singaporeans are eligible for $650 million in GST credits and senior citizens' bonuses this year.

It is not just the low income who are feeling the pinch. Mayor for Central Singapore district, Mr Zainudin Nordin, said families living in four- and five-room flats are trying to downgrade to smaller flats because they cannot afford the cash portion of their mortgage.

He said: 'These families find that they need that few hundred dollars for other necessities now that prices have gone up. They can't afford to put aside any cash for housing.'

For housewife Norliza Maidin, 40, the rising cost of living could not have come at a worse time.

Her husband was retrenched from his warehouse supervisor job last year and now earns $1,500 - $500 less than his previous pay.

The couple have two sons -- aged five and one - and Madam Norliza's elderly mother lives with them in a four-room flat in Jurong.

Madam Norliza limits the family's electricity usage to $3 a day, chooses the cheapest fish and buys the cheapest groceries.

But she still finds herself with no savings at the end of the month. Sometimes, she has to borrow money from friends.

After being out of the workforce for five years, she is back in the job market because she wants to supplement her husband's income.

'I want to save for a rainy day. And buy better food for my children, such as salmon and not just selar,' she said.

With inflation expected to go up to 4.5 per cent next year, MPs such as Madam Phua think that the number of financial aid requests they are receiving is only the tip of the iceberg.

She said: 'I believe more will ask for financial help. This is just the beginning.'

jamieee@sph.com.sg

ndianah@sph.com.sg