The monthly salary of a civil servant comprises the following 4 components:

1. Basic Pay – this component is fixed and is counted for the purpose of computing an officer’s pension if they are on the pensionable service.

 

2. Non-Pensionable Component (NPC) – this component is found in the salaries of officers who are on medical benefits schemes with co-payment features. It is to help offset the co-payment expenses that officers have to make for their own healthcare. Officers who did not opt to convert to medical schemes with co-payment features do not receive this component. This component is not counted for the purpose of pension computation.

 

3. Monthly Variable Component (MVC) – this component comprises the 1982-84 National Wages Council (NWC) Wage Adjustments. It is counted for the purpose of pension computations for pensionable officers and can be adjusted in times of poor economic performance.

 

4. Non-Pensionable Variable Payment (NPVP) – this component comprises all NWC wage adjustments and salary revisions made from 1993 onwards. It is not counted for the purpose of pension computations and can be adjusted in times of poor economic performance.

2 Apart from the 12 months’ salary paid in a year, the Civil Service annual pay package also comprises 3 additional months’ pay in the form of the following components:

1. Non-Pensionable Annual Allowance (NPAA), 1 month’s pay – this component is similar to the Annual Wage Supplement or 13^th month pay found in the private sector. It has been paid since 1972. This component is paid in December every year and can be removed in times of poor economic performance.

 

2. Annual Variable Component (AVC), 2 month’s pay – this component was built up from the NWC wage adjustments for the period 1988-1991. In these years, the NWC wage adjustments that were payable to Civil Servants were used to build up the AVC rather than incorporated in the monthly salaries. The AVC is paid in 2 instalments – ¾ month in July and 1¼ month in December. It can be removed in times of poor economic performance.

II. Historical Evolution of the Variable Components found in the Civil Service Salary Structure

Following the last recession in the mid 1980s, the National Wages Council (NWC) recommended that companies adopt a flexible wage structure based on the following guidelines:

1. a basic wage to provide a measure of stability to the worker’s income;

 

2. an Annual Wage Supplement (AWS) of one month’s basic pay which can be adjusted downwards under exceptional circumstances; and

 

3. a variable component based on group performance which together with the one-month AWS payment will allow up to 20% of wages to be made variable.

2 The NWC also recommended that a separate Task Force comprising both government and union representatives be set up to consider how the recommendations on a flexible system could be adopted for the public sector.

3 At that point in time, the Civil Service salary structure comprised a monthly salary made up of the basic pay and the 1982-84 NWC wage increases. It was cut during the 1985 recession but was subsequently restored after the recession. In terms of annual salary components, the Civil Service had in 1972 introduced the 13^th month pay known as the Non-Pensionable Annual Allowance (NPAA) which was paid over and above the normal 12 months’ salaries. The NPAA is equivalent to the AWS found in the private sector.

4 The Task Force on Public Sector Wage Reform completed its deliberations in Dec 1987 and recommended the following:

1. the 1982-84 NWC wage increases should be converted into a variable component. It was subsequently known as the Monthly Variable Component (MVC);

 

2. the NPAA should be converted into a second variable element which can be adjusted under exceptional circumstances;

 

3. wages should continue to be adjusted annually in line with national economic growth;

 

4. (i) any wage adjustment should initially be effected through the 1982-84 wage increases components, to restore the cut made in the recession

6 To prevent having more than 20% of salaries residing in the annual variable components, annual NWC wage increases made after 1992 were ploughed back into monthly salaries in the form of a new monthly salary component known as the Non-Pensionable Variable Payment (NPVP). As suggested by its name, this component is variable and can be removed in times of poor economic performance.

The cut in the monthly salaries via the NPVP component (after factoring in the Average Group Increment) for the various categories of officers is summarised in the following table:

Note:

1. All timescale civil servants are placed on salary scales. This means that they will receive fixed annual increments and progress along the scale until they reach the maximum point. Superscale officers and officers who have reached the maximum point of the salary scale do not receive any annual increments. Average Group Increment refers to the average of all the annual increments received by timescale civil servants.

The net impact of the wage reductions (including cut in AVC by 1¼ month and the cut to monthly salaries) on the various categories of officers for the period July 98 to Jun 99 (based on NWC wage cycle) over the preceding year is summarised in the following table:

Contact person : Mr Daniel Tan

Public Service Division

Prime Minister’s Office

Contact no. : 332-7307