14 April 2011

Pensions and Wages and Attrition in the Civil Service

Last month, Singapore Deputy Prime Minister and Minister-in-charge of the Civil Service Teo Chee Hean said in Parliament:

"In 2010 the Singapore economy recovered strongly and the labour market tightened.  The resignation rate for the Civil Service rose, from 3.5 per cent in 2009 to 4.7 per cent in 2010.  For the Management Executive Service resignations rose in 2010 with attrition rate highest at 17 per cent for the younger graduate officers.

"To attract and retain able and committed officers, Civil Service wages must be competitive.  Salaries are therefore benchmarked against the private sector.  Civil Service remuneration fell during the recent recession.

"But as private sector wages rise, the wages of civil servants must also rise.  Otherwise, we will lose capable officers and suffer an overall decline in the quality of the Civil Service."

Firstly, the 4.7 per cent annual attrition rate for the Civil Service in 2010 is very modest compared to the 2.0 per cent national average monthly resignation rate.  It seems to be not an inappropriate level that ensures adequate renewal and rejuvenation, rather than something for the Minister or Civil Service to lose any sleep over or to justify a significant upward revision of wages.

Secondly, what about the 17 per cent attrition rate for the younger graduate officers in the management executive service last year?

Under the Pensions Act, a pensionable officer may be allowed to retire from the Civil Service before he reaches the retirement age, provided he satisfies certain service conditions, including having served for at least 15 years.  Upon retirement, the officer will be eligible for pension and medical benefits.

It is likely that many young graduates do not know what they want from their first job, and will resign as soon as they conclude that that is not their cup of tea or the grass elsewhere is greener.

It is not difficult to imagine that an individual who does not intend to remain in the Civil Service for at least 15 years will leave before he has invested too many years there.  The longer he stays (if he leaves before 15 years), the more he loses by way of pension forgone.

Perhaps, then, instead of relying on increasingly higher salaries to hold onto them, the Government should consider allowing pensionable officers to retire (i.e., leave with some benefits) from the Civil Service after they have reached earlier milestones, for example, 5 years and 10 years.  Some officers may still leave eventually, but they will likely have made valuable contributions to the Civil Service, instead of leaving soon after they have been trained and nurtured.

Alternatively, the Government should consider scrapping the pension scheme altogether.  This will relieve the Civil Service from its obligations to pay pensions and medical benefits over extended periods that may sometimes be almost as long as the actual periods of service.  This will also make compensation comparisons between the Civil Service and the private sector more straightforward.

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Notes

1. Singapore Parliament Report (Mar 2011).

2. Why one retired, another resigned The Straits Times Forum (7 Apr 2011).

3. Ministry of Manpower Labour Market 2010.

4. The annual resignation rate is the simple average of the quarterly resignation rates.  The quarterly resignation rates are expressed as the average monthly resignation rate during the quarter, which is the average number of persons who resigned in a month during the quarter divided by the average number of employees in the establishment.

1 comment:

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