Since 13 September 2023, when ex-senior cabinet minister Tharman Shanmugaratnam took over the Presidency role from Madam Halimah Yacob, another change in the top political office in Singapore is about to take place soon.
As announced recently, Deputy Prime Minister Lawrence Wong will officially become Singapore’s Prime Minister on 15 May 2024, taking over from Mr Lee Hsien Loong.
In Singapore, a President holds office for a term of six years from the date of appointment. They are to represent Singapore as the Head of State in ceremonies both domestically and internationally. Furthermore, a president is responsible for safeguarding the national reserves and the integrity of the public service, among other duties.
While the Prime Minister, who is appointed by the President of Singapore, is the effective head of the executive branch of the government and holds office for a term of 5 years. The Prime Minister chairs the Cabinet, which is the central decision-making body of the executive government. Additionally, the Prime Minister also oversees the government’s general policy direction.
While an elected candidate is expected to serve this esteemed role in the spirit of public service, they are also paid a salary in proportion to the heavy responsibilities they bear.
Here’s a quick look at how much our top leaders are paid.
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Who Sets The Pay For The Singapore President, Prime Minister And Cabinet Ministers?
The short answer is that the Singapore Parliament, which consists of elected representatives of the people, reviews and passes into law the framework that is used to determine the salaries of the nation’s highest political officeholders, namely the President, Prime Minister, and other Cabinet ministers.
The salary framework has been revised over the years to ensure that the both the principles and outcomes that Singapore believes in are reflected in ministers’ salaries.
Before 1994, the government set ministerial salaries through informal comparisons with the private sector, with periodic salary revisions. It was in 1994 that the government introduced the first benchmark that pegged ministerial salaries to alternative professions a minister could have pursued, with a significant discount to reflect the sacrifice that political service entails. In 2000, this benchmark was refined, and in 2007, another salary revision was made with, which included the imputed value of pensions.
The current ministerial pay salary is set out in the White Paper titled “Salaries for a Capable and Committed Government”, which was presented and approved by the Parliament in 2012, and currently used as the basis for setting salaries.
This White Paper was the work of a committee convened by Prime Minister Lee Hsien Loong after the 2011 General Elections, who acknowledged that Singaporeans had genuine concerns over the (high) salaries of their leaders.
The committee worked over months in consultation with Members of Parliament (MPs), the public, as well as past and present appointment holders and MPs. Mercer Singapore, a global Human Resource consultancy firm also provided technical expertise in job evaluation, pay benchmarking and design.
What Is The Benchmark For Minister Salaries In Singapore?
In Singapore, Cabinet ministers have grades of M4 (most junior) to M1 (most senior). The salary benchmark for a M4 Minister is 40% less than the median income of the top 1,000 Singapore Citizens earners to reflect the ethos of political service.
It is important to note that this benchmark is not the formula that is used to determine how much Singapore ministers earn.
Rather, it can be thought of as the ballpark figure of what Singapore believes its ministers should be earning in principle, and the approximate salary range that the actual formula should yield.
Formula For Calculating The Entry Salary Of A MR4 Minister
We will take a detailed look at the formula for determining the salary of a MR4 Minister, since the salary of other officeholders’ are calculated off a MR4 Minster’s salary.
The total annual salary of a MR4 Minister consists of two components: Fixed and Variable.
A MR4 Minister receives a fixed salary component of 13-months pay, regardless of job performance or national outcomes.
There are three variable components that an MR4 Minister could receive.
Annual Variable Component (AVC): Typically 1 month worth of salary.
Individual Performance Bonus: Typically 3 months for good performance.
National Bonus: Typically 3 months if national targets are met, which is evaluated by four equally-weighted metrics: 1) real median income growth rate of Singapore Citizens; 2) real growth rate of the lowest 20th percentile income of Singapore Citizens; 3) Unemployment rate of Singapore Citizens; and 4) Real GDP growth;
In other words,
MR4 Minister’s Annual Salary = Fixed Component (13 month) + AVC (~1 month) + Individual Performance Bonus (~3 months) + National Bonus (~3 months) = ~20 months
In 2012, when the White Paper was released, the formula yielded an MR4 Minister’s annual salary of $1.1 million, which works out to a 1-month wage of $55,000. This is a reduction of 31% from the previous framework.
In keeping with the “clean wage” policy, ministers no longer receive a pension, and would rely on the CPF system for their basic retirement needs. Medical benefits are also based on the MediSave/Subsidised Outpatient scheme that civil servants receive.
As ministers are promoted up the grade, their salary increases accordingly from the MR4 salary. Regardless of whether Ministers hold multiple ministerial portfolios, they will only receive one salary.
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Formula For Calculating The Salary Of Singapore’s Prime Minister
As there isn’t a way to evaluate the Prime Minister’s individual performance, the Prime Minister doesn’t receive an Individual Performance Bonus, so the Prime Minister receives a larger National Bonus instead.
On the whole, the Prime Minister’s salary is pegged to two times the benchmark pay of an MR4 Minister or $2.2 million. This is a reduction of 36% from 2010 levels.
Prime Minister’s Annual Salary = 2 x MR4 Minister’s Annual Salary
Formula For Calculating The Salary Of Singapore’s President
The framework calls for the President to receive the same salary as the Prime Minister, with 13th month and AVC, but without the Performance Bonus and National Bonus, which works out to be 70% of the Prime Minister’s wage or $1.54 million. This also represents a reduction of 51% from 2010 levels.
President’s Annual Salary = 70% of Prime Minister’s Annual Salary
Political Appointment Holders’ Salaries Are Reviewed Every 5 Years
An independent committee reviews the political salaries of appointment holders every five years to make sure the salary structure is still appropriate in light of the current economic climate.
The previous reviews were held in 2011, when the reference to the benchmark pool of 48 individuals was expanded to 1,000 individuals, limiting it to only Singaporeans working in Singapore. The last review was held in 2017 with a recommendation to adjust salary levels to match the updated benchmark to keep pace with the market. The next review, which was supposed to be done in 2023, was deferred as the government had other pressing issues to deal with.
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This article was originally published on 13 March 2020 and has been updated to reflect the latest announcement on the change in political office.
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