Sunday, December 24, 2006

Explore Solutions Beyond Restoring CPF Cut

Outgoing chief of the National Trades Union Congress, Lim Boon Heng, has been lobbying for higher Central Provident Fund contributions from employers for middle-income Singaporeans.

He has argued, "We hope that the Prime Minister and the other Cabinet Ministers should be hearing this favourably. We hope also that the employers would consider this seriously and support this, because workers have made sacrifices in the past few years and since, generally speaking, they're doing well, then they should reciprocate the actions of the workers of the past by doing the small restorations to the CPF."

Employers are being encouraged to increase their level of CPF contributions from 13% to 16%.

Lim Boon Heng has suggested, "We should do this gradually, so we shouldn't ask the employers to straight away raise it to 16 per cent but maybe somewhere in between. The timeline would depend on whether we get consensus and support from the employers and whether we also get support from the government."

Some years ago, these level of contributions, which use to be higher than the present 13%, were reduced to help Singapore be more competitive and to enable it to attract investments needed to create jobs.

These threats continue to be relevant, even in these good times.

And, suppose, if the Singapore economy were to return to its dark days, will one have to resort to the CPF cut again?

Interestingly, the outgoing Chief Executive Officer of NTUC Income, Tan Kin Lian, has argued, "There is some discussion in the newspaper on the need for the employer to increase the contribution rate to the Central Provident Fund. The final outcome is not significant in financial planning. It is clear that the CPF is no longer the sole source of funds for retirement."

Perhaps, there are other ways of rewarding employees in these better moments.

For example, when the employers' CPF contributions were cut years back, my own employer decided to reward employees by giving them one month of paid leave every three years.

Another solution could be for employers to do a one-off top-up of CPF contributions when the employers are doing well, much like how the annual wage supplement operates.

The labour movement can explore solutions other than the restoration of the CPF cut.

Dharmendra Yadav

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