SINGAPORE - The CPF's decision to freeze employer pension contributions will help companies get through the current downturn in the economy and help them to reduce retrenchment of labour, according to consultants William M Mercer.
According to the firm, the move means that employers can reduce their budgeted wage costs for the year 2002. But employee contributions remain unchanged at 20%.
The CPF restoration has been delayed due to the current economic slowdown - a downturn of economy of 0.8% in Q2, 2001 - meaning that the current contribution rate of 16% will remain, and the situation will be reviewed again in the middle of 2002.
In December 2000, the CPF board announced that the employers' contribution rate for the CPF would be revised by 4% to 16% from January 2001, from a 10% rate set in January 1999 as part of a cost cutting package. This step was in line with governmental intentions to fully restore the employers' CPF contribution rate back to the original 20%.
In April 2000, the CPF contribution rate for employers was increased again by 2% to 12%. There were no changes made to the employees' contribution rates.
It is hoped that the move will provide the largest chunk in savings exercise.
By Madhu Kalia
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