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A DROP in annual salary is in store for the 66,000 workers in the civil service this year, with senior officers seeing a bigger percentage fall.

The reduction, however, will be made firstly in the variable components of their pay, with the Annual Variable Component (AVC) for 2009 'expected to be lower or even possibly zero', said the Public Service Division (PSD) yesterday.

The PSD, which oversees civil service matters, cited the slowdown in Singapore's economy for the fall in pay.

How steep the drop will be depends on the guidelines set by the National Wages Council (NWC), it said in an e-mail statement to The Straits Times. The council will meet next month or in May.

The PSD also warned that 'if economic conditions continue to deteriorate, further adjustments in salaries will likely be necessary'.

But in explaining the initial reduction, it said: 'The drop is to be expected as it is consistent with our salary policy which pegs the annual pay of civil servants to pay levels in the private sector.

'A substantial portion of this annual pay, especially at the senior levels, is variable, with components closely reflecting the performance of Singapore's economy.

'The drop will be effected, in the first instance, through a reduction in pay components linked to economic performance.'

One such component is the GDP Bonus, which is linked to growth in the country's gross domestic product (GDP). It is paid to administrative officers and senior civil servants like permanent secretaries.

This year, no GDP bonuses will be paid, the PSD said.

Another component tied to the economy is the AVC, which civil servants usually receive as mid-year and year-end payments.

This amount will be determined at a later date, said the PSD.

But individuals who did good work in the past year will still receive performance bonuses, which will be paid this month for work done last year.

This is to encourage officers to continue to excel in their work, it said.

The PSD was responding to queries about a circular it sent out this week to civil servants, priming them to expect a drop in their annual salary this year.

The circular comes ahead of the ending of the civil service financial year on March 31, as civil servants expect news about their annual performance bonus and pay increment.

Several civil servants interviewed were not surprised by the impending pay cut for several reasons.

The Government has forecast the economy to shrink by 2 per cent to 5 per cent this year.

Also, pay in the private sector is set to go down by 10 per cent to 25 per cent this year, according to some analysts.

Civil servants saw the signs too when in January, the Government announced a cut in salary of between 12 per cent and 20 per cent for Cabinet ministers and senior civil servants this year, with room for more changes if the economy worsens.

Statutory boards do not have to follow the pay changes in the civil service, said the PSD, but are expected to exercise wage restraint and stick to the NWC's guidelines.

But most statutory boards are expected to take the cue from the civil service.

Some also have a system of making adjustments based on market conditions, said the general secretary of the Amalgamated Union of Statutory Board Employees, Mr N. Thurairajasingam.

Several statutory boards have informed his union that they plan to give smaller merit increments.

Senior officers will take a deeper cut, he added, declining to identify the organisations.

By Goh Chin Lian