There was happy news for about 30% of our workforce on Thursday as the Public Service Division announced that civil servants will get a year-end Annual Variable Component (AVC) of 1.1 months. This was significantly higher than the previous year’s bonus (0.7months) and the mood in office on Friday was already approaching celebratory even though there was still more than a month to go before Christmas.
Since I am employed by the public sector, I am a beneficiary too. And to be honest, this amount was slightly higher than what I had anticipated. Because of this, I also made some interesting observations of our behaviour during these past few days:
1. Attractive annual package for civil servants
Together with the mid-year bonus payout of 0.4 months, I will be getting a total of 1.5 months of AVC this year. If we include the Non-Pensionable Annual Allowance (NPAA) also known as the 13th month bonus which almost all companies dish out, it adds up to 2.5 months. And not forgetting the performance bonus (expected to be around 2.5 months for me), my bonuses for the year actually total 5 months.
That’s actually not an amount to be sniffed at. After working in this job for almost 3 years, I can slowly understand the attractiveness of a “government job”. Not only is there job security, bonuses are also pretty stable and generally above average? Even though Mrs 15 HWW’s monthly pay is higher than mine, her conservative (more like miserly) employer only rewards her with the NPAA bonus. If we compare the annual package, my overall income will exceed hers by close to $15k!
2. Bonuses pegged to economic growth
Rumour has it that the AVC is calculated using a complicated and undisclosed formula. But what everyone knows is that it is pegged to the state of the local economy. Singapore’s economy was expected to grow at around 1.5% in 2012 vs the 3.5% to 4% expected this year, explaining the bumper payout this year.
Prior to the announcement on Thursday, I found myself fervently rooting for the economy (not that it makes a difference). And I doubt I was the only one. Many could be thinking:
So what if a loose immigration policy is needed? The daily noise at the construction site next door can also be justified if I can get one more month of bonus! The negative consequences of high economic growth like rising prices (especially on houses and cars) and packed trains might also be bearable for the sake of GDP growth?
Using GDP growth as an indicator has its flaws. If I break my window and get someone to replace it, it’s a positive contribution to GDP even though there’s really no value add. And in recent years, most of the fruits of GDP growth have actually gone into the pockets of the few. But it’s still hard for the country not to obsess over GDP when 30% of the citizens’ income is pegged to it.
3. Frame income annually to reduce the “windfall spending behaviour”
“Any plans for a year-end holiday? Getting that new wallet/handbag from Chanel/Prada? How about an additional charm from Pandora? Or a new Samsung Note III?”
These questions were buzzing in the office on Friday. Most people treat these year-end payments as a windfall, something on top of their income and thus, most of it is likely to be spent on frivolous stuff. It’s like a person becoming more carefree with their expenditure after striking the lottery.
However, the 15 HWW household doesn’t see it this way. These bonuses are actually part of the annual package to compensate us for the “blood, sweat and tears” in the office. Furthermore, we have already made an estimate of these bonuses and included them to come up with our annual income of $120,000. Since our minimum target is to save $70,000 of that income, we are more unlikely to blow the bonuses on unnecessary big-ticket items.
And seriously, the 13th month bonus should not even be considered a bonus. We are paid for the days/weeks we work. Otherwise, why are we paid the same in February even though we work at least two days less compared to most other months? The 13th month bonus is actually just deferred (or worse, withheld) pay for the extra 4 weeks we work every year.
Therefore, framing our income annually instead of obsessing over the usual monthly paycheck would also make us view our bonuses differently. However, if you’re feeling miserable because all your colleagues are all out there splurging their bonuses, perhaps you could use the “additional 0.2-0.4 months” that was above the expectation to give yourself a small treat. That’s probably what I would do. =)