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LABOUR chief Lim Boon Heng does not see the Central Provident Fund (CPF) rate cut being restored any time soon, saying the principles behind the cut still apply.

In a commentary published yesterday in the National Trades Union Congress (NTUC) newsletter NTUC This Week, the NTUC secretary-general says robust economic growth and employment last year and early this year have led people to ask whether the cut in employers' contributions to CPF will be restored.

'This shows a fundamental lack of understanding of why we decided to retune the CPF in 2003,' he says.

In 2003, key changes were made to the CPF scheme. Long-term target contribution rates were set at 30-36 per cent for those aged below 50 and 24-30 per cent for those aged 50-55, and the salary ceiling for contributions was lowered from $6,000 to $4,500. These changes were implemented progressively over three years.

There was also an immediate 3 percentage point cut in the employers' contribution rate to 13 per cent for workers aged 50 and below on Oct 1, 2003. For workers aged 50-55, the rate was cut by 4 percentage points in two stages from 13 per cent to 9 per cent.

The employee's contribution rate for older workers was also cut, from 33 per cent to 27 per cent in two stages.

Noting that the final adjustments were made only on Jan 1 this year, Mr Lim says: 'Now is not the time to consider any restoration.'

The NTUC 'actively supported' the changes to the CPF scheme, which were made for three reasons - to make wage costs more competitive, to create and save jobs, and to make older workers more employable, Mr Lim says.

'Today the same principles apply . . . As it is, the pace of restructuring and relocation is relatively high. Retrenchment figures are high. We should not push more employers to relocate faster than we can create new jobs for those who will be displaced.'

Higher CPF contribution rates would hit many people in sectors where Singapore's comparative advantage has been eroded, he says.

'It would mean less take-home pay for lower-income workers. If we care for them, then we should not push for higher CPF contribution rates.

'For the foreseeable future, I do not see any prospects for higher CPF contribution rates. We need certainty in CPF contribution rates. Then workers can plan on the basis of these contributions, for example, for their housing. The new rates are more sustainable.'

Mr Lim warns with the lower rates, the scope for cuts to cope with future recessions is limited, which is why employers must build up flexible wage systems, especially the monthly variable component.

While this is under way in unionised companies, employers in non unionised companies should get their act together now, Mr Lim says. 'They should not expect to be bailed out again by a CPF cut.'