Under guidelines which came into effect in July, ministries and statutory boards must reduce their headcounts by three percent in the current fiscal year to March 2005 and by the same margin for the following two financial years, it said in a statement.

Failure to meet the guidelines will result in a headcount surcharge of S$10,000 (US$5882) for each employee above the authorised limit.

"This is not an exercise in blindly reducing headcounts," the finance ministry statement said.

"The Ministry of Finance has issued guidelines stating that agencies will need to take a close look at what functions they are undertaking and how they are using their manpower.

"Whichever way ministries choose to meet the headcount management framework, it will be the result of each agency carefully examining its functions, resources and manpower needs."

The streamlining exercise will involve nine percent of the 90,000 civil service workers, but defence ministry employees and teachers are exempted from the new guidelines.

Then Deputy Prime Minister Lee Hsien Loong, in his budget speech in March, said the government was considering a headcount tax after payrolls in the public service sector increased 17.6 percent from the fiscal year to March 1997 to the financial year ended March 2004.
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