Saturday, May 28, 2011

Pakistan considers hike in salary for it's employees

In the upcoming budget, the government is considering two main proposals to jack up take-home salaries of public sector employees: merging ad hoc allowances (except the last 50 percent) into basic pay scales and granting 10 to 15 percent relief allowance, as per our source.The Regulation Wing of the Ministry of Finance is calculating the cost of merging ad hoc allowances into basic pay and granting relief allowance in the next budget. It is also learnt that despite spending taxpayers’ money to prepare the Pay and Pension Commission report under the headship of Dr Ishrat Hussain last year, the government has thrown the Commission’s recommendations into the bin. Instead, the government is going to allocate Rs118 billion for the payment of pensions, out of which 90 percent will be utilised for the pensions of defence personnel.

“The pension liabilities of the civilian side are going to increase manifold in the next few years,” a senior official at the Ministry of Finance told our sources here Friday. “People inducted in the public service during the tenures of former Prime Minister Mohammad Khan Junaju and during the first term of Benazir Bhutto will start retiring soon, resulting in the pile up of liabilities of civilian pensions in the next few years.”
Many key officers involved in the budget making process are going to retire in the next few months and are thus doubly interested in the merging of at least two ad hoc allowances into basic pay, as it will increase benefits for them at the time of retirement.
Major recommendations in the last Pay and Pension Commission report, which were never made public by the government, but are available with our sources reveal that the P&PC recommended merging all ad hoc relief allowances granted since 1999 into the basic pay scales for each grade.
The Commission recommended reducing the number of pay scales from 22 to 14; five for officer grade and nine for all other grades. The number of intervening stages for reaching maximum scale was proposed to be reduced from 30 to 15. The maximum revised pay scale would consequently be much higher.
The report recommended raising the basic pay scales by 15 percent in 2010, 15 percent in 2011 and 20 percent in 2012. So by 2012 the cumulative increase in pay scales would be 50 percent compared to 2009 pay scales. It recommended monetising the housing and transport in-kind perks and making them part of the basic pay scale.
Most importantly, the report said all Ad hoc Relief Allowances (ARAs) granted to civil servants since 01-07-1999 will be merged into the existing pay scales 2008. The pay scales for subordinate judiciary, prepared in consultation with the chief justice of Pakistan and from chief justices of High Courts, will include the Special Judicial Allowance and Entertainment Allowance and the entire pay package would be pensionable.
The pay scales of Armed Force after merger of ARAs would also be increased by 50 percent during the same three-year period as mentioned above for the BPS scheme.
“All ad hoc relief allowances granted so far since 01-07-1999 should be discontinued as they have now become part of the basic pay scales-2010 and professionals pay scales-2010 after their merger in BPS-2008,” read the report.
It was suggested that the basic rationale for granting relief allowances should be either location (hard areas or far-flung areas), special job requirements (duties under adverse, hazardous and onerous conditions) and scarcity premium for skills that are in short supply. Special Allowances should be awarded to teachers (from primary to secondary) in Science, Mathematics, Computer Sciences and English. Female teachers in these subjects may be allowed even higher rates of special allowances; the quantum of these allowances would be determined by the government concerned.
“Housing, Transport and Outdoor Medical facilities provided by the government should be monetised and equivalent amounts should be paid in cash to all civilian employees as part of total pay package w.e.f. 01-07-2010 in a phased manner. The value of these monetized benefits will, however, not be treated as pensionable emoluments,” read the report. “The scheme of monetisation of Housing, Transport facilities will not be applicable to the members of the subordinate judiciary who will continue to avail these facilities at the place of their postings. Reimbursement will be made for indoor medical treatment at designated hospitals after deducting 15% of the amount of the medical bill.”
The monetised value of housing, allowed under this report, can be redirected for long term asset creation on behalf of government employees. Simply adding the monetised value of housing in the salary is likely to result in imprudent use and increase in current consumption by civil employees.
All new entrants into government service/recruits will be governed under the Defined Contributory Scheme (DCS) and the scheme should become operational by July 1, 2010. An institutional arrangements to mange, operate and regulate the DCS of pension may be made on regular basis, suggested the report.
“The rate of commutation will be reduced from 35% to 25% and accrual rate may be adjusted provided the pension/commutation of the retiring employees will be somewhat higher than the one which would have been admissible if the person had retired under the existing pay scales,” said the repor. “Reduction factors will be introduced for voluntary early retirement but these factors should not act as disincentive for voluntary earlier retirement.”
The pension of existing pensioners may be increased by 50% and 65% in three years w.e.f. 01-07-2010. Those who retired before December 1, 2001 should receive 20 percent increase in July 1, 2010, another 20 percent increase in 2011 and 25 percent increase in 2012. The corresponding rates of increases for those who retired after December 1, 2001 will be 15 percent, 15 percent and 20 percent respectively. 
Source : Pak Tribune.

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