Pakistan postpones pay commission implementation, 35 to 40% interim relief may be granted.

The government has decided not to implement the recommendations of the pay and pension commission from the coming fiscal year because of budgetary constraints and pressures from donor agencies. 
Sources in the finance ministry told Dawn on Thursday that the decision had been taken after a meeting with officials of the World Bank and Asian Development Bank. 

However, a salary increase of between 35 and 40 per cent will be given to federal government employees as an interim relief. It costs about Rs40 billion to the exchequer. 

A major problem in implementing the salary increase proposal was a demand by the ministry of defence about increasing the salary of civil employees of the armed forces. 

The ministry of defence wants the salary of civil employees working in the services made equivalent to that of armed forces personnel. 

The salary of the armed forces personnel was raised by 20 per cent in the last quarter of 2009 and was increased by 100 per cent in January this year. The annual impact of the increase is Rs72 billion. 

Meanwhile, donor agencies have asked the ministry of finance to improve the state of economy, especially of the power sector, before taking a major stop because implementation of the recommendations of the commission would be an additional burden. 

“The main portions of the recommendations of the commission have been put in abeyance and only the relief part will be taken up in the next budget,” the official said. He said there would not be any revision in employees’ pay scales. 

The government has also decided to set aside suggestions relating to monetisation of perks and privileges and increase in medical allowance made by the commission headed by former governor of State Bank Dr Ishrat Husain. 

“The international agencies are concerned about the regular resurgence of circular debt and want to streamline the power sector that was not only incurring burden on the economy but also causing downturn to other relevant sectors like the petroleum sector,” the sources said.


Salient Features of the pay hike proposal


As part of a major overhaul of the government machinery, a 50 per cent across-the-board raise in the pay and pension of civil and military personnel from July 1 this year has been proposed. The proposal will have an impact of about Rs507 billion on the national exchequer over three years. 
The proposal is part of a 131-page report submitted to Prime Minister’s Adviser on Finance and Economic Affairs Dr Abdul Hafeez Shaikh by a 21-member Pay and Pension Commission led by Dr Ishrat Hussain after year-long consultations with federal ministries, provincial governments, the AJK prime minister and employees’ associations. 

The report makes startling revelations about the deterioration of the quality of 2.84 million public servants in the absence of civil service reforms for years, saying the government is “no longer the employer of choice among young people and is unable to attract and retain people of the right calibre”. 

It recommends a ban on recruitment in Grades 1-16 to reduce the government’s size. 

In 2006, the Federal Public Service Commission found that 25 vacancies for the Central Superior Service went unfilled. In 2007, the number was 47, and in 2008 the figure rose to 88. At one point, Punjab wanted to recruit 10 district prosecutors in BS-19. Fifty-four candidates appeared for the selection process, but only one of them reached the final stage. But even he could not clear his viva. The report has recommended excluding the bureaucracy from the jurisdiction of the National Accountability Bureau and similar provincial agencies, suggesting instead “a strong, open, transparent and objective performance management system” on the pattern of Malaysia and Singapore for public officials. 

The commission has proposed immediate exclusion of groups like teachers, lecturers, professors, professionals of health departments, police, internal security forces and subordinate judiciary from the purview of the national pay scale. 

“They will have their own pay scales that will vary from each other. These professionals will be excluded from the purview of the Civil Servants Act and will be public servants with their own rules and regulations.” 

Under the plan, the existing 22 pay scales of civilian employees will be reduced to 14. The entry level for officers has been proposed as BS-10 instead of BS-17. 

All ad hoc relief allowances granted to civil servants since July 1999 will be merged into the pay scales of 2008 and then discontinued. 

The minimum and maximum pay after the merger will be increased by 50 per cent in three years. 

The salaries will be increased by 15 per cent on July 1 this year, followed by another 15 per cent on July 1, 2011, and 20 per cent in 2012 when the new scales will become fully operational. 

The pay scales of armed forces will be increased similarly. 

The existing employees will have the choice to continue with the BPS-2008 or opt for the new scales which will apply to all new entrants. 

An amount equivalent to the housing, transport and outdoor medical facilities of government servants will be made part of the pay package. However, the value of the benefits will not be treated as pensionable emoluments. 

Like Singapore, civil servants will get financial assistance for owning houses. They will be encouraged to utilise their defined contribution account for down payment and pay monthly instalments financed from monetised amount in salaries, because simple payment of the benefits in salaries will encourage higher consumption. 

Members of subordinate judiciary will continue to avail housing and transport facilities at the places of their postings. 

PENSION: The pension of two categories of existing pensioners will be increased by 50 per cent and 65 per cent in three years. Those who retired before Dec 1, 2001, will get 20 per cent increase on July 1 this year, another 20 per cent next year and 25 per cent in 2012. The increases for those who retired after December 2001 will be 15 per cent, 15 per cent and 20 per cent over the three years. 

All new entrants into government service will be governed under the Defined Contributory Scheme (DCS) to become effective on July 1. 

The rate of commutation will be reduced from the current 35 per cent to 25 per cent and accrual rate will be adjusted provided their pension is somewhat higher than the one which would have been admissible if the person had retired under the existing structure. 

Family pension of those who die after retirement will be increased from 50 per cent to 75 per cent. 

The minimum pension will be increased from Rs2,000 per month to Rs3,000 and minimum family pension from Rs1,000 to 1,500. Ad hoc raise given to retiring employees in 2005, 2006 and 2008 will be discontinued. 

The federal establishment division and provincial services and general administration divisions will be converted into human resource divisions. GOVERNMENT SIZE: The size of government will be gradually reduced by not filling vacancies in grades 1-16 (except for education, health, police and judiciary) and introducing information technology tools. 

The size will be further reduced through privatisation of corporations and companies and abolition of federal ministries and divisions whose functions have been transferred to provinces and local governments. 

The impact of the measures has been estimated at Rs507 billion, including Rs203 billion in 2010, Rs190 billion in 2011-12 and Rs114 billion in 2012-13. 

The amount is estimated to be 10 per cent, 8.2 per cent and 4.2 per cent of the current expenditure in the first, second and third year. The salary and pension budget will increase by 25 per cent next year, 20 per cent in 2011-12 and 10 per cent in 2012-13. 

The increase in basic pay and allowances will cost Rs267 billion, monetised value of perks Rs174 billion and pensions Rs66 billion. SPECIAL ALLOWANCES: Special allowances will be given to teachers of science, mathematics, computer science and English and teachers and health professionals serving in rural, tough and remote areas.The commission mentioned two resolutions adopted by the National Assembly and the NWFP Assembly recommending implementation of the proposals.


Source : The Dawn.