Pay commission says government’s expenditure to rise by 64%
In a move that has drawn mixed reactions, the highly anticipated pay commission report has proposed up to more than doubled salaries for public servants, with the proposed lowest to the highest basic salary grades ranging between Tk8,200 and Tk80,000.
The latest proposal sees a higher spike than the previous pay commissions: the two most recent commissions in 2005 and 2009 had asked for 94% and 96% hikes respectively, while the current commission has recommended up to 112.5% salary hike, according to the Finance Ministry.
The Eighth National Pay and Service Commission (NPSC) Chairman Muhammad Farashuddin submitted the final report to Finance Minister AMA Muhith yesterday, recommending the government to spend 63.7% more on its employees.
The commission also suggested that all kinds of deputation appointments be cancelled in the government administration, Farashuddin said, adding that the government has also been advised to introduce an option to allow public servants to retire after 20 years of service, instead of the existing 25 years.
He added that the salary hike proposal would have little impact to the annual enhancement of budget and revenue earning of the country.
The massive salary hikes were proposed as an incentive to draw in better educated talents into public service, to raise the financial status of government employees, and to keep them in service to ensure good governance to an expanding economy, Farashuddin said.
While preparing the recommendations, the commission counted six-member family units – unlike the four-member units counted before – as well as considering six years’ worth of accumulated inflation of 63%, said
Farashuddin, a former central bank governor.
Public servants’ salaries in other countries, as well as the compensations offered by the private sector organisations were also brought into consideration in the preparation of the proposal, he added.
The 250-page report was submitted to the finance minister at his secretariat office auditorium yesterday. Finance Secretary Mahbub Ahmed and 17 members of committee also attended the handover ceremony.
Sources said an additional Tk20,000 crore will be kept aside for the payment of salary as per the recommendations. Currently, the government spends Tk38,000 crore for the payment of salaries and pensions of government staffs and officials.
Salaries
According to the proposal, the existing 20 pay grades would be reduced to 16 grades, while classification of posts – such as distinctions between first-class and fourth-class employees – would be cancelled to introduce only grade-based identification.
Farashuddin added that only monetary difference would remain between two separate grades, with a total of 20 tiers suggested between the ninth grade and the 16th grade.
The commission also suggested withdrawing the efficiency bar – a regulation that has existed since colonial times, to stop the increment for officials after a certain level.
The selection grade and time scale would also be withdrawn, as these have prompted many cases to be filed with courts, meaning government employees would only reach higher grades through promotion.
Officials would also enjoy an annual compound 5% increment in every grade, resulting in the salary of fourth to sixteenth grade employees to double within 15 years.
Under the proposal, the lowest grade’s basic salary would increase 100% to become Tk8,200 from Tk4,100. The main salary of the highest grade would also be doubled to become Tk80,000.
Farashuddin said the existing ninth and eighth grade would be merged to create a new eighth grade with a basic salary of Tk25,000.
The pay scale report suggests a ratio of 1:9.076 between the lowest and highest salaries, a ratio which had remained the same for the past few commissions.
However, according to the proposal, a senior secretary’s basic salary would be fixed at Tk88,000, while the basic salaries of the cabinet secretary and the PM’s principal secretary would be Tk100,000. They would be paid 5% to 10% of the basic salary or Tk4,000 for any additional duty.
Recommendation was also made to increase existing pensions by 90%, Farashuddin said.
Allowance
Regarding 20% dearness allowance, Farashuddin said it would be abolished from 2015-16 fiscal year when the eighth pay commission comes into effect.
The proposed raise in salary and pension amounts to only 14% of the current fiscal year’s budget, Farashuddin said, adding that for the earlier pay commission the number was around 15%.
Observing that allowances should be rationalised, he said the commission has recommended against giving any new allowance as the salary hike has been massive.
Recommendation has also been made to introduce a four-stage house rent allowance for officials based in metropolitan areas in Dhaka, Chittagong, Narayanganj, and district and upazila levels.
New benefits
According to the proposal, an accommodation scheme was recommended to allow groups of government employees to purchase flats under a 60:40 ratio with the developers on pieces of government khas land or abandoned buildings; a move which Farashuddin hoped would boost the country’s real estate sector.
The government would provide 50 months’ worth of basic salaries to a group of at least five or six public servants if they can show documentation of land purchase, Farashuddin also said.
In another experimental offer lasting one year, the government would provide loans of Tk25 lakh to third and fourth grade employees to purchase cars. The staff of the government autonomous bodies will also be given the same amount as loan, but the car maintenance costs would be the responsibility of those autonomous bodies.
For the first time, the government was also recommended the introduction of a comprehensive insurance system for all public servants, including life insurance at a Tk100 premium and health insurance at Tk400 premium.
If this is implemented, there would be no cash transactions for government employees at hospitals, as they would submit their insurance demand with the hospital. The move would boost the insurance sector and reduce government expenditure, Farashuddin hoped.
The insurance premium would later be used to construct a modernised 500-bed cardiac hospital, he said.
The pay commission also suggested to move away from the existing 12-month-long PRL (post-retirement leave) system and return to the previous LPR (leave prior to retirement) system of 18 months. The commission chairman also said there was no legal base for the one rank-one pension system.
Welfare, insurance, and pension fund management should be reorganised and empowered, the commission observed. In order to do so, the Government Employees Welfare Association would sell 20-25 katha of its land near the capital’s Dainik Bangla area for around Tk400 crore and use it as capital to set up a bank named “Shamriddhir Shopan,” the commission chief said.
Further review was required to ensure better service from public servants, while assessment was needed to reduce the facilities gap between the cadre and non-cadre officials of the government, the commission observed.
A new organogram should be introduced for officials who have remained in the same post for a long time, Farashuddin said, adding that it has been suggested to execute the recommendations of the National Pay and Services commission 2015 in line with the 1977 pay and service order.
The commission also recommended the government to form a permanent pay commission or service commission or service reform commission to look into the services issues that were not addressed.
The government had formed the 17-member commission, headed by Farashuddin for more than 1.3 million current and former public servants. Presently, there are more than 832,000 government employees and around 500,000 pensioners in the country.
Other recommendations
The government’s attention was also drawn to Village Defence Party (VDP) – also known as the Gram Police – half of whose salaries could not be paid by the authorities concerned at the union councils. Government-procured rice would be sold to the VDP personnel at a lower price, Farashuddin pointed out.
The MPO-based colleges and schools should wait six more months than the rest of the administration to implement the proposed pay scale, he said, adding that some of the profitable MPO-based institutes would have to submit a portion of their earnings to the government exchequer.
The chairman added that the boards of directors of these profitable entities that are not depended on government financial support – can fix their own salary structures with permission from the Finance Division.
The commission was against separate pay scales for non-profitable autonomous bodies including state-owned banks and public universities; but supported a separate salary structure for Bangladesh Bank – a structure which would have to be approved by the Finance Division.
Reactions
After receiving the report, Finance Minister AMA Muhith said he was very happy with it, adding that the policymakers of the Finance Division would now go through the report before its execution.
The government would now form an implementation committee after getting approval from the cabinet, while the new pay structure would come into effect on July 1 next year.
Asked whether there would be any inflationary impact of the new pay scale, Muhith said: “Absolutely not.”
Meanwhile, Mirza Azizul Islam, adviser to a past caretaker government, said such a huge salary hike would definitely increase the demand of products in the market and have a negative impact on product prices.
His views were echoed by Ahsan H Mansur, executive director of Policy Research Institute Bangladesh, who said such a huge salary hike would cause an inflationary pressure in the market. He also recommended that the proposals of the pay scale commission be executed in phases.
Former cabinet secretary Shahadat Hossain, however, praised the move, claiming that it would reduce the inferiority complex of government servants and boost their financial status.
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