Rationalising national pay structure
THE twenty national pay scales effective from July 1977 emanated from the recommendations of the Pay & Services Commission of 1976-77. The minimum and maximum basic pay were Tk.225 and Tk.3,000 per month, respectively. These twenty pay scales covered almost all the employees within the civil service system, including those who were working in various corporations, autonomous bodies, banks, and financial institutions.
However, successive governments had to take measures to adjust the salaries of the public sector employees by setting up National Pay Commissions at four to eight years intervals.
In 1985, for instance, a Pay Commission doubled the basic pay, and in 1991 another Commission increased the same by about 1.7 times, and in 1997 the increase was about 1.5 times, together with occasional payments of "dearness allowances" during the intervening periods. The present salary structure also has 20 distinct national scales, which came into effect from January 2005, with a minimum basic pay of Tk.2,400 and a maximum of Tk.23,000.
Currently, an official move is on to enhance the salaries by about 1.7 times, with a minimum pay of Tk.4,100 and a maximum of Tk.40,000.
An efficient salary structure should offer pay rates that are competitive both internally and externally, and maintain internal equity in grading and compensation. A good indicator of the efficacy of the salary structure is the salary compression ratio, i.e., the ratio of the highest salary to the lowest.
One study (2002) reveals that the salary compression declined from 1:46 in 1962 to 1:10 in 1997. An even more disconcerting aspect of salary and benefits is that, even though the compression ratio between officers (Class I and II) and supporting staff (Class III and IV) in Bangladesh is around 1:5 based on salary grade structure, it drops to 1:2 when actual "take-home" payments are taken into account. Thus the average salary of an officer in 1993 was about Tk.8,300 per month compared to Tk.4,000 per month of a staff member.
This is because Class III and IV staff are entitled to a number of additional allowances, as well as exemptions from certain deductions. Moreover, the existing salary structure does not allow for differences in professional skills, educational level, or the nature of the job. So doctors, engineers, teachers, revenue or administrative officers entering Class I positions all receive the same salary.
Hence, most critics of the present salary structure seem inclined to link many of the problems of Bangladesh's dysfunctional bureaucracy to poor pay of the civil servants.
In bureaucracies, as in everything else, you get what you pay for. In general, the more favourably the total public sector compensation package compares to compensation in the private sector, the better the quality of bureaucracies.
This observation has message, which, in effect, warrants the implementation of certain pay reforms towards improving public service efficiency. And, in this regard, reform measures from the following options may be implemented piecemeal or in combination.
Monetised salary system: There is growing recognition worldwide that a fully monetised salary system is preferable, but will certainly be complicated in Bangladesh. If, for example, instead of occupying a public owned house, a public servant receives a housing allowance matching his rank and the rents of privately owned houses, he is likely to move out of public housing and opt for cash -- thus increasing the budgetary costs unless public housing is sold. The budgetary strain operates on a static basis in the short or medium term -- that is when the government has those facilities and yet pays out allowances in cash.
Over a longer period and on a dynamic basis, the gains are certain and perhaps substantial. The government does not have to own and construct houses; the savings on capital expenditure and expenditure on maintenance can pay towards housing allowances; and the maintenance staffs can be substantially reduced. A study would need to be carried out to determine the pros and cons and the modalities of a monetisation program.
Broad salary range: While most reforming countries have retained the basic elements of the traditional, rigid system of a unified pay structure, they have also begun to build greater flexibility into it. One such initiative is "broad banding." This means that recruits having different professional skills and academic levels enter the service in a broadly banded salary range rather than at a fixed point. More importantly, subsequent increments and promotions are not automatic but are linked to performance.
Profit-based salaries in SOEs: Bangladesh is one of the few countries where the salaries in state-owned enterprises (SOEs) are not differentiated from regular government salaries. The adverse effects that this salary policy is having on the SOEs' performance and the quality of their services are too well known.
Hence, the implementation of remedial measures seems warranted, taking lessons from other countries' reform efforts in this regard. In Pakistan, for example, the Central Bank, financial institutions, and manufacturing SOEs all have their own specific salary scales. There is no uniform SOE salary scale and the salaries of larger firms are usually much higher than that of smaller firms. SOEs are free to set their salary increments based on profitability and ability to pay.
Public service awards: These awards should go to 1-2 percent of performers in each ministry or department, and should be based on performance-related factors such as timely ADP implementation, achievements in revenue collection, expeditious custom clearance, or high quality policy analyses. The awards should have a substantial cash value, say 12-18 months' salary, to be meaningful and to pay for one-time essential capital expenditures such as house and/or car purchase -- which otherwise are made up through rent seeking for the most part. A committee in each department or ministry would select candidates, who would be further short-listed by a centralised high-level committee comprising senior government officials, professional experts, and leading public figures.
Special qualification supplements: These would go to officials who have obtained Master's or PhD degrees from recognised universities in Bangladesh and abroad. Again, this should be substantial -- say 100 percent of basic salary for a Master's degree and 200 percent for a PhD. This would give public servants an incentive to travel overseas for training, even at their own expense, and attract more highly qualified people into the public service.
The benefits of these schemes are likely to outweigh potential costs. Assuming 300 (0.5% of about 60,000 class I officials) meritorious awards -- 100 PhD degree supplements at Tk.200,000 each and 200 Master's degree supplements at Tk.100,000 each, the annual costs would amount to no more than Tk.40,000,000.
Pay research unit: Working in close collaboration with the ministry of establishment, a pay research unit in the ministry of finance would regularly undertake systematic and comprehensive reviews of salary levels and analyse various options for making public sector wages and salaries competitive with the market. It should be able to recommend annual increases rather than leaving these to ad hoc Pay Commissions.
As its first task, the unit should undertake an in-depth study to formulate a path of adjustment of public sector pay which is consistent with fiscal goals and which, over five to seven years, could bring about a paradigm shift in compensation through attrition, early retirement, subdued pay increases at the bottom, and big pay increases at the top paid for by reduction of lower level staffs.
It is true that the implementation of some of the pay reforms indicated above is ambitious in today's Bangladesh context. Fundamental reforms, such as the ones specified in nos. 1, 2 and 3 above are complex, require much more in-depth study and need to be closely tied to fiscal space and goals. Realistically, a major overhaul will take 5-7 years. But, in the interim, at least the remaining three options (nos. 4, 5 and 6) deserve to be considered for implementation, targeting thousands of those outstanding and highly skilled public servants who are "change agents" and committed to uphold the image of public service despite overwhelming countervailing forces.
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