Pay Commission: New wine in old bottle

M. Mujibul Huq, a former cabinet secretary, is now heading the sixth pay commission constituted by the alliance government. In this context, it is relevant to mention that Huq will be the chairperson of a pay commission for the second time, a rare distinction he can take pride in.

Tap here to add The Daily Star as a trusted source

The antecedents
There is no established machinery such as a permanent pay commission for determining civil service pay. The determination of pay in the civil service remains technically complex and politically sensitive. The practice has been that depending on the demands made by the civil service unions at various levels, the government would first respond to the demand by providing dearness allowance based on considerations of inflationary trends. Sometimes, the government would give ad hoc increase in percentage terms, which would be related to the basic pay drawn by a civil servant. Finally, government would establish temporary pay commissions and revision of pay would be made based on the recommendations of the commission and the availability of the funds. The government has thus to balance the demand for increase in pay and the capacity of the government to meet such demand.

What should be fair pay
What should be the fair pay for a civil servant has remained an elusive question over the years. The general consensus, however, is that in spite of periodic upward revision, the pay given to civil servants is considered to be not a living wage. Studies conducted in 1993 and 1996 have drawn attention to this issue (World Bank, 1996). The study of 1996 has shown that in terms of 1962 salary level, the 1994 salaries of secretaries, joint secretaries, and deputy secretaries suffered a sharp decline in real terms. It has concluded that such decline emanated from "the government's long standing policy of expanding employment while eroding salary."

The study has also pointed out, based on the Consumer Price Index (CPI) of 1969-70, that the salary level of a secretary would be Tk. 260,000 in 1994. This conclusion is drawn based on what nominal salary in 1994 would be if purchasing power of 1962 salary is maintained by increasing the salary based on CPI. By the same logic, the pay of a joint secretary and a deputy secretary would respectively be Tk. 199,300 and Tk. 132,170.

The study has also pointed out that the private sector salaries are much higher than those of the public sector at the management level. It has also argued that the salaries of civil servants cannot be identical with those in the private sector because the former has a more secure job. At the same time, scales of pay should bear a reasonably uniform relationship to them and should not get too far out of line.

One of the ways to increase salary of the top management level suggested by the study is the retrenchment of low-level functionaries. In BCS, the officer-staff ratio is very high, an issue that will be taken up later. In 1998, the total number of officers and staff in the government and statutory bodies was 932,050, of which 64 percent belonged to Class III category and 22 percent to Class IV. Together they constitute 86 percent of the total number employed in the public sector. There is evidently good logic in this approach but it is more easily said than done. The retrenchment proposal is sure to become a political issue, which no government can afford to resort to. However, under pressures from the donors, retrenchment had taken place in some of the public statutory bodies.

Finance minister's guidance
Even before the newly constituted pay commission could start functioning, the finance minister made a preemptive statement. It is said that there will not be any separate pay structure for police and bankers. This was the guidance given by the finance minister when the commission met him. In respect of bank employees, however, the minister is reported to have said that the bank employees might get some additional incentives. For the police personnel, the minister did not say anything. It is reported, however, that two more members would be added, one representing the banking community and the other from the police. The intention evidently is to allow these entities to press home their points. The minister is said to have further asserted that the previous twenty grades will remain unchanged.

Payment of income tax by public sector employees
An important issue which is included in the guidance given to the commission relates to the question of payment of income tax. According to the minister, about 100,000 employees of the government do not pay any tax although they earn enough to be under the tax net. It is not clear what exactly is meant by this. None is exempted from payment of taxes. The tax assessed on the amount of salary drawn is, in theory to be paid by the government. Over and above the amount, there can be other legitimate source of income, which must be taxable and paid not by the government, but by the relevant official. If, on the other hand, it means taxes on amounts drawn as salary have to be paid by the official himself, there will be erosion of salaries. This aspect needs to be looked into by the pay commission.

Examples from other South Asian countries
The chairperson of the commission is reported to have said that it would review the pay structures of India and Pakistan, and would try to come up with a balanced report acceptable to the government and the employees. This indeed will be a difficult task. Will it be possible to match the level of pay that is there in either India or Pakistan? How far the Indian example will be relevant for Bangladesh remains an open question. This is because the cadre system in India is not structured into unified grading system, which exists in Bangladesh. The cadre system in India is grouped into All India Services (AIS), and the state services, and other central services grouped into A and B categories. In category A are included postal, audit and accounts, customs, income tax, railway accounts, central trade etc. The maximum pay in such cadre is Rs. 24,500.00 while in AIS it is Rs. 26,000.00, perks excluded. The Indian cabinet secretary gets Rs. 30,000.00 as against Tk. 15,500.00 for Bangladesh.

It is said that in case of India, if perks are added, a secretary's pay would be Rs. 61,000.00 and that of cabinet secretary Rs. 65,000.00. Some in India plead in favour of a flexible system of compensation package for IAS and IFS officers and make it closer to what the market would pay such officers with similar experience. The World Bank study (1996) spoke more or less in similar vein but admitted that it would not be possible unless there was a downsizing of government.

In case of India, the Fifth Pay Commission recommended an increase in salary to be linked to a cut in the number of employees on the government rolls. The United Front government accepted the wage-hike part but not the downsizing.

Past experience
If past experiences are any guide, there will be some pay hike but the monolithic unified grading system will continue as already indicated by the finance minister. Besides, for political as well as social reasons, the government is unlikely to accept the logic of downsizing. It may be argued that downsizing as a cost cutting measure is one of the options. Other options include, but are not necessarily limited to, cutting down other costs arising out of uncontrolled and unnecessary expenditures to which the Public Expenditure Review Commission has drawn attention.

AMM Shawkat Ali, PhD, is a former Secretary, Ministry of Agriculture.