Well compensated?

Solving the mystery of civil servants’ total wages is a tough task

There is a common belief in Pakistan that civil servants are at a disadvantage compared to their counterparts in the private sector in terms of their salary packages. A recent study by the Pakistan Institute of Development Economics (PIDE), Islamabad, suggests otherwise. The study, Cash Poor, Perks Rich, quantifies the total pay package for each grade by consolidating pay, allowances, non-monetary benefits and intangible rewards. This can help resolve the so-called mystery around the civil servants’ total compensation.

Whether civil servants are adequately paid is widely debated but has never been thoroughly investigated. One reason is that not all payments and rewards in Pakistan’s civil service are on the pay slip. PIDE’s study on civil service compensation, within the broader theme of civil service reforms, offers valuable insights in this regard. It is certainly a tough exercise because the current reward system is a cobweb of cash remunerations, in-kind payments and intangible rewards.

The study attempts to quantify the civil servants’ total cost by collating information on cash payments and the market value of perks and privileges. Not to forget, this is a lower bound estimation for various government entities as only those allowances are included that are available to everyone. Adding ministry-specific allowances will make the estimates higher and might make intra-government differentials look inequitable. The study relies on several government documents and datasets to estimate the total cost as a sum of wage, allowances, in-kind and intangible perks.

Wage plus allowances constitute the take-home salary of civil servants - the salary that appears on the salary slip. This salary includes monetary wage, rental ceiling, medical allowance, conveyance allowance, monetised transport facility (for grades 20-22), along with other general allowances, on which information is readily available across the ministries. These may include special pay, ad hoc, senior-post, orderly and qualification allowance. These allowances make up a large portion of the cash received by the civil servants. Surprisingly, instead of indexing salaries and developing a proper payment system, the approach of different pay and pension committees has been to provide arbitrary allowances to compensate for inflation.

The study relies on several government documents and datasets to estimate the total cost of a civil servant as a sum of wage, allowances, in-kind and intangible perks.

According to the study, 74 such allowances are standard across many government departments and ministries. To mention a few, these include allowances for mobility, haircutting, education, special travelling, research, entertainment, firewood, washing, mobile phone, medical risk, fuel, etc. Most of the allowances can be easily merged to consolidate the pay structure.

It is pertinent to note that different allowances increase the cash payments above the basic pay by varying degrees. House allowance increases the compensation by 45 to 55 percent, ad hoc by 10 percent, medical allowance adds 15 percent, and special pay adds 20. For grades 17 to 19, these allowances constitute 54 to 57 percent of the total pay. And for grades 20-22, the allowances form more than 70 percent of the total income. Thus, with the inclusion of different allowances, civil servants’ compensation increases manifold over and above the basic pay.

Other than tangible cash allowances, civil servants also enjoy in-kind allowances or perks that add to the total cost of keeping a civil servant. These perks include in-patient medical cost, which is reimbursable upon submission of invoices, shadow cost for using an official vehicle despite the monetisation policy, the market rental value of government housing, the use of servants provided by the government, paid utility bills, and many others. These are hidden costs because they are not mentioned on the salary slip. These perks further add to the civil servants’ total cost: 39 percent for grade 17, 34 for 18, and 38 for 19. Starting with grade 20, the percentage increase in monetary terms shoots up to 53 percent for grade 20, 60 for 21, and 57 for grade 22.

So, with higher grades, the proportion of cash allowances in pay and quantified perks in the total cost increases. Moreover, the government housing facility, given as an in-kind benefit, has never been accounted for in the total cost of the civil servants. Nor has its opportunity cost to the government ever been calculated. Likewise, using official vehicles for personal use by grade 20-22 officers increases the total cost by more than 1.2 times the basic pay. Roughly, civil servants of grade 1 to 19 officers get a total package (including allowances) around 3-4 times their basic pay. For grades 20 to 22, the total package is approximately 7 to 8 times their respective basic pays.

If the allowances and perks are monetised, it will break the myth of low salaries in the public sector. Monetisation can thus enhance transparency and fairness and reduce administrative overheads and hassles.

The writer is a research   economist at the Pakistan   Institute of Development   Economics (PIDE), Islamabad

Well compensated?