Despite being in a tight fiscal position, authorities are considering increasing the salaries of federal government employees from between 7.5 to 10%. They are also planning to give significant relief to 1.8 million pensioners from July.
According to sources, the finance ministry has prepared two proposals for the government to provide relief to federal government employees. A final decision, however, will be taken by the new cabinet.
The first proposal is to link the increase in salaries with the annualised rate of inflation, which is expected to remain in the range of 7.5%, sources added. This will increase the federal government’s pay bill by almost Rs15 billion. For the next fiscal year, the estimated expenditures for running the civilian government are Rs278 billion and over half of it will be consumed in paying salaries.
In addition to roughly 650,000 armed personnel, the civilian federal government employees number about 600,000. Salaries to the military are paid out of the defence budget but its pension cost is borne by the civilian government.
The second proposal was to increase the salaries by 10%, which will augment the federal salaries bill by Rs20 billion, sources said. Next year’s budget is expected to be tabled before Parliament in the second week of June.
Two factors will influence the salaries decision. The first is the response of the provincial governments, which employ over 2.2 million employees; and secondly, the fact that a 20% increase was already given to the employees of the Federal Secretariat in March this year.
Despite budgetary constraints, former prime minister Raja Pervaiz Ashraf had approved a 20% increase in the salaries of Federal Secretariat employees.
Currently, pay structures have been distorted to a large degree, as there are different pay packages for the judiciary, military, and employees of the Presidency, Prime Minister’s Secretariat, National Accountability Bureau and those serving in various departments.
Sources said there was also a proposal to merge some of the ad-hoc allowances given during the last three years. At the moment, ad-hoc relief allowance of 50% given in 2010, 15% in 2011 and 20% in 2012 are not merged in the basic pay.
Mergers will not only increase the annual benefits of the employees but also increase their house rent and medical allowances. For the next fiscal year, the pension bill has been estimated at Rs155 billion and 76% of it goes on paying the pensions of retired military officers.
Published in The Express Tribune, May 28th, 2013.