READ ALSO: Proposed pay hike for public sector up to 45% President Benigno S. Aquino III endorsed to Congress today a proposed bill entitled, “Salary Standardization Law of 2015,” or SSL 2015, for its consideration and enactment into law. The bill mandates a four-year P226 billion compensation increase for the national government’s 1.53 million civilian and military and uniformed personnel.
Photo from the Department of Labor and Employment.
According to Department and Management (DBM) Secretary Florencio B. Abad, “the compensation package is composed of a salary increase, a mid-year 14th month pay, and an enhanced performance-based bonus (PBB) system. The bill seeks to increase the basic salary of covered employees on the average by 27%, while the 14th month pay will further raise compensation by 8%. The enhanced PBB is equivalent to 1 to 2 months’ salary or an average 10% increase in salary. Government personnel who play a greater role and carry a heavier responsibility in improving government performance, will receive a higher bonus.
“At the end of the four tranches,” according to Abad, “government compensation, on a weighted average basis, is estimated to increase by 45% and should be around 84% of private sector pay. The lowest salary grade, Salary Grade 1, will be about 154% of the market, while the highest, Salary Grade 33, which is the President, will be about 70% of the market.” Currently, government pay, on the average, is only 55% of market rates.
“The adjustment,” Abad added, “is mandated by the Joint Resolution No 4 of Congress of 2009, which provided for a review of the compensation and position classification system after three years from the last year of the adjustment (which was June 1, 2012) to determine “the competitiveness of government pay in relation to the private sector” and “the compensation strategy to bring government pay closer to market rates”. Accordingly, with the help of private sector consultants, Towers Watson, the DBM undertook and completed the study in July 2015.
“In structuring the compensation adjustment, we were guided by five parameters: (1) The minimum basic salary—Salary Grade 1—shall be raised from P9,000 to P11,068 a month; (2) To attract and retain competent and committed personnel, the new compensation level for all salary grades shall be at least 70% of the market; (3) To recognize differences in duties and responsibilities, there shall be no salary overlaps; (4) The link between pay and performance shall be strengthened, especially for those in the higher salary grades, and (5) The structure of the adjustment should temper the cost of benefits (i.e. GSIS premiums and PhilHealth contributions) and allow for higher take home pay, especially for those in the lower salary grades,” Abad clarified.
As a consequence of Republic Act 10653, which raised the amount of benefits exempted from tax to P82,000, for majority of civilian employees, those belonging to Salary Grades 1-11, and who are only receiving the existing tax-exempt 13th month pay, the cash gift and the productivity enhancement incentive (PEI), their full 14th month pay and full PBB will also be exempt from tax. For those belonging to Salary Grades 12-16, who also are only receiving the existing tax-exempt 13th month pay, cash gift and PEI, only their full 14th month pay will be exempt from tax.
“The first tranche of the adjustment will take effect on January 1, 2016, and the subsequent three tranches on everyJanuary 1 thereafter until the final tranche in 2019,” Abad added.
Abad further clarified that “under the Constitution, no increase in the compensation of the President and the Vice-President shall take effect until after the expiration of the term of the incumbent during which such increase was approved. Similarly, no increase in compensation shall take effect until after the expiration of the full term of all the members of the Senate and the House of Representatives approving such increase.”
For the regular members of the Cabinet, Abad said, “the compensation adjustment shall take effect only on July 1, 2016.”