The Department of Budget and Management (DBM) announced plans for a new round of compensation adjustments that would raise the basic salaries and benefits of the 1.3 million government workers by up to 45 percent. The proposed pay hike shall be implemented in four tranches over four years starting January 2016 and, upon full implementation, will bring the compensation of all government workers to at least 70 percent of market rate.
The proposed compensation plan is composed of across the board salary increase plus a mid-year bonus equivalent to one month basic salary and the new Performance-based Bonus (PBB) as an added bonus contingent on performance. The mid-year bonus, in addition to the present year-end bonus or 13th month pay, will account for an 8 percent increase in annual salary. The PBB is equivalent to 1 to 2 months basic salary or an 8 to 16 percent increase depending on the position.
“It is about time for another round of increase. Joint Resolution No. 4, which mandates the review of compensation every three years, was fully implemented in 2012. From then until 2015, the purchasing power of the pay of government workers has been eroded due to inflation,” Budget Secretary Florencio “Butch” Abad said in a press conference.
The review of the public sector compensation and benefits is mandated by Joint Resolution No. 4, or Salary Standardization 3 (SSL 3), which states that “a periodic review of the government’s Compensation and Position Classification System shall be conducted every three years.” This is to take into account the competitiveness of salaries relative to the private sector, adjust salaries for the inflation rate and consider changes in skills, expertise, and competency requirements of the bureaucracy.
The budget chief said that the proposed salary adjustments or SSL 2015 shall be implemented based on the following principles: fair and reasonable compensation based on fiscal realities; competitiveness of pay in relation to the private sector; strengthening the link between pay and performance by enhancing the performance-based incentive system; and tempering the cost impact of the compensation increase to allow for higher take home pay.
“We have a solid basis for this policy recommendation. We have a study to compare the competitiveness of government pay in relation to the private sector. And based on this study we crafted a compensation adjustment strategy to bring government pay closer to market rates,” he said.
SSL 3 is 45% below market
Abad said the study found that while the pay of sub-professional workers in government matches or even exceeds those of their private sector counterparts, professional workers get as low as 41 percent of market rates as they move up the ladder. Middle managers, comprised of directors, only get more or less a third of what their counterparts in the private sector get; while executives are paid only about a quarter to a third as much.
“Overall, government pay is 45 percent below market. SSL 2015 will further enhance the market position of Salary Grades 1-7 since they will be at 4 percent to 54 percent above market. Salary Grades 8- to 17 will be competitive to the market at 72 percent to 98 percent% of the market. Salary Grades 18 to 24 will be at 70 percent of the market,” he said.
Higher salaries to help attract and retain technical staff, middle managers
“Higher salaries help attract and retain critical talent. We want to attract the best and brightest managers and executives to join and stay in government. More than a proposal for a salary increase, SSL 4 is an advocacy to further improve government service. With competitive compensation, we intend to bolster the recruitment of agencies that need to fill up vacancies in senior technical and middle management positions,” Abad said.
He added that government agencies have been having difficulty in recruiting and retaining senior technical staff/middle managers.
According to DBM data, the number of unfilled positions in government is 191,988 or 12.53 percent of total authorized positions. Agencies with the highest number of unfilled positions include the Ombudsman, Commission on Audit (COA), Department of Agriculture, (DA), Department of Environment and Natural Resources (DENR), Department of Finance (DOF), Department of Health (DOH), Department of the Interior and Local Government (DILG).
Salary Grades (SG) that are hard to fill are senior technical positions from SG 21 to 25 where vacancies are between 26 to 41 percent of the total authorized positions for the respective SGs. Among the positions that belong to these SGs are senior accountants, lawyers, and division chiefs.
The proposed SSL 2015
Abad said the minimum salary (SG 1) shall be raised from P9,000 to P11,068 monthly. For higher position levels, (SGs 18-30), pay should reach 70 percent of market rates. This is to strike a balance between enhancing the compensation of the senior professionals, managers and executives, and keeping the additional personnel services cost within the government’s financial capacity.
“The plan is not to raise the basic salaries alone. We want government compensation to be roughly comparable with the market. But raising basic salaries will also entail an increase in mandatory contributions, such as for GSIS and health insurance. This would consume part of the increase in pay. To temper the cost impact of the compensation increase, as well as to achieve the desired market positioning and also move towards a performance culture, we have included two benefits on top of the basic salary and in addition to the existing benefits. These are the mid-year bonus and the PBB. Overall, these adjustments will give employees an average increase of 35 percent to 45 percent plus mid-year bonus; and the new PBB if they qualify,” said Abad.
Total cost of SSL 2015
Implementing the SSL 2015 will cost around P225.8 billion in four years. For the first tranche, the amount of P58 billion is included in the proposed 2016 budget.
Of the total cost of P225.8 billion, only 3.9 percent will go to government executives or those in salary grades 29 to 33. Sub-professionals will get 4.28 percent; Professionals 60.4 percent; Middle managers 8.26 percent; and Military and Uniformed Personnel 23.16 percent.
Abad stressed that considering the tax exemption provided under the law for gross benefits not exceeding P82,000, the full mid-year bonus and the full PBB shall, in effect, be tax-exempt for salary grades 1 to 11. And the mid-year bonus will be tax-exempt for salary grades 12 to 16. This will make for higher take home pay for the majority of government personnel.
President Aquino will not benefit from the increase
Abad said the plan is to implement the SSL 2015 effective January 1, 2016. However, the constitution provides that incumbent Senators and members of Congress approving compensation increases, as well as the President and Vice-President, shall not benefit from the proposed compensation adjustment. The implementation of the proposed compensation adjustment with respect to these officials, including the regular members of the Cabinet, shall be effective July 1, 2016.