Parliament passes bill on state wage policy to create Pay Commission

Parliament yesterday passed a bill on the state wage policy to create a National Pay Commission tasked with determining salaries and allowances for the public sector.

The wage policy legislation was passed with 46 votes in favour, two against and two absentions. The bill was submitted by Independent MP for Haa Dhaal Kulhudhufushi Mohamed ‘Kutti’ Nasheed and sent to committee for further review on March 30, 2011.

If ratified, a five-member National Pay Commission will be instituted within 60 days with part-time members appointed by the president for a five-year term.

The commission would be chaired by the Finance Minister and would determine salaries and allowances for state employees and authorise pay raises.

The commission would also formulate standards and rules for determining the state’s pay scale or appropriate salaries based on qualifications and nature of employment.

The bill stipulates that the commission must consider the cost of living, inflation and the consumer price index in determining wages.

Moreover, salaries should incentivise government employees to work in islands with small populations.

The commission would also have to consider the state’s resources, public debt and social justice in approving salaries and allowances.

Once the law comes into force, articles in the Human Rights Commission Act, Civil Service Commission Act, Defence Forces Act, Police Act, Elections Commission Act, Prosecutor General’s Act, Anti-Corruption Commission Act, Judicial Service Commission Act, Broadcasting Act, Customs Act and the Civil Aviation Authority Act that allows the institutions to determine wages for officials and staff would be abolished.

IMF recommendation

At a press conference held upon conclusion of a visit by an International Monetary Fund (IMF) mission last month, head of the mission Koshy Mathai stressed the importance of instituting a Pay Commission to streamline the pay structure for government employees.

“We have a lot of independent institutions in this country and they are all on different pay scales,” he observed.

“There’s no harmonisation within the public service. There are radically different pay scales. And that has problems in terms of incentivising staff to belong to one institution versus the other. And it also implies a lot of cost for the government. So establishing a Pay Commission that can set up a rational system of compensation for the entire public service seems like a priority.”

According to a report by the World Bank in May 2010 which identified the dramatic growth of the public sector wage bill as the origin of the Maldives’ ongoing fiscal imbalances, increases to the salaries and allowances of government employees between 2006 and 2008 reached 66 percent, which was “by far the highest increase in compensation over a three year period to government employees of any country in the world.”

“Between 2004 and 2009, the average monthly salary of a government sector worker increased from MVR 3,223 (US$250) to MVR 11, 136 (US$866),” explained a UNDP paper on achieving debt sustainability in the Maldives published in December 2010.

Former President Maumoon Abdul Gayoom responded to growing calls for democratisation with “a substantial fiscal stimulus programme” of increased government spending, “much of which was not related to post-tsunami reconstruction efforts.”

“This strategy led to a large increase in the number of civil servants from around 26,000 in 2004 to around 34,000 by 2008 or 11 percent of the total population. Thus the government simultaneously increased the number of public sector workers as well as their salaries,” the paper noted.

Consequently, recurrent expenditure – wage bill and administrative costs – exceeded 82 percent of total government spending in 2010.

However, the new government’s efforts to enforce pay cuts of up to 20 percent and downsize the civil service – which employs a third of the country’s workforce – were met with “a severe political backlash from parliament,” the UNDP paper observed.

Recurrent expenditure

Presenting the 2013 budget to parliament earlier this month, Finance Minister Abdulla Jihad noted that of the proposed MVR 16.9 billion (US$1 billion) of government spending, more than 70 percent was recurrent expenditure.

“As in other years, the highest portion of recurrent expenditure is expenditure on [salaries and allowances for government] employees,” Jihad explained. “That is 48 percent of total recurrent expenditure.”

During the budget debate in parliament, Majority Leader MP Ibrahim Mohamed Solih ‘Ibu’ criticised Finance Minister Jihad for failing to mention budgeted salary increases for military and police officers as well as plans to hire 800 new officers for the security services.

Combined with the transfer of about 5,400 employees in the health sector to the civil service, Ibu explained that the wage bill would shoot up by 37 percent.

Echoing the concerns of the parliamentary group leader, Maldivian Democratic Party (MDP) MP Eva Abdulla revealed that MVR 6 million (US$ 389105) was added to the budget of the Maldives National Defence Force (MNDF) following the controversial transfer of presidential power on February 7.

Since the MDP government was ousted in the wake of a police mutiny on February 7, Eva said that the police and army have hired 250 and 350 new staff respectively.

Consequently, the institutions spent more than MVR 75 million (US$4.8 million) in addition to the approved budgets for 2012, she claimed.

The proposed budget of MVR 930.9 million (US$60.3 million) for defence expenditure in 2013 was meanwhile 14 percent higher than 2012.

Eva observed that the increase in the government’s wage bill of 37 percent was approximately MVR1.7 billion (US$110 million), which was also the amount allocated for harbour construction in the 2013 budget.

These funds should instead be spent for “harbours, education, sewerage and housing,” she argued.

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