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Increase in salaries of govt employees

Private sector workers pay more taxes despite no increase in remuneration

By Syed M. Aslam
June 28 - July 04,1999

  1. Privatization of PTCL
  2. National savings ratio to GDP declines
  3. Solar power project in Balochistan
  4. IMF unhappy over budget 1999-2000
  5. Increase in salaries of Govt employees

For the first time since 1994 the salary of government employees was increased when finance minister, Ishaq Dar, announced a special additional allowance of 25 per cent for the government employees in Grade 1 to 16 and a 20 per cent for employees in Grade 17-22 in Budget 1999-2000.

However, any little— little because the cost of living has gone up sharply during the last five years— euphoria about the salary increase was short-lived when the finance minister told a post-budget press meeting that the ’initial basic salary’ and not the ‘running basic salary’ would be the criteria for the increase.

Thousands of government employees, who have been working in a particular grade for many years and whose running basic salary far exceeds the initial basic salary for that particular grade, were dejected to realize that their calculations of salary increase based on their running salary were wrong. Instead, they found out that the criteria has denied them the 25 per cent or 20 per cent increase and that they will get an allowance equivalent to just 13-14 per cent of the initial basic pay.

The salary of government employees in Grade 1-16 will increase by Rs 311 to Rs 634. With no change in allowances since 1991 and with the price of everything gone up sharply since then, including such basic necessities like transportation, rent and medical treatment, the government servants’ purchasing power has already declined substantially.

A Grade 16 employee of Karachi Water and Sewerage Board told PAGE that the employees are still receiving a transportation allowance of Rs 96 and Rs 193 though the fares of all public transportation have increased many times in last eight years. The house rent, 45 per cent of the basic pay, and medical allowances also remain unchanged despite high inflation during this period, he added.

The plight of the government servants is worse than those employed in the private sector, particularly multinationals, which pay their workers a much better salary than the government. Although those in the higher grades are comparatively better-off than their counterparts in the lower grades, the difference between the initial basis salary of Grade 15 and 16 is Rs 344 while that between Grade 16 and 17 is Rs 1335, the government servants in general are envious of the salaries of employees in the private sector, particularly multinationals which though much more demanding, provides a better working environment, salaries, allowances and benefits.

Many also feel that resorting to other income sources by the government employees, particularly the low salaried grade 1-16, such as part-time work or small shop, is enough to prove that the government employees are officially under-paid. No surprise, that nothing seems to move in the government departments.

As government is the single biggest employer in the country, some 3.6 million people work for the government in Pakistan, any salary increase to the civil servants ultimately means a boost in the economic activity. However, the recent salary increase is deemed too little to make any real difference in the purchasing power of the employees to have a profound effect on the national economy.

There are indications that the government employees of Sindh may not even get the salary increase announced by the finance minister as the provincial government has announced that it does not have the ability to absorb the increase which will burden it with an extra resources of Rs 3.4 billion during 1999-2000. The employees deprived of a genuine salary increase in Sindh are feared to take a heavy toll on an already extremely inefficient provincial official workforce. It is also feared to result in increased corruption at the cost of the salaried class which is finding it harder by every passing day to make both ends meet.

On the other hand, the salaried persons have to pay more taxes in 1999-2000 as in addition to the previous practice of taxing the salary the perks will also be subjected to the taxation separately in 1999-2000. From next fiscal the income and the perks will be joined together for the taxation purpose. While the maximum limit of personal tax for 1999-2000 was revised by the finance minister to 30 per cent it will go up to 35 per cent in the new fiscal.

How this will make life a lot more for the salaried person can be illustrated by the following example. Basic salary of up to Rs 100,000 was subjected to 5 per cent taxation plus 10 per cent of the amount over Rs 100,000. A person earning a basic salary of Rs 10,200 monthly or Rs 122,400 per year paid an income tax Rs 4,740 per year— Rs 5,000 being 5 per cent of Rs 100,000 and Rs 2,240 being 10 per cent of Rs 22,400 to 5 per cent taxation on Rs 100,000 and 10 per cent or Rs 2,240 on the Rs 22,400 above Rs 100,000 minus Rs 2,500 rebate.

With the new tax rates the same income will now be subjected to a taxation of Rs 7,240 per year or Rs 605 per month, Rs 210 or 53 per cent more than the Rs 395 previously. This will not be against those employed in the private sector who will not benefit from the salary increase announced for the government employees but will have to absorb the increase in taxation.