Public Pay Policy and Its Implications for the Budget Jordan Public Expenditure Review June 19, 2003...
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Transcript of Public Pay Policy and Its Implications for the Budget Jordan Public Expenditure Review June 19, 2003...
Public Pay Policy and Public Pay Policy and Its Implications for the Its Implications for the
BudgetBudget
Jordan Public Expenditure ReviewJordan Public Expenditure Review
June 19, 2003June 19, 2003
Amitabha MukherjeeAmitabha MukherjeePoverty Reduction and Economic Management UnitPoverty Reduction and Economic Management Unit
East Asia and Pacific Region, The World BankEast Asia and Pacific Region, The World Bank
Public Pay Policy and Public Pay Policy and Its Implications for the Its Implications for the
BudgetBudgetSome conceptsSome conceptsCivil service compensation: Civil service compensation: international comparisonsinternational comparisonsPublic pay policy issuesPublic pay policy issuesBudget formulation, execution, Budget formulation, execution, monitoring:monitoring:
Processes and InstrumentsProcesses and Instruments
Civil Service Role & Civil Service Role & SizeSize
Based on answers to three basic Based on answers to three basic questions:questions:
WhatWhatrole of the staterole of the state
HowHoworganization, or structure of the public organization, or structure of the public administrationadministration
By whomBy whomcivil service – role, composition & sizecivil service – role, composition & size
(Sample references: WDR 1997; WPS 1771/1806; Kazakhstan Transition of
the State Report)
Civil Service Civil Service CompensationCompensation
Elements:Elements:Base salaryBase salaryAllowancesAllowancesPensionsPensionsOther benefitsOther benefits
MonetaryMonetaryNon-monetaryNon-monetary
Civil Service Civil Service CompensationCompensation
Concepts:Concepts:Wage adequacyWage adequacy
Average Central Govt. Wage as multiple of per capita Average Central Govt. Wage as multiple of per capita GDPGDPCompression RatiosCompression Ratios
TransparencyTransparencyMonetizationMonetizationCompetitivenessCompetitivenessFiscal sustainabilityFiscal sustainabilityRelativityRelativity
Civil Service: Relating Civil Service: Relating Positions To Positions To
CompensationCompensationJob descriptionJob descriptionJob evaluationJob evaluationJob familiesJob familiesGradingGradingClassification of positionsClassification of positionsPay policyPay policySalary structure/grades/stepsSalary structure/grades/steps
Budgetary Pay & EmploymentBudgetary Pay & Employment
ObjectiveObjective To achieve a sustainable level of To achieve a sustainable level of
budgetary employment consistent budgetary employment consistent with remuneration levels sufficient with remuneration levels sufficient to attract and retain qualified to attract and retain qualified personnelpersonnel
Budgetary Pay & EmploymentBudgetary Pay & Employment
Linkage with: Linkage with: role and functions of the state role and functions of the state streamlining of central governmentstreamlining of central government affordability criteriaaffordability criteria fiscal and administrative relations fiscal and administrative relations
between central and local governmentsbetween central and local governments legal framework for budgetary legal framework for budgetary
employment (benefits, severance employment (benefits, severance payments, pension, etc)payments, pension, etc)
Why are Government Employment Why are Government Employment
and Wages comparisons trickyand Wages comparisons tricky??
Lack of reliable and recent country Lack of reliable and recent country datadata
Differences in:Differences in: Methodology and classificationMethodology and classification Concept of the StateConcept of the State Role and functions of different tiers of Role and functions of different tiers of
govt.govt. Treatment of benefits and allowancesTreatment of benefits and allowances
WagesWages
Caveats:Caveats: Compensation may be understated Compensation may be understated
(e.g. bonuses/allowances may not be (e.g. bonuses/allowances may not be captured)captured)
Manufacturing wages in particular, Manufacturing wages in particular, and private sector wages in general, and private sector wages in general, are often understated for tax and are often understated for tax and social contribution purposes by social contribution purposes by employers and employeesemployers and employees
WagesWages Average Central Government Average Central Government
Wages (yearly, in local currency)Wages (yearly, in local currency) Assessment of the Wage levels in Assessment of the Wage levels in
relative termsrelative terms Wage bill as % of GDP, O&M Exp. Wage bill as % of GDP, O&M Exp. Private Sector Comparators Private Sector Comparators
Average Manufacturing WageAverage Manufacturing Wage Average Financial Sector WageAverage Financial Sector Wage Average Private Sector WageAverage Private Sector Wage
Wage AdequacyWage Adequacy Average Central Govt. Wage as multiple of per capita Average Central Govt. Wage as multiple of per capita
GDPGDP Compression RatiosCompression Ratios
Government Wages as Government Wages as percentage of GDPpercentage of GDP
0
2
4
6
8
10
12
Africa Asia ECA LAC MENA OECD Overall
Central Government Wages and salaries
Average Govt. Wages as Average Govt. Wages as Multiple of per capita Multiple of per capita
GDPGDP4.3
2.5
1.1
2.22
1.2
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Africa Asia ECA LAC MENA OECD
General Government EmploymentGeneral Government Employment
Employment in “all government departments offices, organizations Employment in “all government departments offices, organizations and other bodies which are agencies or instruments of the central or and other bodies which are agencies or instruments of the central or local authorities whether accounted for or financed in, ordinary or local authorities whether accounted for or financed in, ordinary or extraordinary budgets or extra-budgetary funds. They are not solely extraordinary budgets or extra-budgetary funds. They are not solely engaged in administration but also in defense and public order, in engaged in administration but also in defense and public order, in the promotion of economic growth and in the provision of education, the promotion of economic growth and in the provision of education, health, cultural and social services.”health, cultural and social services.”
SourceSource: International Standard of Industrial Classification of All : International Standard of Industrial Classification of All Economic Activities (ISIC), Series M No. 4, Rev 3- 1990. Economic Activities (ISIC), Series M No. 4, Rev 3- 1990.
General Government EmploymentGeneral Government Employment
Six categories within General Government Employment:Six categories within General Government Employment: Armed forcesArmed forces Civilian central governmentCivilian central government Sub-national governmentSub-national government Health sectorHealth sector Education sectorEducation sector PolicePolice
Not included: casual/seasonal/temporary employeesNot included: casual/seasonal/temporary employees
EmploymenEmploymentt
Public Sector Employment: Public Sector Employment: State Owned Enterprises (where available)State Owned Enterprises (where available) General Government Employment: General Government Employment:
Military EmploymentMilitary Employment Central Government Employment Central Government Employment Subnational Level Employment Subnational Level Employment Education (primary & sec. school teachers)Education (primary & sec. school teachers) Health (Doctors, Nurses, Midwives and Nurses Assts.)Health (Doctors, Nurses, Midwives and Nurses Assts.) Police * (as an experiment)Police * (as an experiment)
Expressed in nominal terms and as % of Expressed in nominal terms and as % of population, labor force, total employmentpopulation, labor force, total employment
EmploymenEmploymentt
Trends in employment, especially Trends in employment, especially those relating to health and those relating to health and education, need to be seen against:education, need to be seen against:
Fiscal situation necessitating Fiscal situation necessitating measures such as taking employment measures such as taking employment off budget (e.g. Armenia/Kazakhstan)off budget (e.g. Armenia/Kazakhstan)
Progress on reform of Progress on reform of intergovernmental finances (e.g. intergovernmental finances (e.g. Central Europe) Central Europe)
Data accuracy a key issue in many Data accuracy a key issue in many countriescountries
Government EmploymentGovernment Employment
0
1
2
3
4
5
6
7
8
9
10
Asia LAC OECD
Central Sub-National Education Health Military
Civil Service Civil Service Compensation Policy: Compensation Policy:
IssuesIssues
Two common issues: Two common issues: Objective(s) of Pay PolicyObjective(s) of Pay Policy
Are objective(s) clear?Are objective(s) clear? If multiple objectives, are they consistent?If multiple objectives, are they consistent? If not, how to reconcile?If not, how to reconcile?
Pay Determination Mechanism including:Pay Determination Mechanism including: Extent of Independence from ExecutiveExtent of Independence from Executive Extent of Collective Bargaining If AnyExtent of Collective Bargaining If Any
Civil Service Civil Service CompensationCompensation
Structure of CompensationStructure of Compensation Pay PoliciesPay Policies Dispute Resolution Dispute Resolution Interaction between budget cycle Interaction between budget cycle
and pay determination cycleand pay determination cycle
Collective BargainingCollective Bargaining
Level at which negotiations take placeLevel at which negotiations take place Status of collective agreementsStatus of collective agreements Participants in collective bargainingParticipants in collective bargaining Unionization levelUnionization level Matters covered by collective Matters covered by collective
bargainingbargaining IndexationIndexation Frequency of collective bargainingFrequency of collective bargaining
Structure of PayStructure of Pay
Basic ratesBasic rates Flexibility and relativitiesFlexibility and relativities Pay progressionPay progression Performance pay?Performance pay? Regional pay variationsRegional pay variations Extent of Decentralization and Its Extent of Decentralization and Its
Effect(s)Effect(s)
Pay PoliciesPay Policies
Policy objectives and principlesPolicy objectives and principles Public sector pay cost restraintPublic sector pay cost restraint Factors in adjusting payFactors in adjusting pay Data sourcesData sources Minimum wage issuesMinimum wage issues Sector specific issuesSector specific issues
How much flexibility is How much flexibility is appropriate????appropriate????
Resolving Compensation Resolving Compensation DisputesDisputes
No strike rulesNo strike rules Typical conflict areas/themesTypical conflict areas/themes
Pay Determination Pay Determination SystemsSystems
Centralized collective bargaining esp. for Centralized collective bargaining esp. for federal/central civil servantsfederal/central civil servants
Exceptions:Exceptions: New Zealand: Individual contractsNew Zealand: Individual contracts France: Negotiation not official. No France: Negotiation not official. No
agreements in several years: pay was agreements in several years: pay was unilaterally set by Govt.unilaterally set by Govt.
Finland: (personal agreements for c. 1000 Finland: (personal agreements for c. 1000 senior CS)senior CS)
Germany, Greece: CS status and pay set by law.Germany, Greece: CS status and pay set by law.
D. Link With Budget D. Link With Budget Formulation, Execution Formulation, Execution
and Monitoringand Monitoring
Pay Policy: Pressures & Pay Policy: Pressures & ImpactsImpacts
Fiscal Pressures:Fiscal Pressures: Size of wage billSize of wage bill Number of public sector employeesNumber of public sector employees
Public Administration StructuresPublic Administration Structures Human Resource ManagementHuman Resource Management Legal FrameworkLegal Framework Sector-specific issues, especially in health, Sector-specific issues, especially in health,
education, police, armed forceseducation, police, armed forces
All of these impact poverty reduction, All of these impact poverty reduction, service delivery and growthservice delivery and growth
ImpactsImpacts
Impact of pay and employment Impact of pay and employment policies:policies: Governance and corruption problemsGovernance and corruption problems
Access to services (see slides)Access to services (see slides) Under the table payments (see slides) Under the table payments (see slides)
Poor quality of civil servicePoor quality of civil service InefficiencyInefficiency Increases cost of service deliveryIncreases cost of service delivery
Impacts: Example – Impacts: Example – Contracting Out Health Contracting Out Health
Care ServicesCare Services Need for careful design and Need for careful design and
implementimplementationation:: Financing arrangementsFinancing arrangements
Reporting and monitoringReporting and monitoring Timeliness of reimbursementTimeliness of reimbursement
Realism of cost recovery arrangementsRealism of cost recovery arrangements PrePreventing venting buildbuild--up of arrearsup of arrears Increase in bribe levels and frequencyIncrease in bribe levels and frequency No change in staffing levels and staffing mixNo change in staffing levels and staffing mix Impact on health statistics – ‘emergencies’Impact on health statistics – ‘emergencies’
The Rich Pay More, The Rich Pay More, But the Poor Pay More But the Poor Pay More
DearlyDearly
11%
8%
5%
16%
20%
33%
poorest third middle third richest third
median percent of household income paid in bribes (among those that paid)
percent of households that reported paying bribes in the previous 12 months
The Rich Bribe for The Rich Bribe for Speed, Speed,
The Poor Bribe for The Poor Bribe for AccessAccess
Notes: This chart is restricted to those respondents who made unofficial payments that they felt were necessary in order to receive proper
50%
67%
77%
22%
6%9%
39%
30%
17%
11%
36%
23%
0%
25%
50%
75%
100%
poorest third middle third richest third
Speed
Benefits
Avoid Problems
Gratefulness
service. Thus the designation "gratefulness" not not imply an innocuous token of appreciation or tradition.
Processes and Processes and InstrumentsInstruments
Medium Term Expenditure FrameworkMedium Term Expenditure Framework MTEF & Budget Cycles and Human MTEF & Budget Cycles and Human
Resource PlanningResource Planning Example from readingExample from reading
Linking personnel information and Linking personnel information and payrollpayroll Human Resource Management Information Human Resource Management Information
System (HRMIS)System (HRMIS) Post managementPost management Wage bill controlWage bill control Rightsizing and severanceRightsizing and severance
Processes and Processes and InstrumentsInstruments
Estimating the fiscal impact of pay and Estimating the fiscal impact of pay and employment adjustments:employment adjustments: Modeling tool to explore alternative scenariosModeling tool to explore alternative scenarios
Mongolia, Philippines, Cambodia, West Bank/Gaza, Albania, Mongolia, Philippines, Cambodia, West Bank/Gaza, Albania, etc etcetc etc
Challenges:Challenges: Personnel dataPersonnel data Compensation dataCompensation data Pensions and social security contributionsPensions and social security contributions
The role and importance of participatory PERsThe role and importance of participatory PERs Examples: Philippines, Indian statesExamples: Philippines, Indian states
Reference: PEPFMR and follow upReference: PEPFMR and follow up The AAA “project cycle” – see uploaded presentationThe AAA “project cycle” – see uploaded presentation
CSR: Operational Approaches CSR: Operational Approaches
Strengthening the linkages – ThailandStrengthening the linkages – Thailand ‘‘Efficient nucleus’ – Russia (TAMP)Efficient nucleus’ – Russia (TAMP) Internal structural adjustment – Internal structural adjustment –
UK/JapanUK/Japan Combination of all three:Combination of all three:
New Zealand/AustraliaNew Zealand/Australia KazakhstanKazakhstan
CSR: Operational ApproachesCSR: Operational Approaches
Personnel management systemsPersonnel management systems Addressing capacity constraintsAddressing capacity constraints Simplification of pay and grading Simplification of pay and grading
structuresstructures Internal upward feedback from insideInternal upward feedback from inside External feedback for measuring External feedback for measuring
impact:impact: Feedback from public (households/firms)Feedback from public (households/firms) Feedback from civil society and mediaFeedback from civil society and media
Public Pay Policy and Public Pay Policy and Its Implications for the Its Implications for the
BudgetBudgetSome conceptsSome conceptsCivil service compensation: Civil service compensation: international comparisonsinternational comparisonsPublic pay policy issuesPublic pay policy issuesBudget formulation, execution, Budget formulation, execution, monitoring:monitoring:
Processes and InstrumentsProcesses and Instruments