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Title: A1258582538fwalH


1
PUBLIC SERVICE MEDIUM TERM PAY REFORM
Current Remuneration Structure for Civil Servants

2
Welcome
  • Governments in Africa face serious fiscal
    challenges because of the global financial
    crisis. They are under pressure to maintain and
    raise spending especially in the social sectors.
  • This presentation is dedicated to all those hard
    working people engaged in the fight to eradicate
    poverty from Zambia.

3
Overview
  • Civil service management
  • Ancient civilizations (e.g. Roman Empire) built
    empires on performance of efficient civil
    services
  • Today, good governance for eradication of poverty
    dependent on skilled, well paid, motivated,
    efficient and ethical civil service.

4
Good governance
  • Achievable only with established stable,
    efficient and effective public administration
  • More vital to economic development than either
    free elections or parliaments
  • Essential to functioning of free market
    economies.

5
An established efficient and effective civil
service
  • Contributes to peaceful and orderly political
    succession
  • Promotes genuine pluralism
  • Helps to speed up poverty reduction.

6
Poverty Reduction
  • Long running focus of government policy in
    Zambia
  • Transitional Development Plan (TDP) 1964, and
    First National Development Plan (FNDP) 1965 both
    focused on infrastructure development, education
    health, and social safety net operations and
    programmes for needs of the poor.

7
Introduction
  • Zambia has made some progress to restructure
    civil service through attempts to downsize
  • But little progress to revamp pay and promotion
    policies
  • Cost cutting measures must be accompanied by wide
    ranging reforms of public service to improve
    quality of service delivery.

8
Period to 1985
  • Nominal government wage bill expanded due to
    rapid increase in civil service employment
  • Expansion a reflection of high degree of
    government intervention in Zambian economy
  • Also a reflection of need to educate and provide
    health care to rising population
  • Government also guaranteed employment for
    university graduates.

9
Period to 1985.continued
  • Rapid employment expansion facilitated by salary
    reductions, particularly at higher end of pay
    scales.
  • Example 1971 Assistant Directors salary 17
    times salary of lowest paid worker 1986. it was
    4 times as much
  • Result overstaffing and low salaries therefore
    poor staff morale and decline in work effort
    difficult to recruit and retain technical and
    professional staff non-transparent forms of
    remuneration (non-wage benefits) in cash or in
    kind and strong incentives to solicit and/or
    accept bribes.

10
Impact on other economic operations
  • Nominal wage bill contributed to rising fiscal
    deficits
  • Reduced allocations for non-wage expenditures
    such as RDCs hence teachers and health workers
    lacked materials to carry out their work
  • Roads no longer maintained
  • Inadequate transport for law enforcement
    officers, etc.

11
Early Reform Initiatives Goals and Strategies
  • Public Service Reform Programme (PRSP) launched
    in 1993.
  • First generation reforms sought to (1) downsize
    civil service to make it more affordable and
    aligned with new scaled down role for government
    in economy (2) provide civil servants with
    appropriate incentives, skills and motivation
    and (3) enhance management and accountability.

12
Early Reform Initiatives.continued
  • First generation reforms primarily for
    macroeconomic stabilization focusing on
  • quantitative adjustments to wage bill by reducing
    staff or redeploying them to priority sectors
  • removal of ghost workers from
  • government payroll
  • govt. also sought alternative
    delivery
  • of public services through
    contracting out
  • to private sector.
  • Despite these efforts problems remained wages
    continued to be eroded skilled staff were
    leaving the civil service those remaining became
    demoralized absenteeism, moonlighting, and
    corruption increased.
  • To address these problems government sought a
    more appropriate balance between quantitative
    (first generation reforms) and qualitative
    (second generation reforms) adjustments.

13
Second generation reforms under Public Sector
Capacity Building Programme (PSCAP). These
included
  • Downsizing the civil service savings to finance
    increase in overall pay levels
  • Decompression of pay scales to improve
    competitiveness of civil service pay at higher
    levels
  • New grading system based on job evaluations
  • Establishment of payroll control system
  • Establishment of performance based pay and
    performance monitoring systems
  • Improvement of pay policy making and
  • Decentralization.

14
Reform outcomes
  • Right sizing
  • Right sizing civil service employees reduced
    from 137000 in 2000 to 112259 in 2005 todays
    headcount is 131543, the increase over 2005 due
    to maintenance and increase in requirements of
    frontline service providers in education and
    health, at centre of poverty reduction programmes
    including attainment of MDGs, as well as police.

15
Reform outcomes continued
  • better control over employment levels
  • Recomposition of wage bill by rationalization,
    decompression of pay structure and consolidation
    of some allowances into base salaries.
  • Implementation of a medium term pay reform
    strategy (MTPRS) 2003.

16
Medium Term Pay Reform Strategy (MTPRS)
  • Implementation of MTPRS dependent on resource
    envelope of MTEF
  • MTPRS focus on (1) salary decompression (2)
    consolidation of allowances into base pay and
    (3) growth of public wage bill restricted to GDP
    growth rate.
  • MTPRS overall objective to simplify salary
    structure to retain and motivate professional and
    technical personnel in public service.

17
Current System and Structure of Public Sector
Remuneration
  • Feature of system and structure wage
    compression.
  • Problems
  • Tenuous link between recruitment and merit
  • Promotion more by seniority
  • Unplanned career progression
  • Pay unrelated to performance and
  • Cumbersome staff appraisal.

18
Reforming system is difficult because
  • Low pay constrains recruitment, retention,
    motivation, and productivity
  • Poorly constructed internal grading structure
    increments system based on length of service
    rather than performance, killing initiative and
  • Fragmented job grades dependence on fringe
    benefits and monetary allowances as compensation
    enhancement especially for senior civil servants
    severely weakens horizontal and vertical equity.

19
Challenge for government to design and implement
MTPRS at say wages 5 of GDP. Reform must be
  • consistent with MTEF resource envelope
  • ensure control of size and growth of govt
    employment
  • eliminate distortions and anomalies, and pay
    salaries according to skills, experience, and
    amount of responsibilities
  • progressively consolidate all allowances into
    basic pay
  • progressively decompress pat of senior and middle
    ranking staff
  • design and implement performance management
    system and employment policy and
  • Remove distortions created by donor practices on
    salary supplements.

20
Design of public pay and compensation system Key
elements
  • Compression ratio of pay scales
  • Comparison between public and private sector pay
    and
  • Allowances.
  • Compression Ratio
  • Vertical compression ratio between top and
    bottom salaries within the same civil service
    agency. Today in Zambia, some progress made under
    PSCAP ratio is 131
  • (2) Horizontal compression refers to degree to
    which earnings may differ for officials at same
    grade or level, with same seniority.

21
Determination of Civil Service Pay
contractual
non-contractual/
monetary in-kind
intangible current base
1.base 2. health
3. job security, rewards
rewards wage/salary insurance
prestige, social

privileges
allowances 4. transportation 5.
transportation 6. trips abroad,
housing, meals,
housing, meals, training
telephone, travel
travel
cost of living Future expectations 7.
pension 8. housing
9. reputation, etc.

Base wages and salaries are one
element of total rewards received by civil
servants. Allowances may also be discretionary
even if based in contracts.
22
Definitions
  • personal emoluments 1 and 4 (current monetary
    rewards and allowances)
  • personal disposable income personal emoluments
    minus deductions for tax, provident fund/pension
    contributions
  • total compensation 1, 2, 4 and 5 (contractually
    provided current rewards and allowances)
  • total rewards 1 to 9 inclusive (contractual and
    non-contractual, current and expected rewards and
    allowances).
  • Base pay regular salary linked to employees
    position but only one component of civil
    servants total rewards.
  • Allowances purpose encourage working in
    hardship places, eg rural areas (housing)
    accessibility in emergencies etc. (telephone)
    taxable if paid in cash untaxed if in-kind.
  • Retirement benefits a pension and/or lump sum
    gratuity.
  • Intangible benefits job security, social
    privileges, hard currency savings from trips
    abroad, per diems from seminars, workshops,
    conferences, etc.

23
Comparison Between Public and Private Sector Pay
Maximum Monthly Salaries in Public and Private
Sectors (in 000s of kwacha
_________________________________________________
_____ Public
Service Private Sector
__________________________________________
____________ Managerial staff
8354 24596 Professional staff 4700
6474 Non-Professional staff 1339 3450 Support
staff 725 1640 Source Public Service
Management Division
24
Future Action Plans Public Service Management
Reform Programme (PSM)
  • Objectives
  • Help improve budget allocation process to support
    poverty reduction
  • Reinforce budget as tool to reflect government
    priorities
  • Discipline use of public funds
  • Further increase transparency and accountability
    in budget procurement systems improvement of
    payments and incentive systems in civil service
    and realignment of ministry structures and
    management incentives to raise performance and
    public service delivery.

25
PSM Components
  • Payment Reform continue to consolidate
    allowances (stalled because of impact on govt
    pension liabilities) reform pension scheme
    revise Pensions Act and implement approved
    MTPRS
  • Establishment and Payroll Control implement
    computer-based Payroll Management and
    Establishment Control system
  • Financial and Policy Management MTEF as basis
    for disbursements, including that of Activity
    Based Budgeting System all Cabinet Memoranda
    with financial implications to be cleared by
    MOFNP prior to Cabinet approval
  • Financial Management and Accountability to
    ensure auditing by the Auditor General.
  • Decentralization to develop and implement
    National Decentralization Policy.

26
Civil Service Remuneration and Budgetary
Allocations
Relative Shares of Poverty Reducing
Expenditures and Wages and Salaries in Domestic
Revenue, Total Expenditure and Gross Domestic
Product (in
billions of Kwacha) ______________________________
_________________________________________________

2005 2006 2007
2008 2009 ________________
__________________________________________________
_______________ Domestic revenue 5642
6618 8422 9467
10573 Total Expenditure 8350
9051 11317 12806
13895 Wages and salaries 2455
2833 3547 4240
4806 Poverty reducing expenditure 1995
2356 3793 4225
4716 ___________________________________________
______________________________________
(in percent of domestic
revenue) Wages and salaries 43.5
42.8 42.1 44.8
45.5 Poverty reducing expenditure 35.4
35.6 47.2 44.6
44.7 _____________________________________
____________________________________________

(in percent of GDP) Domestic
revenue 17.4 16.9
18.4 18.4 18.7 Total
expenditure 25.7 23.1
24.7 24.8 24.5 Wages and
salaries 7.6 7.2
7.7 8.2
8.5 Poverty reducing expenditure 6.1
6.0 8.3 8.3
8.4
27
Allowances Compared to Poverty Reduction
Expenditures
Civil Service Allowances and Poverty Reducing
Expenditure 2005-2005 (in billions of
Kwacha) __________________________________________
_____________________
2005 2006 2007
2008 2009 ________________________________________
_______________________ Poverty Reducing expend.
1995 2356 3793
4404 5152 Allowances est. 9.8
11.3 14.1 19.5 13.3 Allowances
as of poverty Reducing expend. 4.9
4.8 3.7 4.4
2.6 Sources MOFNP and own estimates
28
Estimate of Civil Service Per Diem Payments for
Attending Seminars, Workshops, and Conferences
(in billions of Kwacha) __________________________
_____________________________________
2005 2006 2007 2008 2009
_________________________________________________
______________ Total wage Bill 2455 2833
3547 4240 4806 Est. per diems 368 425
532 636 721b Poverty reducing
expend. 1995a 2584 4040 4740
5593c Per diems as of Poverty reducing expend.
18.4 16.4 13.2 13.4 12.9 Per diems as
of GDP 1.1 1.1 1.2
1.2 1.3 Source MOFNP and own
estimates. a excluding donor
financed projects bc own estimates.
29

Poverty Reducing expenditures Approved Budget
Allocations and Actual Spending (in billions of
Kwacha) 2006 2007
2008 __________________________________________
______________ Budget Actual
Budget Actual Budget Actual
2584.1 2356.0 4096.0
3508.6 4740.8 4404.0 _______________
_________________________________________ Source
Ministry of Finance and National Planning
30
Budget Allocations and Actual Spending
onPoverty Reduction
  • Review of actual spending pattern indicates
    actual expenditure largely at variance with
    budgeted allocations
  • For three year period to 2008, average spending
    was 90 per cent of budget allocations
  • In 2002, only 24 percent of allocation was spent
  • In 2003, only 52 percent of funds budgeted for
    poverty reducing programmes was spent.
  • Hence there is need to adapt budget execution
    infrastructure, staff capacity in the civil
    service, and work processes to meeting the
    increased need for tracking the actual use of
    budgeted funds for poverty reduction.

31
The Medium Term Expenditure Framework (MTEF)
  • MTEF Three-year rolling macroeconomic framework,
    outlining overall resource envelope that forms
    basis for setting national priorities and
    expenditure allocations.
  • MTEF is a set of recommendations for overall
    medium term planning, fiscal policy and budgeting
    to achieve
  • aggregate fiscal discipline
  • resource allocation in line with strategic
    priorities (allocative efficiency) and
  • provide ministries and agencies predictability in
    policy and funding to plan efficient use of
    resources (operational efficiency).
  • MTEF consists of top-down resource envelope a
    bottom-up estimation of current and medium term
    costs of existing policy and matching costs with
    available resources in context of annual budget
    process.

32
Preparation of a MTEF Six Stages
STAGE
OUTCOME
1. Development of Macroeconomic/
-Macroeconomic model projecting revenues
Fiscal Framework
and expenditure in the medium term (3
yrs) II. Development of Sectoral programmes
-Agreement on sector objectives and

activities
-Review
and development of programmes

and sub-programmes

-Programme cost estimation iii. Development of
Sectoral Expenditure -Analysis of inter-
and intra-sectoral trade- Frameworks
offs

-Consensus building on strategic
resource
allocation iv.
Definition of Sector Resource
-Setting medium term sector budget ceilings
Allocations
(Cabinet approval) v. Preparation of
Sectoral Budgets -Medium term
sectoral programmes based

on budget ceilings VI. Final Political Approval
-Presentation of
budget estimates to Cabinet and

Parliament for approval
33
Objectives of the MTEF
  • Objectives are
  • Improved macroeconomic balance, especially fiscal
    discipline
  • Better inter- and intra-sectoral resource
    allocation
  • Greater budgetary predictability for line
    ministries
  • More efficient use of public funds
  • Greater political accountability for public
    expenditure outcomes through more legitimate
    decision making processes
  • Greater credibility of budgetary decision making
    (political restraint)

34
The MTEF, Budget, FNDP, MTPRS, MDGs and National
Vision 2030 Linkages provided by the MTEF
  • Value added of MTEF integration of top-down
    resource envelope with bottom-up sector
    programmes
  • It is at stage III of MTEF development of
    sectoral expenditure frameworks that (1) policy
    making (MTPRS, MDGs) (2) strategic planning
    (National Vision 2030, FNDP) and (3) Budgeting
    are linked
  • Government defines sectoral resource allocations
    through top-down resource envelopes, used by
    sector ministries to finalize their bottom-up
    sector programmes and budgets.
  • The broad strategic expenditure framework
    reflects the resource constraint and government
    policy
  • Sectoral ministries have autonomy to make
    decisions that maximize efficiency and
    effectiveness
  • Resulting MTEF becomes the basis for the
    subsequent years budget after taking account of
    changes in economic conditions and policies.

35
Millennium Development Goals 2008 Progress Report
  • Goal
  • Eradicate extreme poverty and hunger decreased
    from 58 percent to 51 percent (1991-2006)
  • Achieve universal primary education net primary
    enrolment is 98 percent for both girls and boys
    percentage of pupils starting Grade 1 reaching
    Grade 5 ( of both sexes) 76.4
  • Promote gender equality and empower women Gender
    parity index in primary level enrolment (ratio of
    girls to boys) 1.0 Literacy rates of 15-24
    years old (percent of both sexes) 69.5 seats
    held by women in Parliament () 14.6
  • Reduce child mortality mortality of children
    under 5 years old (per 1000 live births) 182 1
    year old children immunized against measles ()
    84

36
MDGs continued.
5. Improve maternal mortality ratio (per 100000
births) 830 6. Combat HIV/AIDS, malaria and
other diseases people living with HIV, 15-49
years old () 15.2 prevalence of tuberculosis
(per 100000 people) 568 7. Ensure environmental
sustainability Land area covered by forest
() 58 Carbon dioxide emissions per capita
(metric tons) 0.2030 Access to improved
drinking water sources ( of total population)
58 8. Develop a global partnership for
development Internet users (per 100 people)
4.2
37
Other Issues Resource Allocation
  • Broad Principles for Resource Allocation
  • Need to promote economic growth
  • Improve distribution of income and wealth and
  • Reduce poverty through public interventions.
  • Since 1990s government redefinition of states
    involvement in economic activities hence
    concentration of resources in productivity
    increases improved quality of public
    expenditure and greater impact on poverty
    reduction.
  • More resources to priority sectors identified in
    poverty reduction documents health, education,
    water, agriculture, and infrastructure.

38
Other Issues Budget Execution
  • Sound budget management is correlated to impact
    of public expenditure on most disadvantaged in
    society.
  • Poverty reducing programmes must be implemented,
    in timely and accurate manner.
  • Budget execution major weakness in budget
    process funding unpredictable and inadequate
    despite MTEF
  • Cash budget system diverts resources away from
    intended recipients
  • Service delivery by public service employees is
    poor, hence weak budget execution, and waste of
    public resources.
  • There are consequences of weak budget
    implementation
  • insufficient supplies and equipment in hospitals
    and rural health centres
  • few or no books, supplies or furniture in
    schools
  • Funds for operation and maintenance frequently
    not available, etc.

39
Other Issues Public procurement,
Decentralization, Expenditure tracking,
monitoring and evaluation by civil society, Role
of donors, Gender budgeting, Participatory
budgeting
  • Efficient corruption-free public procurement
    system essential for sound budget execution.
  • Decentralization control and monitoring of
    poverty reducing programmes planned and funded by
    central government to take place at local and
    final point of service delivery.
  • Expenditure tracking, monitoring, and evaluation
    need to extend number of expenditure observers
    beyond public sector accountants to broader
    spectrum of stakeholders, including Parliament
    and civil society.
  • Role of donors donors to focus aid on poverty
    reduction with disbursements made directly to
    targeted poor groups at district level this will
    help curtail corruption and rampant thefts.
  • Gender budgeting systematic examination of
    budget programmes and policies for their impact
    on women.

40
Other Issues.continued
  • Participatory Budgeting Citizens are directly
    involved in
  • Making policy decisions
  • Allocation of resources
  • Setting priorities of broad social policies and
  • Monitoring public spending.
  • Programmes are designed to integrate citizens
    into policy making process to encourage
    administrative reform and distribute public
    resources to low income areas.
  • Objective is to give participatory opportunities
    to the poor, traditionally the socially and
    politically excluded class in society.

41
Concluding Remarks
  • There are problems of pay policy
  • A high proportion of real earnings of civil
    servants not monetized
  • Many benefits not captured by personal
    emoluments in line item in the budget
  • Dilemma of public sector wage bill reduction
    while simultaneously trying to improve
    remuneration to attract and/or retain skilled
    personnel
  • Pay adjustments biased towards the low end of pay
    scales largely for political reasons
  • To compensate the top end there were extra
    allowances

42
Concluding Remarks.continued
  • including per diems for attending seminars,
    workshops, etc, and deliberately less visible
    non-wage benefits.
  • Pay policy also reflects changing priorities of
    government, eg, higher rewards for civil servants
    in the frontline of poverty reducing programmes
  • Highly compressed salary structure reduces civil
    servants incentives to pursue a long and
    successful career in the civil service by
    reducing the appeal of promotions in some cases
    wage compression may encourage moonlighting

43
Concluding Remarks.continued
  • MTPRS to be based on MTEF resource envelope
  • Improve public service capacity to implement
    poverty reducing programmes including MDGs
  • Streamline and simplify public service
    compensation structure by monetizing and
    consolidating all allowances in the civil
    servants remuneration

44
Concluding Remarks..continued
  • Improve pension benefits for public servants
  • Simplify the job grade structure to facilitate
    implementation of performance pay in the public
    service
  • Also need for
  • Decentralization
  • More active civil society involvement in
    expenditure tracking, monitoring, and evaluation
    and challenge abuses including corruption
  • Break culture of secrecy pervading functioning of
    govt
  • Empower people to demand public accountability in
    spending of public money and
  • Call for institution to monitor poverty and
    resources for programmes.

45
THE END
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