The government can consider introducing a locality pay adjustment system in which public employees in more expensive areas are compensated for higher living costs. This means that a percentage, which is lower than the national base pay increment, will be given to such people.
For instance, in the US, the civilian federal employees’ pay was increased by 2.2% and an additional 0.5% increase as locality pay which brings the overall base pay rise to 2.7% in 2022. The locality pay in Ghana however, could compensate people living in remote areas for their sacrifices and difficulties obtaining basic amenities to ensure they discharge their duties effectively.
Under this system, instead of using the national inflation rate to determine the pay rise, the regional or locality inflation rates will be used to determine the percentage rise in the base pay each year.
This is because there is always a tug of war between the government and public sector employees over pay increments each year, despite the introduction of the public sector base pay of the Single Spine Salary Structure (SSSS) in 2010.
Under the current pay structure, the Fair Wages and Salaries Commission embarks on a yearly review of the base salary of public sector workers on the SSSS. However, the current policy, even though meant to ensure fairness in the compensation of public sector employees, seem to have placed the government under serious fiscal constraints with the wage bill rising consistently over the years.
On June 1, 2021, the Public Services Joint Standing Negotiation Committee (PSJSNC) agreed on a 4 percentage point rise in the base pay of all public service workers in 2021 and a 6% rise in 2022. Consequently, Compensation of Employees was revised upwards by GH¢1,177 million in 2021, “reflecting the increase in the public sector base pay by 4.0 percent”, The Finance Ministry highlighted in the 2021 Mid-year Budget statement.
Organized Labor entered the negotiations with high hopes with a proposal of a 15% increment which was later reduced to 10% for both 2021 and 2022. However, the government expressed its unwillingness to honor this proposal, citing the need to fight the current pandemic, which has already limited the fiscal space of the government, as its main constraint. Also, the government indicated that it may be forced to lay off some workers if it agreed with the proposed 15% increment.
Yet, recently the government announced that it has increased the base pay in 2022 by 7% instead of the agreed 6% during the negotiations. For now, it’s still not clear whether the GH¢35.8 billion earmarked for the compensation of employees was based on the 6% or 7% base pay increment. If it is not based on 7%, then government will be forced to revise it upwards again.
Employee compensation
Employee compensation remains one of the major expenditure component of government and consumes a chunk of the country’s domestic revenues. In the first three quarters of 2021, government spent GH¢23.4 billion on compensation of employees, with the projected outturn for 2021 standing at GH¢33.0 billion. In 2019, Compensation of employees amounted to GH¢22.2 billion and rose by 27.5% to 28.3 billion in 2020.
Few years ago, the immediate past CEO of the Fair Wages and Salaries Commission, Dr. Edward Kwapong, hinted of a change in the recent pay structure to help reduce government’s rising expenditure on public sector remuneration.
“Because of the rate of inflation, people say the real income has eroded. So there is the need to restore us back to the real wage we were making at the beginning of the year. The increase which will keep workers where they were before the end of the year is informed by figures from the Ghana Statistical Service”.
Dr. Edward Kwapong
This will mean that the pay given to employees will reflect the cost of living in the country. So, once national inflation goes up, the pay is also expected to go up. Yet, the government must look for ways and means of compensating its workers based on their productivity and not just mere presence at the work place.
The government’s efforts to clean the government’s payroll and eradicate ghost names must be complimented by metrics that will measure productivity of workers to ensure value for money in addition to ensuring better living conditions of workers.
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