5% basic pay hike, allowances clubbed together and Performance Based Incentive in Pay Structure Reform Bill

The Finance Minister Namgay Tshering presented the Pay Structure Bill of Bhutan 2022 under which the Pay Structure shall comprise of fixed pay and variable pay.

The Fixed pay shall comprise of Monthly Basic Pay (MBP) applied for the calculation of post service benefits and other computations currently pegged to the basic pay, and secondly the Non-Pensionable Monthly Pay (NPMP) which shall include existing allowances applicable across the board like House Rent Allowance and Communication Allowance. 

The Variable pay comprises the monthly variable compensation (MVC) which includes the cash equivalent of allowances; and Performance Based Incentives (PBI).

The MVC includes allowances like Leave Encashment and Leave Travel Concession divided on pro-rata basis, Professional, Uniform, Night Duty, Difficult Area, High Altitude, Overtime, Foreign Service, Contract Allowance, Radiation for civil servants. 

The MVC for MPs and constitutional posts are Leave Encashment, Leave Travel Concession, Domestic Help, Water and Electricity, Driver and Fuel, Vehicle Purchase, Discretionary, Difficult Area, Overtime, High Altitude, Special Responsibility. 

Performance Based Incentive 

The PBI will be Individual, Organization, and Nationalperformance based. 

The performance based incentive will be predicated upon a robust system of measurements and performance shall be provided when the performance management system is implemented.

The performance based incentive comprising components that are linked to national, organizational and individual performances could be up to 100% of the annual basic pay of the public servant’s pay to drive meritocracy and to pay competitive salary packages. 

Lyonpo said competence and merit is important in the civil service which is why the performance based incentive is being introduced.  Lyonpo said a danger is that without PBI those working sincerely will get discouraged. 

5% hike 

Under the Bill there is a 5% indexation added on basic pay of all civil servants and public servants which is like a 5% salary hike. 

A one – off fixed payment to public servants at the P1 position level and below shall be provided to mitigate hardship. It is Nu 1,000 for P1-P4, Nu 1,500 for P5- S4 and Nu 2,000 for S-5 and below. 

The leave encashment at one month’s minimum pay scale shall be prorated per month or divided per month. 

The Leave Travel Concession at one month’s minimum pay scale with a maximum ceiling of Nu. 15,000 per annum shall be prorated per month.

The continuity of the one-off payments of 5% indexation and the one-off fixed payment shall be reviewed by the Government on a periodic basis to give the Government the flexibility and levers to adjust to the fiscal situation of the country from the variable pay.



No Vehicle quota for CS and MPs 

The entitlement of vehicle import quota or the monetized amount of Nu. 1.5 m and 0.25 m for all public servants shall be discontinued. 

However, for those public servants who are eligible for the vehicle import quota shall be retained as per eligibility until the effective date of this Act. 

In case, a Public Servant who was eligible for the vehicle import quota until the effective date of this Act becomes deceased, the vehicle quota will be forfeited. The implementation process shall be formulated by the Ministry of Finance. 

Allowances and Benefits Discontinued

The practice of Personal pay shall be discontinued. However, the amount received as personal pay shall be subsumed in the monthly variable compensation under variable pay. 

The Red Kabney (Nyie-kel-ma) allowance of Nu.100 per month shall be discontinued. 

The discretionary allowance for Dzongdas at Nu. 75,000 per annum shall be discontinued and shall form part of recurrent expenditure. 

The in-country training Daily Subsistence Allowance (DSA) of Nu. 2,000 per day shall be discontinued. However, the TA/DA for in-country travel shall be eligible wherever applicable. 

The Patang allowance of Nu. 50,000 provided towards purchase of the Patang if Patang is not provided by the Government shall be discontinued and shall form part of recurrent expenditure. 

The Overtime Session Allowance (OSA) for NA/NC/DNB of Nu. 15,000 and Nu. 5,000 per session shall be discontinued. 

The officiating allowance of Nu. 5,000 per month with a maximum ceiling of three months shall be discontinued. 

The cash handling allowance of Nu.400 per month shall be discontinued. 

The sitting fees for the Local Government for Thrompon: Nu.5,000 (DT)/Gup: Nu. 5,000 (DT)/Nu. 1,000 (TT)/Mangmi: Nu. 5,000 (DT)/Nu. 1,000 (TT)/Dzongkhag Thromde Thuemi: Nu. 5,000/Tshogpa: Nu. 1,000 (GT)/Thromde Thuemi: Nu. 5,000(TT) shall be discontinued. 

The additional allowance for teachers based on Government approved Bhutan Professional Standards for Teachers (BPST) at Proficient Teacher: 10% /, Accomplished Teacher: 15%/ and Distinguished Teacher: 20% shall be discontinued.

In the Foreign Service certain allowances discontinued are representational grant to individuals which will instead be in the current budget, children education allowance for a place out of posting, utility expenses, 250 to 100 kg baggage allowance on transfer, container for transfer and carriage of personal vehicles on transfer.

Apart from the above the others mainly remain as they are with some changes.

FM explains the logic behind the figures 

The Finance Minister said that there have been 4 Pay Commissions so far. He said in 4th pay commission in 2019 the government paid Nu 4.5 bn more in pay per year. Lyonpo said that from the recurrent expenditure around 60% is in salary and allowances. 

He said in the 2021-22 financial year of the Nu 36 bn internal revenue Nu 32 was spent as mandatory expenses which is mostly in salary. It is going up as there is also increments.

Lyonpo said the government cannot give a large hike as we must carry our own load and spend within our revenue. 

He said in 2022-23 FY we had 37 bn and 33 bn in mandatory expenses of which the majority is salary. 

Lyonpo said for two plans the recurrent is higher than capital. He said foreign experts said we spend too much for small works. 

Lyonpo said the economy is weak and import independent. The dollar is high and Nu is weaker and so loan repayment is higher. 

The hydro projects are also delayed there are worries about what will happen. 

These factors were considered by the 5th Pay Commission and submitted to the government which is presenting it is a bill. 

Lyonpo said when the 5th Pay Commission looked into the issue it found 30 different types of allowances. He said civil servantsdon’t mention allowances when asked about pay. 

He said the commission found there is lack of transparency in the current pay system and allowances. The pay slip does not reflect the allowances. 

He said there is higher administrative burden for implementing the allowances. Lyonpo said the allowances have largely been retained and put under the variable pay. 

Effective date 

For the National Council Members, it shall come into force with the election of the Members of the Fourth Parliament.

For the civil servants and other public servants, it shall come into force with effect from 1st July 2023.

For the National Assembly Members, it shall come into force with the election of the Members of the Fourth Parliament

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