Combined pay hike and house rent allowance comes to around 25% total hike for most civil servants

And not 40% plus hike as most people had calculated

Understanding the pay hike rates in the government’s complicated final Pay Revision report, approved by the Cabinet, did not come easy to many of us.

The confusion was made worse by various sources interpreting different hike rates. A separate Pay Commission report, which was ir¬relevant but also presented, further added to the confusion.

The popular but inaccurate consensus was that since the government has given a 20 percent House Rent Allowance (HRA) and a separate 19 to 25 percent pay hike for civil servants then it would mean a total hike of 39 to 45 per-cent for civil servants.

However, on closer examination of the Pay Revision report, the 15 percent allowance that civil servants are already getting as their last hike in 2011 has been incorporate as part of the latest pay hike.

This would mean that if the pay hike for a civil servant at the S5 to S1 level is 23 percent then the actual hike would only be 8 percent given that they are already getting the 15 percent allowance. The advantage here is that the earlier 15 percent hike within this 23 percent hike becomes part of the basic pay, and hence, benefits like provident fund and gratuity can go up.

For example, currently a S5 level officer gets an entry level pay of Nu 9,045 and with the 15 percent allowance his or her pay, it comes to a total of 10,401. What the pay hike has done is take this 9,045 as the basic pay and give a 23 percent hike on it which makes it 11,125.

The 20 percent HRA is also not as simple as it sounds, with many assuming that it is 20 percent of whatever basic pay they are getting. The Pay Revision re-port, however, shows that the 20 percent HRA is on the en-try level or minimum salary level of any grade.

For example, the same S5 level officer’s salary after the 23 percent hike is now Nu 11,125 as an entry level salary. But other senior S5 officers who have received many two percent automatic annual increments after years of service could be earning up to14, 500. However, the 20 percent HRA for this category, like all categories, will be based on the minimum entry level salary of that grade and not with what the officer is currently earning.

This would mean that the 20 percent HRA hike for the entire S5 level will be based on the minimum entry level salary of Nu 11,125 which translates to around Nu 2,225.

Given that there are many senior officials in the same grades getting higher salaries than the new entrants in the same grade, the actual HRA hike for many will not be 20 percent of their real and actual salary.

The Bhutanese has done a detailed calculation and shown what civil servants will actually be getting after including the HRA (See Main Box 1).

The actual pay hike for staff from 01 to 04 levels receiving a 25 percent hike is actually 10 percent with a 20 percent HRA allowance based on their minimum pay. An estimate total hike would be below 30 percent.

Similarly, for officers from S5 to S1 level who are get¬ting a 23 percent hike, the actual hike is 8 percent with a 20 percent HRA allowance based on the minimum pay at the scale. The approximate total hike is below 28 percent.

For the EX/ES 3 to EX/ ES 1 category getting a pay hike of 19 percent, the actual hike will be four percent. Since some Dzongdas and non-government Secretaries in this category are already receive HRA, the total hike will remain at 4 percent. However, for the vast major¬ity like, Directors and DGs, the 20 percent HRA on the minimum salary will be new. For them, the estimate total hike will be below 24 per-cent.

For the 10 Government Secretaries getting a hike of 21 percent, the real hike will be 6 percent and since they already get HRA, there will not be any major impact.

According to the Finance Minister Lyonpo Namgay Dorji, the pay hike for civil servants has been done with the aim of giving a fair hike and to bring down the in-come gap and giving a higher overall hike to those earning less. The pay hike will be applicable from July 1, 2014.

The total cost to the government is Nu 1.799 bn or Nu 1,799 mn. This is expected to reduce by Nu 283 mn from the second year onwards.

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