Committee looking at paying civil servants based on performance

The Ministry of Finance committee is working on a proposal of paying civil servants two types of wages. One would be a basic pay that would include all allowances like house rent allowance etc. and the other component would be variable pay which would be paid only at the end of the year depending on the performance of the nation’s economy, agency’s performance and individual performance.

While civil servants can expect to get their pay and allowances combined under one Clean Wage pay scale, if they want something more through the variable pay then it will depend on their performance.

The model being studied for this is a mix of the Druk Holdings and Investment (DHI) and Singapore Civil Service pay system.

In the DHI headquarters for example the staff there gets a basic pay called Total Fixed Monthly Remuneration (TFMR) which equivalent to a Clean Wage as it combines both basic pay and all allowances as one pay.

As per past practice this is higher than the civil service pay and allowances by around 15 percent or more.

To reduce the provident fund burden for DHI only 60 percent of the TFMR pay will get PF contribution.

Apart from the TFMR there is a performance based pay called variable pay which is 15% of the TFMR at the operational level (support staff, office assistants, field people, accountants), 20% at the professional level (assistant analysts, analysts) and 25% at the executive level (senior analysts, associate directors, CEOs).

This variable pay is not paid out immediately, but retained and collected every month till the end of the year.

At the beginning of the year clear individual targets are set for people and if by the end of the year the individuals can meet those targets then they can expect to get the accumulated variable pay based on how much targets they met.

If your achievement is higher than you get more variable pay.

This accumulated variable pay is roughly around two months’ worth of TFMR pay.

Now in the case of civil servants the performance of civil servants will be linked to the revamped Performance Management System (PMS).

However, the above while being worked on seriously are still not firmed up as a big challenge for the MoF will be to carve out funds from the budget pool for this performance component.

For example, while civil servants normally get paid for 12 months in a year there could be pay for up to 15 months in a year for performing civil servants. As a result, even a junior civil servant can earn more than his or her seniors if they perform well.

The bonuses could be an individual bonus component, an agency level bonus component and a national level bonus component.

However, the exact amount of bonuses available will be dependent on the funds available.

This is since most of the capital programs in Bhutan are funded either through grants or borrowing and there is limited revenue available.

The individual performance of civil servants will be judged based on the Individual Work Plan (IWP) under the PMS system.

From this year onwards a P 1 officer will be rated by the executives while the executives will be rated by the RCSC in addition to feedback from juniors.

Earlier the Annual Performance Agreement (APA) was taken as a proxy for the ratings of executives, but this will no longer be the case.

There will be moderations whereby one block would be outstanding, one block would be meeting targets and another block would not be meeting targets.

Those under P 1 will be rated by their superiors in a joint manner. The improved system will aim to avoid the ‘you scratch my back and I will scratch yours’ system of rating earlier where bosses and juniors gave each other high ratings. 

The aim is to link the performance based pay to the Clean Wage bill, however, it is not certain for now.

Both the Clean Wage and performance based variable pay would be changing the Pay Commission recommendations of the past like certain allowances etc. so the legal aspects and measures are being looked at on how things can be done.

The above will also mean that the annual salary indexation system of the past which was put on hold due to the pandemic will not happen.

Another challenge for the MoF is in calculating when to give a national bonus as given the small size of the economy even when a single large project like starting a hydro project construction will lead to GDP rates going up though the revenue will stay the same.

Given the tough financial situation of Bhutan right now even if legislation is passed it could enact the Clean Wage first and then state a certain date or economic condition by when the variable pay linked to performance is given.

Another system that is being looked at to craft the above, apart from DHI’s pay system, is the Singapore Civil Service pay system which also gives a clean wage with no hidden allowances.

A Singaporean civil servants’ salary is comprised of a basic monthly pay or clean wage, an individual performance bonus given to individuals based on performance, an annual merit increment based on performance, a mid year bonus of half month pay and a year end bonus or the 13th month called the Annual Variable Component (AVC) which is based on Singapore’s economic performance and a national one-month bonus based on four socio economic indicators.

In a good year like in 2018 a Singaporean civil servant in addition to his or her individual performance bonus and increment can collect 2.5 months’ worth of AVC and the national bonus.

In a tough year like 2020 only one-month bonus was given out.

Lower paid staff on top of the above bonuses gets an additional one-time cash payment like Singapore dollar 200 to 750 to supplement their income.