PC calls for more post-retirement benefits

One of the salient features of the pay commission’s recommendation is the post-retirement benefits.

The commission recommended inducting the general service personnel (GSP) and elementary service personnel (ESP) for post retirement benefits.

The commission recommended an additional increase in the employer’s share of provident fund (PF) contribution by seven percent to 18 percent, keeping the employee’s contribution unchanged at 11 percent which increases the total contribution to 29 percent from 22 percent.

The 16 percent will continue to be accounted for pension fund, the PF contribution will increase to 13 percent from the present six percent for existing PF members and 18 percent for ESP and GSP employees.

With this additional allowance, ESP’s overall benefit increases by 77 percent – 29 percent basic pay, 10 percent performance based incentive, 18 percent PF and 20 percent house rent allowance. For those in the GSP category, the benefits will rise by 51 percent – basic pay 23 percent, PBI 10 percent, and PF 18 percent.

Since rising income levels of public servants through pay revision tend to create inflationary pressures, the commission recommends dispersing the overall benefits rather than a straight upfront increase in basic pay.

Accordingly, the total pay revision for public servants will consist of three components – modest increase in the basic pay, and monetary reward in the form of Performance Based Incentive (PBI) and additional government contribution to post-retirement benefits (PF).

“This is a strategy adopted deliberately to prevent price distortions in the market based on the trends of past pay revision exercises that immediately led to increases in house rents and price of commodities leaving the public servants with little real benefit.”

The commission states that the existing level of salary is barely enough to enable savings for the future. Also, the rise in the price of essential commodities and house rents as a result of pay revisions pushes the overall cost of living higher affecting the living standard of public servants.

The increase in post retirement benefits was needed in order to minimise this impact, and recognising the importance of a decent living after retirement.

This move of enhancing the post-retirement benefits according to the commission will help in retaining competent and qualified public servants.

The commission also recommends lifting the existing gratuity ceiling of Nu 1.5 million to encourage public servants to serve longer and enhancing the post-retirement benefits. Today, public servants resigning after 10 years of service are paid gratuity calculated on the last pay times the number of services with a maximum ceiling of Nu 1.5M.

Tshering Palden

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