Salaries commission

Following strikes by powerful trade unions the Government has decided to appoint a salaries commission that would be tasked with evaluating the salary structures of the entire public sector and recommend reforms to streamline the different grades and reduce salary anomalies. The Commission, which is expected to give their report in two months, could provide important proposals for the Government to better manage its finances.

The Salaries Commission will conduct an in-depth study on the provisions of the existing circulars dealing with the payment of salaries and other allowances paid to public sector employees and will make its recommendations to the Government within the next two months.

The Government, based on the recommendation of the Salaries Commission, will introduce a new salary structure to increase the salaries of all public servants and to remove the reported salary anomalies that exist at certain government institutions including the Railways Department. 

The commission comes after a standoff between the Government and railway trade unions that went on strike demanding a salary increase. Minister Samaraweera rejected trade union demands as a salary hike for the railway department would have resulted in a pay increase for 24 other grades within the public sector including for teachers, doctors and police. After a days-long standoff President Maithripala Sirisena met with the railway trade unions and promised to find solutions to their demands. However, this compromise looks set to be short lived as railway unions have only given the government one week and have threatened to recommence their strike next Tuesday. 

The challenge of salary demands is that the public sector is overcrowded and salary payments are made irrespective of the financial performance of the institution. When State assets become loss-making, they have to be funded by taxpayers, forcing governments to increase taxes and divert revenue that could be spent on healthcare, education and housing into maintaining corporations that provide little or no benefit to the people. In extreme cases, more loans have to be taken to repay old loans, entrapping countries in colossal debt and causing massive macroeconomic headaches to governments. These hidden costs are rarely seen by the masses, but governments are stepping up to tackle them. 

In mid-2017, Moody’s Investors Service put Sri Lanka’s public enterprise debt at a whopping 14% of GDP and warned the Government of additional risks to its finances should such debt require any State support, which is likely to become the case as most cannot support repaying their debt. This translates into a massive debt pile of little under $ 12 billion, or Rs. 1,848 billion, that has accumulated due to the continuous annual losses. According to Moody’s, the total liabilities include Government guarantees, outstanding SOE debt to the banking system and outstanding SOE foreign borrowings. 

As difficult as it is, an emotionally driven political discourse on loss-making State assets should not be allowed to take precedence over the economic facts. Paying salaries, perks and pensions of an overloaded public sector is a colossal task that will become increasingly difficult given Sri Lanka’s limited growth and socio-economic dynamics such as a rapidly aging population. The salaries commission would also have to take into account these peripheral factors in making its recommendations and link them to larger public sector reforms for the process to be successful.