The Challenges of Pay Reform
in Zambia
Managing the Payroll and the Establishment
1
Pay has fallen.
Pay scales have compressed.
Sources: Colcough, 1997, Tables 4.9 – 4.11; Directorate of Personnel; Republic of Zambia, 2001c; and Calculations.
2
It is difficult to sustain reductions in the size of the civil service.
 Employment fell after 1997.
 But is creeping up.
Sources: Colcough 1997, Table 4.3,p. 73; International Monetary Fund, Figure, Number of Public Servants,
1989-99, page 5;Data Centre, MoFED.
3
Allowances significantly add to the salaries, especially at the top.
Source: Data Centre, Ministry of Finance and Economic Development
4
Imagination is needed in the design of allowances.
Allowances Proposed for Consolidation or Elimination
PD CODE
2
2.3
2.148
3
3.17
3.39
3.43
3.47
3.51
3.53
3.55
3.57
3.59
3.63
3.67
3.94
3.96
3.98
3.102
3.153
3.163
3.165
3.167
3.169
3.171
3.173
Category of Compensation
Amount
Number of
Recipients
Average Payment
per Request
Flexible Allowances
Housing Allowances
Local Supplementation Allowance
Sub-Total
Fixed Allowances
Tool Allowance
Instructors Allowance
Machine Allowance
Grade Allowance
Amourer Allowance
Bandsman Allowance
Coxwains Allowance
Dog Handler Allowance
Equitation Allowance
Mental Allowance
Trade Testing Allowance
Body Guard Allowance
Finger Print Expert Allowance
Protect. Unit Kilometre Allowance
Danger Risk Allowance
Non Private Practising Allowance
Medical Allowance
Telephone Allowance
Entertainment Allowance
Motor Vehicle Allowance
Drivers Allowance
Secretarial Allowance
69,563,233
6,131
69,569,364
150
7
157
463,755
876
443,117
29,692,642
358,720
1,500
75
24,485
820
42,116
1,675
678
10,019
8,284
44,552
29,032
11,745
19,820,263
153,020,962
5,300,210
4,549,638
6,037,206
5,424,394
5,830,998
10,891,992
1,958
180
3
54
46
38
6
8
12
6
11
199
102
261
13,134
110
55
56
54
57
59
55
15,165
1,993
500
1
532
22
7,019
209
57
1,670
753
224
285
45
1,509
1,391,100
96,367
81,244
111,800
95,165
98,830
198,036
Sub-Total
Grand Total
241,102,004
310,671,368
16,464
16,621
14,644
18,691
5
Then employment structure is very fragmented
There are 26 salary scales
Within the structure there are 185 salary grades
Some job scales contain few grades, some just one,
with few personnel within them
For many grades, average differentials are 1 per cent
or less
Thus increments regards as rights, contributing to
salary creep
The proliferation took place when the economic crisis
limited the potential to salary increases
Zambia now moving to 26 job-grade scales
6
It is difficult to recruit technical and
professional staff
Few responses to adverts, most without minimum
qualifications
Staff trained under projects leave for private sector –
procurement officers, accountants, lawyers
Salaries in private sector typically 4 to 10 times higher
Income maintenance strategies: moonlighting, sitting
allowances,…
Also senior staff hired by parastatals on contracts for civil
service jobs
Less of a problem at the lower end, many applications for
any vacancies
7
The wage bill is a focus of policy concern.
It is on a rising trend (everywhere).
Expenditures and Wage Bill Trends Relative to GDP, 1998 - 2001
(Kwacha in Billions)
GDP market prices
Total Re-current Expenditures excl. debt service
Total Wage Bill
Public Service Wage Bill
1998
1999
2000
6,028.60
1,139.41
l319.52
231.01
7,411.50
1,237.72
392.81
284.00
9,087.000
1,533.400
538.300
387.576
2001
11,715.289
2,237.620
738.063
491.716
Expenditures/GDP %
Total Wage Bill/GDP %
Public Service Wage Bill/GDP %
18.90%
5.30%
3.83%
16.70%
5.30%
3.83%
16.87%
5.92%
4.27%
19.10%
6.30%
4.55%
Total Wage Bill/Exp %
Public Service Wage Bill/Exp %
28.04%
20.27%
31.74%
22.95%
35.10%
25.28%
32.98%
21.97%
Annual rate of increase in Public Service Wage Bill
Annual Inflation rate
24.50%
-1.90%
26.80%
2.02%
30.10%
3.47%
18.70%
5.20%
Source: Republic of Zambia, 2001a; International Monetary Fund, 1999; International Monetary Fund,
2001, Standard Bank, 2002; and Price Waterhouse Coopers, 2002.
8
It is difficult to manage the wage bill together with the establishment.
Composition of the Wage Bill
Figure 1
The share of total resources being consumed at year-end 2002
Autonomous and Grantaided Institutions
(including Health Boards)
18%
Education
26%
Classified Employees (in
non-Defense/Security)
3%
Foreign Affairs
7%
Defense/Intelligence/Polic
e
39%
All other Civil Service
7%
9
Note the varying responsibilities for different parts of the establishment.
Institution
Electoral Commission
PE’s in
Yellow
Book
X
Cash
Release
for PE’s
Payroll
managed
by MoF
X
Comments
Viewed as autonomous but funded as
PE’s rather than grants
Judiciary
X
X
X
Is supposed to be treated as autonomous,
i.e., grant-funded in future
Anti-Corruption Commission
X
X
X
Is supposed to be treated as autonomous,
i.e., grant-funded in future
National Assembly
X
X
Viewed as autonomous but funded as PE’s
rather than grants
Human Rights Commission
X
X
Viewed as autonomous but funded as PE’s
rather than grants
Health Boards
X
X
In YB as Grants although releases are as PE’s
UTH
X
X
In YB as Grants although releases are as PE’s
X
X
Represents status of most ministries.
Ministry of Commerce
X
ZRA
Completely autonomous
Defense
X
X
Payroll managed independently, so data is lacking
Intelligence
X
X
Payroll managed independently, so data is lacking
10
The Government decided to introduce a
sustainable medium term pay reform policy.
Projections of Recurrent Expenditures and Wage Bill Relative to GDP, 2001 – 2007
(Kwacha in Billions)
Categories
GDP market prices
Recurrent Expenditures
excl. debt service
Total Wage Bill
Public Service Wage Bill
2001
2002
2003
2004
2005
2006
2007
11,715.29
13,585.05
15,470.65
17,541.02
19,799.42
22,036.76
24,526.90
2,237.62
738.06
491.72
2,350.21
842.27
608.96
2,630.01
959.18
693.49
2,981.97
999.84
722.88
3,365.90
1,128.57
815.95
3,746.25
1,256.10
908.16
4,169.57
1,398.03
1,010.78
Expenditures/GDP %
Total Wage Bill/GDP %
Public Service Wage Bill/GDP %
19.10%
6.30%
4.55%
17.30%
6.20%
4.48%
17.00%
6.20%
4.48%
17.00%
5.70%
4.12%
17.00%
5.70%
4.12%
17.00%
5.70%
4.12%
17.00%
5.70%
4.12%
Total Wage Bill/Exp %
Public Service Wage Bill/Exp %
Annual Inflation rate
GDP Real Growth Rate
32.98%
21.97%
18.70%
5.20%
35.84%
25.91%
13.00%
4.00%
36.47%
26.37%
11.00%
4.00%
33.53%
24.24%
10.00%
4.50%
33.53%
24.24%
9.00%
5.00%
33.53%
24.24%
7.50%
5.00%
33.53%
24.24%
7.50%
5.00%
Source: International Monetary Fund, 2001, Standard Bank, 2002; Price Waterhouse Coopers, 2002; and
projections.
11
Cabinet approved a policy involving:
 Decompression
 Retrenchment
 Folding allowances into pay
(scenario 4)
Scenarios Assumptions Matrix
Wage Bill/GDP Ratio
Employment Trends
Salary Structure
Scenario 1
The Wage Bill/GDP ratio declines
from 6.2% in 2002 to 5.7% in 2003
and remain constant thereinafter.
Size of the public service
remains constrained
at 2001 level.
New salary structure
introduced. Salary differentials
(increment and grade differentials)
remain constraint through the
period.
Scenario 2
Same as Scenario 1.
Size of the public service
reduced in line with the KPMG
report recommendations.
New salary structure introduced.
Salary differentials (increment and
grade differentials) remain
constraint through the period.
Scenario 3
Same as Scenario 1 .
Same as Scenario 2.
New salary structure introduced.
Salary differentials (increment and
grade differentials) rise through the
period.
Scenario 4
Same as Scenario 1.
Same as Scenario 1.
New salary structure introduced.
Salary differentials (increment and
grade differentials) rise through the
period. Allowances are eliminated
for the compensation structure.
12
But the policy was immediately knocked off course!
Current Headcount
of Annual Wage Bill
Civil Service
Defense, Intelligence,
National Assembly
119,373
n/a
Current Estimate
Estimate of Wage Bill
Original MTPRS
901.2 billion
609.0 billion
463.3 billion
233.3 billion
13
But perhaps has been some sustainable progress:

The payroll and the establishment will soon be a single
database; a major payroll cleansing exercise has been
carried out

Some allowances have been eliminated

The number of salary scales has been reduced from 26 to 6

The number of salary grades from 185 to 68

For the first time the Government had a medium term policy
when it went into the negotiations with the unions
14
Lesson
Difficult enough to prepare a meaningful and
sustainable wage policy/plan/strategy
Real challenge is in the implementation
We must provide consulting/training resources
needed to support implementation, not just say:
“Here is the policy, now be tough,
implement it!”
15
Mozambique (meticais)
Public Sector
Private Sector
Salary
Subsidies
Benefits
Total
Teachers
4.013.561
1.877.958
1.275.000
6.025.771
9.880.000
743.056
650.000
Nurses
2.013.589
1.200.000
2.762.638
6.000.000
500.000
575.000
Others
4.418.811
2.996.411
8.652.996
20.242.096
170.342
2.685.716
Salary
Subsidies
6.619.972
Benefits
2.985.440
Total
10.585.833
7.075.000
28.679.282
16
Sierra Leone (Leones) – Salary plus allowances
Civil
Service
SLComm Bank
Stan Chart
Bank
Rokel Comm
Bank
BSL (Central
Bank)
SLState
Lottery
Union Trust Bank
Chief Executive
24,131,750
59,250,000
60,565,789
79,500,000
50,080,000
53,560,000
56,354,992
Top Management
(Heads of Dept.)
14,994,000
37,620,000
39,600,000
55,125,000
31,116,663
30,258,482
31,837,500
Middle Management
6,650,387
13,862,264
14,170,109
18,600,000
11,716,830
17,772,552
18,700,000
Clerical
3,196,360
7,200,000
10,800,000
6,030,000
5,631,433
3,309,907
5,550,000
Middle Level
Support Staff
1,696,136
4,836,264
6,701,330
4,696,319
3,705,826
2,841,767
4,023,746
Junior
979,137
2,472,528
2,602,661
3,362,638
1,780,220
2,373,627
2,497,493
CR*
25
24
23
24
28
23
23
17