10 May 2007

Prudence keyword in salary revision

WHILE Prime Minister Datuk Seri Abdullah Ahmad Badawi has assured civil servants that they deserve a salary increase, the public can only hope that the Government will exercise prudence when considering Cuepacs’ request.

The Public Service Department (PSD) which has been given the task of working out the details, will need to look at both the short- and long-term impacts of a revision.

Cuepacs, the umbrella union for civil service unions, has asked for an increase of between 10% and 40%, with those at the lower tiers getting a higher figure. In any case, Cuepacs has gone on record that it does not expect its recommendations to be accepted in total.

This is a good sign as employees must be realistic and accept that the actual quantum will have to depend on the nation’s financial position. With over a million workers involved, it is not easy for any employer to raise wages without worrying about the financial implications.

Even an across the board 10% boost will cost the Government hundreds of millions annually. In good times, there will be money to meet this commitment. But it is the long-term impact that is of concern, since this will add considerably to the pension bill.

This can be so huge that it may be difficult for the Government to sustain such payments in future. Good times cannot last forever, and with globalisation we may be less competitive than other nations – such as China, India and even Vietnam – which are booming.

These are the new investment centres of foreign funds because of cheaper labour and other incentives being offered by their governments. This is a threat we cannot ignore, one that will adversely affect the manufacturing and industrial sectors.

Any salary adjustment in the public sector will have side effects on the rest of the country, too. Workers in the commercial world may wish to ask for higher pay and other perks.

The Government, therefore, must take all such concerns into account and come up with a suitable solution. After all, any pay increase will have to come from taxes, whether direct or indirect.

Instead of just a salary revision, the Government should also consider other incentives. It is better to have a reasonable salary, and when times are good workers could be rewarded with bonuses to share the goodies.

When times are not so good, such bonuses could be reduced or even stopped. In this way, workers will at least be assured of maintaining their pay. In really bad times, a pay cut and even retrenchment of staff may be necessary to keep the administration or company going.

A good formula to use in future pay revisions should be one based on performance. If Cuepacs should ask for a review a few years down the road, this should be based on the productivity of the workforce.

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