Public wages soar 18 percent to $6.4 billion

The State’s total personnel cost including social benefits, retirement and end of service indemnities, surged by 18 percent in 2018 to $6.4 billion, according to the Ministry of Finance (MoF).

The cost grew by a compound annual growth rate of 8.4 percent over the period 2011-2018.

The $1 billion jump in costs seen in 2018 was mainly driven by the new salary scale granted to public sector employees in August 2017 and which took full effect in 2018. The salary scale only had a partial impact in 2017 as it only affected the last four months of that year.

End-of-service indemnities soared by $344 million in 2018, or nearly 150 percent. “The increase in end-of-service indemnities can be partly explained by the implementation of the new salary scale, which encouraged many public employees to undergo an early retirement plan,” the MoF said in its ‘Personnel Cost’ report. Retirement indemnities jumped by $228 million or 17 percent.

Salaries, wages and social benefits rose by $392 million, or 11 percent.

The total personnel cost represented 36 percent of total budget expenditure in 2018, up from 35 percent in 2017. It represented 11 percent of the gross domestic product (GDP) in 2018, compared with ten percent in the previous year.

The 2019 budget law includes a number of measures to curb personnel costs, such as freezing hiring in the public sector until a comprehensive survey of public institutions is completed. The law also put a ceiling on the allowances and indemnities offered to public servants. A monthly deduction was also imposed on the salaries and pensions of military personnel as a medical and hospitalization allowance. The budget law also freezes early retirement for most public sector employees for the next three years. These measures are part of the government’s effort to achieve its target of cutting the 2019 fiscal deficit to 7.6 percent of GDP.