Govt to review personnel spending to reduce public service wage bill

Image source: Pexels

“The Department of Public Service and Administration will continue reviewing personnel spending to reduce unsustainable growth in the public-service wage bill.”

The National Treasury said the 2021 wage agreement provides for a pensionable increase of 1.5%, as provided for in the 2021 Budget.

Cash gratuity

“It includes a once-off non-pensionable cash gratuity of R1,000 after tax per person per month, which was not budgeted for.”

The National Treasury said the gratuity is expected to cost government R20.5bn in the current year, with a preliminary carry through of R20.5bn in 2022/23 if no new agreement is reached.

“In 2021/22, the gratuity will be largely funded by additional revenue, and will require shifting funds from the Infrastructure Fund, with a provisional allocation of R20.5bn for 2022/23 included in the fiscal framework.

“Fiscal consolidation has halted the trend of above-inflation growth in the wage bill, with budgeted increases of 1.5% growth in the baseline for 2021/22 and 2022/23.

“Should it be necessary to implement the final leg of the 2018 wage agreement retroactively, however, additional measures would be required.”

The National Treasury said some of the measures could include revenue measures, increased borrowing and active steps to reduce the size of the public service.

“In addition, government is developing a comprehensive public-sector remuneration strategy for the medium to long term.

“This will include public office bearers, state-owned companies, public entities and local government. The strategy will seek to better balance competing interests on the basis of fairness, equity and affordability.”

The National Treasury said in the long run, compensation spending growth cannot exceed GDP growth.

Government committed to fair and sustainable compensation of employees

The National Treasury said, meanwhile, that government is committed to fair and sustainable compensation of employees.

“As discussed in previous years, however, compensation growth has been on an unsustainable trajectory.

“Although the wage growth moderation in 2020/21 has helped to make compensation spending growth more sustainable, the extent to which this will continue depends on the outcome of ongoing wage negotiations.

“It will also depend on whether the Constitutional Court upholds the decision of the Labour Appeal Court, which held that government was within its rights not to implement the cost-of-living adjustment as stipulated in the 2018 wage agreement, because the National Treasury had not affirmed its affordability.”