The request by the Government of Grenada to defer the 4% salary increase due in 2021, will actually cost more than if Government paid the agreed-upon increases on time.
Given the fluidity of the Covid-19 pandemic and the continuing widespread impact, Government is at this point, unable to ascertain the exact period of deferral. However, any delayed payment means that compounded interest will apply and the burden of retroactive pay arises. Head of the Government’s Negotiating Team Honourable Oliver Joseph said it is the first time since Government returned to office in 2013 that it will have to resort to retroactive payments. Speaking on GBN’s Beyond the Headlines programme on Monday night, Permanent Secretary in the Department of Public Administration, Rhonda Jones elaborated on this.
Jones who is also the Deputy Chair of the Government’s Negotiating Team said, “Deferring the payment really is not in the best interest of the Government. That is simply because we have worked very hard over the last few years to move from a situation where we have to make back payments for personnel expenditure. That was a very unhealthy period in our financial history. We managed to successfully move away from that type of negotiations and we are now at the point where we were able to project and budget for salary/wages increases that would come in the 3-year cycle.”
She further explained, “It is not a pleasant situation that we find ourselves in because if we do not meet that obligation for 2021, we will have a compounded percentage to pay in 2022 and this actually increases the debt burden for Government to honour its obligations, the longer we protract on meeting that obligation.”
The 4% wage/salary increase for public officers will add $13.2 million to Government’s annual wage bill, at a rate of about $1.1 million per month.
Jones explained that the true cost of wage/salary increases goes beyond the additional money public servants receive. She said, “Every time increases to public officers are to be paid out, there is a concomitant increase in increments, social contributions – NIS and pension payments. Therefore, the perception that $1.1 million represents the value of what is payable in wages and salaries for public officers is incorrect.”
Statistics provided by the Ministry of Finance and shared with the trade unions indicate that 4% increase will bring Government’s wage bill for 2021 to $337.6 million, up from $324.4 million in 2020. Similarly, pension payments would increase from $46.3 million in 2020 to $48.1 million in 2021 and NIS contributions from $14.1 million to $14.6 million.
Government first engaged the unions in 2020 when it analysed the impact of the pandemic on revenue collection combined with the unplanned expenditure, and determined that it would be a challenge to meet the additional recurrent expenditure.
At a meeting of the social partners on Tuesday afternoon, the 4% increase was also an agenda item. Prime Minister, Dr the Rt Hon. Keith Mitchell assured attendees that in seeking a deferral, Government is not questioning the legitimacy of the increase for public officers, but rather it is seeking some consideration of Government’s inability to increase recurrent expenditure at a time when the Covid-19 pandemic has significantly impacted its revenue collection.
In the interest of full transparency, Government has proposed quarterly engagements with the trade union representatives and the submission of quarterly fiscal statements on Government’s revenue.
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