MB Subba

The government’s decision to endorse the corporate pay revision without recommendations from a Pay Commission was in violation of the Constitution, the opposition party and observers say.

According to some interpretations, the fourth Pay Commission should have included recommendations for the corporate sector in its report. But the problem was that the Terms of Reference (ToR), which the government issues, for the fourth Pay Commission did not have reference to corporate pay, it was learnt.

The other option, observers say, is to form a separate Pay Commission for the corporate sector employees. The third Pay Commission was formed in 2017 to recommend the pay revision for the local government.

Article 30(2) of the Constitution states, “The Pay Commission shall recommend to the Government revisions in the structure of the salary, allowances, benefits, and other emoluments of the Royal Civil Service, the Judiciary, the members of Parliament and Local Governments, the holders and the members of constitutional offices and ‘all other public servants’ with due regard to the economy of the Kingdom and other provisions of this Constitution.”

The first and the second Pay Commissions of 2008 and 2014 respectively had come up with guidelines for Druk Holding and Investments (DHI) companies,   DHI-linked corporations and Ministry of Finance (MoF)-owned corporations.

Although the details of the corporate pay were endorsed at a latter date than that of civil servants, they became effective from July of the respective years. This, observers say, was in keeping with the constitutional provision and the past precedents.

Opposition spokesperson Dorji Wangdi said the corporate pay revision should be covered in the Pay Commission report. Employees of SOEs, he said, were public servants and that their pay revision must be made based on the recommendations of a Pay Commission.

“He said that it was a fundamental error on part of the government not to include corporate pay in the ToR for the fourth Pay Commission in keeping with Article 30(2) of Constitution,” he said.

However, he added that the recommendations for corporations were broader in comparison with civil servants’ pay revision recommendations.

“The Pay Commission covered recommendations for corporations both after democracy and before democracy. The money and investments in the sector were public money,” he said.

Dorji Wangdi said that the pay revision for SOEs should ideally be effective from July 2019 unless the Pay Commission recommended otherwise. Should the pay revision be effective from July, employees would be entitled to arrears of salaries for five months.

The government decided that the pay revision would be effective from December 1.

However, Finance Minister Namgay Tshering said that the dynamics of work in the civil service and the corporate sector were different. “Civil service and corporate sectors should not necessarily be pegged,” he said.

According to him, the MoF-controlled companies would get more than DHI-owned companies. “The employees of SOEs will benefit a lot from the pay revision,” lyonpo Namgay Tshering said.

The pay revision for MoF-controlled SOEs was endorsed by the Cabinet on November 26.

The first Pay Commission report stated that it was difficult to implement a uniform pay policy across all the companies and suggested that the MoF and DHI categorise the companies.

It had recommended that pay package be linked with performance, and that the corporations establish a comprehensive performance management system (PMS) that will incorporate clear and measurable targets and goals at both the units and the individual level.

The second Pay Commission report had recommended keeping the pay and allowances of SOEs at 15 percent higher than the civil servants. The SOEs under MoF were expected to meet any salary revisions through gains in efficiency and reduction in other operating costs, as the government may not provide any funds for meeting the salary revision cost.

The past Pay Commission report had also analysed the impacts of the corporate and civil service pay raise on the private sector employees.

SOEs, which include both DHI-owned and linked companies and companies directly under the MoF have been a major source of job creation, wealth creation and revenue to the government.

In 2017, SOEs generated gross revenue of Nu 54,611 million (M), which was 30 percent of GDP and profit after tax of Nu 17,752M.

There are 38 SOEs, 19 of which are held directly by the ministry of finance and as many through the DHI. They contributed 38 percent of the domestic revenue and 6 percent of GDP in 2017, according to statistics published by the finance ministry.

About 13,000 people are employed in the corporate sector.