How are civil service positions affected by salary top-ups? What role do donors play in this process? This note was prepared by the World Bank’s ‘Governance and Public Sector Reform’ team. It identifies the existing types of incentives available for civil servants, highlights the underlying risks associated with this practice and draws on various examples to illustrate the problem.
Salary top-ups are official cash payments or in-kind benefits that civil servants receive over and above the grade and pay scale they are on. The distortions in incentives resulting from salary top-ups are damaging, particularly because scarce knowledge and skills can be drawn away from essential positions. Top-ups are widespread in developing countries, for example in Indonesia where they form a significant proportion of the salary for many government officials. By way of contrast, in OECD nations the basic pay averages nearly 90% of the total wage received by civil servants.
Although salary top-ups often make unattractive jobs more appealing, they are sometimes misused and in reality only add incentives to already interesting positions. This is the case with jobs that offer high recognition or accelerated promotion opportunities. Other interesting findings are:
- Salary top-ups are developed in relation to: position, task or donor influence. Benefits can be in the form of an extra percentage of the basic salary or be in-kind benefits (e.g. house, car and/or telephone).
- Position-based allowances are granted in jobs that are either more risky, require very specialised skills or are based in remote or unattractive locations.
- Task-based allowances are paid on a temporary basis to encourage employees to take on more responsibility or add to their existing workload. The risk is that these allowances tend to become permanent.
- Task based-allowances can make civil service careers less attractive by reducing the number of promotion opportunities. They can also create huge disparity in payment and workload for staff carrying out similar tasks.
- Donor-funded allowances are associated with specific projects or tasks in which staff already receive a higher than average salary.
Paying excessively generous salaries to their own local staff helps donors to attract skilled employees. However, there are several repercussions in this which should be taken into consideration:
- The most qualified civil servants, who also have donor language skills, are drawn away from state jobs. Government capacity is undermined and extra pressure is placed on other associated implementation units.
- International candidates are attracted to positions that could otherwise go to local talent. This contributes to creating perceptions of favouritism and impropriety.
- Donors should support the development of clear salary and benefits standards that are in line with government policies to ensure that civil service positions do not become less attractive.
- Civil servants should have a cooling-off period between leaving government service and taking a donor contract or a position with a private firm which supplies to government.
