An efficient and affordable public service is essential to good governance. An inefficient one will fail to deliver the services people need. An unaffordable one can threaten macroeconomic stability. This guide, produced for DFID by Price Waterhouse Coopers, based on research by the University of Manchester, is designed to improve the quality and impact of DFID assistance in the area of public sector employment and pay reform. This covers all issues relating the number and control of posts and staffing, levels of recruitment, the size of the overall wage bill, pay levels and differentials, and terms and conditions including pension rights.
In many countries, especially in Africa, the need to provide employment, poor personnel management and an expanding role for government have combined to produce a population explosion in the public sector. High numbers, often including large numbers of ‘ghosts’, make for low pay, encouraging corruption and making it hard to retain good quality staff. Governments have been reluctant to tackle the problem for fear of the social discontent and possible unrest that retrenchment policies might bring. However, the potential benefits from reform are great, especially for the poor and under-privileged who rely most heavily on public services.
Reform programmes have not all been successful or sustainable. The guide suggests that successful reform must have high level government commitment, and be a continuous process rather than a one-off intervention. It suggests ways of building support, diagnosing problems, and implementing reforms in ways which will stick, avoiding hardship amongst the retrenched. The paper finds that:
- The main benefits to the poor from employment and pay reform are likely to be indirect. For example, taken with other public sector reforms such as improved revenue collection, they should result in a more efficient and better funded administration which can deliver better services
- While direct benefits are harder to achieve they might be possible, for example, by redirecting savings from retrenchment to expenditure on priority services, or by relocating staff to areas of greater need.
Policy implications include:
- Governments are often reluctant or unable to finance severance payments. Redundancy packages can be very expensive and have to be met up front, whilst savings take time to materialise. A government may see the need to cut the public sector wage bill, but be unable to afford the short-term costs of doing so. Donor assistance in meeting these costs can greatly encourage reforms
- Technical assistance can play an important part in all stages, but is especially useful in pay and salary reviews, retrenchment administration and tracer studies. Retrenchment programmes are especially tricky and the guide recommends that up to 10 per cent of development funds allocated to them should go towards technical assistance, to reduce the risks of poorly designed and implemented programmes, mismanagement and possibly fraud.
