Updates on Compensation By Assistant Secretary Myrna S Updates on Compensation By Assistant Secretary Myrna S. Chua Department of Budget and Management October 2015

Salary Standardization Laws 1. Republic Act No. 6758, Compensation and Position Classification Act of 1989 (SSL 1) 2. Senate and House of Representatives Joint Resolution No. 1, s. 1994 (SSL 2) 3. Senate and House of Representatives Joint Resolution No. 4, s. 2009 (SSL 3)

Congress Joint Resolution No. 4, s. 2009 (SSL 3) Guiding Principles: Payment of just and equitable compensation to government personnel in accordance with the principle of equal pay for work of equal value; Comparability of civilian government pay with those in the private sector; Rationalized and standardized compensation across all government agencies; and Allow me to backtrack a bit to explain how this study came about. On June 4, 2009 Congress passed Joint Resolution No. 4 in 2009, or the Salary Standardization Law 3 to modify the Compensation and Position Classification System. The following principles are espoused in this resolution: (a) All government personnel shall be paid with just and equitable compensation in line with the principle of equal pay for work of equal value. (b) The compensation for civilian government personnel shall be comparable with those in the private sector to attract, retain and motivate a corps of competent civil servants. (c) The compensation for all civilian government personnel shall be standardized and rationalized across all government agencies to foster and promote social justice, integrity, efficiency, productivity, accountability and excellence in the civil service. (d) The government shall then establish a performance-based incentive scheme which integrates personnel and organizational performance to reward exemplary civil servants and well-performing institutions. Adoption of a performance-based incentive scheme 3 3

Total Compensation Framework Under Joint Resolution No. 4 (SSL 3) Basic Salary Including Step Increment Standard Allowances and Benefits ---------------------- given to all employees e.g., PERA, Year-End Bonus and Cash Gift, Uniform/Clothing Allowance Specific- Purpose Allowances and Benefits ---------------------- given under specific conditions of work e.g., RATA, Subsistence Allowance, Hazard Pay Incentives ------------------------ Rewards for loyalty and productivity e.g., Loyalty Incentive, Anniversary Bonus CNA Incentive, Productivity Enhancement Incentive (PEI) 4

Performance-Based Incentive System (PBIS) Executive Order No. 80 “Directing the Adoption of a Performance-Based Incentive System for Government Employees” Objectives To rationalize the current incentive system generally characterized by across-the-board bonuses that are given uniformly. To strengthen performance monitoring and appraisal system like the Performance-Informed Budget and OPIF used by DBM to measure agency performance . Link organizational and individual performance thru the Strategic Performance Management System (SPMS) of the CSC.

Performance-Based Incentive System (PBIS) Executive Order No. 80 Adoption of a Performance Based Incentive System (PBIS) consists of the following: Productivity Enhancement Incentive = ₱5,000 Given across-the-board Performance-Based Bonus = ₱5,000 to ₱35,000 A top-up bonus given to personnel of bureaus or delivery units in accordance with their contribution to the accomplishment of their agency’s overall targets and commitments.

The RBPMS is now on its third year of implementation The RBPMS is now on its third year of implementation. The work is continuing since the AO 25 IATF/TWG is institutionalizing the RBPMS and PBIS. It is now wrapping up the FY 2014 cycle, a year of changes as well as improvements in the review and validation process. The current FY 2014 cycle saw the alignment of the Department targets thru the adoption of targets based on the Congress-approved Performance Informed Budget (PIB) for FY 2014/2014 Government Appropriations Act (GAA) and the Secretary/ Agency Head Planning Tool targets. In FY 2015, the PBB should have reached the Institutionalization Phase. It is hoped that the system is fully developed such that there is full alignment of the Department targets down to individual targets.

Performance-Based Bonus (PBB) Executive Order No. 80 Principles Governing the PBB Scheme PBB is a system of ranking delivery units and personnel within an organization according to performance in the following areas : Major Final Outputs; Commitments to the President that are supportive of the priorities under EO 43; and Good Governance Conditions to be determined by IATF under AO 25.

Performance-Based Bonus (PBB) Performance Categories and Rates of Incentives The amount of PBB is based on the performance of the delivery units and the individual employees. Ranking of delivery units and individual employees according to their performance. PBB amounts are as follows: Category of Delivery Unit Category of Individual Performer BEST BETTER GOOD ₱35,000 ₱20,000 ₱10,000 ₱25,000 ₱13,500 ₱7,000 ₱15,000 ₱5,000

FY 2014 PBB Cycle Supplemental Guidelines on the Grant of Performance-Based Bonus for Fiscal Year 2014 under EO 80 (Memorandum Circular No. 2014-1 dated April 21, 2014) Distribution of Delivery Units per Category Item 6.1 of MC No. 2014-1 Distribution when General Conditions are Met Ranking Performance Category TOP - 10% Best Bureau/Office/Delivery Unit NEXT - 25% Better Bureau/Office/Delivery Unit NEXT - 65% Good Bureau/Office/Delivery Unit

Category of Delivery Unit Category of Individual Performer FY 2014 PBB Cycle Ranking for Individual Performance Item 6.4 Distribution by Category Category of Delivery Unit Category of Individual Performer BEST BETTER GOOD 20% 35% 45% 15% 30% 55% 10% 25% 65% Effective FY 2014 PBB Effective FY 2013 PBB Effective FY 2012 PBB Since 2012 the % distribution for Individual Performer qualifying under the Best and Better Category was increased

Updates on PBB Implementation Participation Rate 96% 98% 184 out of 191 Agencies 189 out of 192 Agencies 190 out of 192 Agencies 99% For the pilot implementation in FY 2012, national agencies, including State Universities and Colleges (SUCs) and Government-Owned and Controlled Corporations (GOCCs), garnered a very high participation rate of about 96% or 184 agencies out of 191.   For PBB FY 2013, the number of agencies that participated increased from 184 to 189. This represents an improvement in participation rate from 96 percent to 98 percent. Among the constitutional agencies, only the Commission on Elections (Comelec) has not participated in the PBB for this cycle. About 99 percent or 190 agencies out of 192 participated in FY 2014. The number of participating local water districts, which have been included among agencies covered by the PBB starting this cycle, is 165. + 165 Local Water Districts Source: AO25 Secretariat 12

Good Governance Conditions Average Compliance Rate Transparency Seal (Sec 91 GAA 2013) 2012 - 87% 2013 - 89% 2014*- 98% PhilGEPS (RA 9184) 2012 - 79% 2013 - 90% 2014*- 95% OverAlL 2012 - 88% 2013 - 94% 2014*- 98% ARTA (RA 9485) 2012 - 94% 2013 - 96% 2014*- 99% Report on Ageing of Cash Advance 2012 - 91% 2013 - 97% 2014*- 100% For FY 2012, average compliance rate to Good Governance Conditions (GGCs) was 88%. In FY 2013, this went up to 94 percent or a six percent increase in compliance. For FY 2014, compliance rate as of May 29 is 98 percent. As you can see, the compliance of agencies to the GGCs is improving every year. SALN (RA 6713) 2013 - 96% 2014*- 96% *As of May 30, 2015 13

Productivity Enhancement Incentive (PEI) for FY 2015 Executive Order (EO) No. 181 dated May 15, 2015 Implementation of the Provisions of the FY 2015 GAA on the Productivity Enhancement Incentive (PEI) for 2015 Entitles an employee to the one-time grant of PEI at one month basic salary as of May 31, 2015, provided that certain conditions are met.

Productivity Enhancement Incentive (PEI) for FY 2015 Conditions for the grant of PEI at one month basic salary: For NGAs a. Achievement of at least 90% of two performance indicators for at least one Major Final Output under “Operations” for FY 2014 b. Posting of the Transparency Seal c. Posting or publication of the Citizen’s Charter or its equivalent

Productivity Enhancement Incentive (PEI) for FY 2015 For GOCCs covered under RA No. 10149 a. Achievement of at least 90% of two performance indicators for at least one Major Final Output under Operations for FY 2014 or The targets under the Performance Scorecard as agreed upon between the Governance Commission for GOCCs (GCG) and the GOCC (GCG Memorandum Circular No. 2013-02) b. Posting of the Transparency Seal c. Posting or publication of the Citizen’s Charter or its equivalent

Productivity Enhancement Incentive (PEI) for FY 2015 For Local Water Districts (LWDs) Positive net balance in the average net income for the 12 months of operations prior to May 31, 2015. For Local Government Units (LGUs) Compliance with the requirements under the Good Financial Housekeeping (formerly the Seal of Good Housekeeping) component of the FY 2014 Seal of Good Governance (DILG Memorandum Circular No. 2014-39).

Productivity Enhancement Incentive (PEI) for FY 2015 Agencies unable to comply with the afore-mentioned requirements may still grant the PEI only at the fixed amount of ₱5,000 to qualified employees.

Study on Compensation and Benefits in the Public Sector, FY 2015 To determine: The competitiveness of government pay in relation to the private sector; and, The compensation strategy to bring government pay closer to market rates. JR No. 4 was fully implemented in 2012. Since then until 2015, the purchasing power of the pay they receive has eroded by up to 12.43% due to inflation.* To lay a solid basis for policy recommendation, DBM undertook this study with a private consulting firm to: Compare the competitiveness of government pay in relation to the private sector; and Craft a compensation strategy to bring government pay closer to market rates. JR No. 4 states that “a periodic review of the government’s Compensation and Position Classification System shall be conducted every three years. (i.e., 3 years after 2012)”. Hence, reviewing the compensation system comes at the right time. *NOTE: Compounded inflation rate from 2012 to 2015 19 Year Inflation Rate Compounded Inflation Rate 2012 3.2 103.20 2013 3.0 106.30 2014 4.1 110.66 2015 (January – September) 1.6 112.43 19

Per Congress Joint Resolution No. 4, s. 2009 SSL 3 Salary Increase Per Congress Joint Resolution No. 4, s. 2009 The salary increases under this Joint Resolution were implemented in four tranches between July 1, 2009 and June 1, 2012. The resulting increases had a weighted average increase of 51.9 percent. On top of the salary increase, teachers and nurses moved up to SG 11 from SG 10: in effect, salaries of entry level teachers and nurses were raised by an average of 50 percent. Note: The total cost of the implementation of SSL 3 amounted to P144.8 billion. The yearly costs are as follows: 2009 – 22.8B 2010 – 42.6B 2011- 38.7B 2012- 40.7B

Highlights of Competitive Review: SSL is Below Market Annex A Highlights of Competitive Review: SSL is Below Market Regressed Market Total Guaranteed Pay (Median) Actual Market Total Guaranteed Pay (Median) SSL Midpoint At lower SGs, SSL is already close to market. At higher SGs, SSL falls far below market. The salary progression in market follows an exponential rate of increase, unlike in SSL which follows a linear progression. The SSL Midpoint is the exact middle point between Step 1 and Step 8 of each salary grade. In the market, the progression between salary grades is exponential. The higher the grade, the higher the salary increase from the previous level. This is because at higher levels, there is less opportunity for promotion and the labor pool of critical talent is smaller. Higher salaries are given to help attract and retain critical talent. At lower levels, SSL is already close to market. At higher levels, SSL falls far below market. The salary progression in the market follows an exponential rate of increase, unlike in SSL which follows a linear progression. SSL Salary Grade (SG) 21

Highlights of Competitive Review: SSL 3 is 45% Below Market Job Category Sample Positions Market Position of Government Pay Utility Worker Driver Messenger Clerk Administrative Assistant 126% to 79% of market Economist Agriculturist Accountant Engineer Lawyer 76% to 41% Director I Director IV Executive Director Assistant Secretary Undersecretary Secretary Senator Vice - President President 32% to 23% Sub-Professional (SGs 1 to 10) Professional (SGs11 to 24) 39% to 34% of market Middle Manager (SGs 25 to 28) The study looked where government compensation stands in the market at the job category-by-job category. Pay for sub-professional workers is at 126 (at SG1) to 79 percent (SG10) of the market rates. Professionals can get as low as 41 percent of the market as they move up the ladder.* Middle managers, comprised of directors, only get more or less third of what their counterparts in the private sector get; while executives are paid only about a quarter to a third as much. Overall, government pay is only at a weighted average of 55% of the market. Stated in reverse, it is 45% below the market. *SG 24, which includes division chiefs, is at 41 percent of the market. Executive (SGs 29 to 33)

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