Cash Poor, Perk Rich! Civil Service Compensation: Incentives, Dissatisfaction, And Costs

The question of reforming the colonial civil service, and its linked institutions, has been on the agenda since independence. Numerous commissions and efforts have been thwarted. The popular perception remains that there has been a secular decline in civil service efficiency. Most reform efforts focus on grades, performance reviews, and structures of the civil service. The incentive structure which economists think is central to human behaviour is often left out of the reform process. Civil service payment remains mired in its colonial foundations consisting of cash compensation that has not kept pace with inflation and several allowances and physical perks such as houses and cars. The perks are nontransparently given and have set up several individual and group dynamics that may not be conducive to the objectives of the public service. This report is the first attempt to develop some clarity on the cost of the civil service, quantifying all aspects of compensation. It also develops a strategy for monetisation of all perks and setting in place a compensation system that is in line with modern economics and HRM practices. It also points to the huge gain from monetisation in terms of the release of city centre land for commercial development through a public-private partnership. This is an important document that requires a lot of debate and further research for us to improve our public sector management. I would also like to acknowledge Mrs. Nargis Sethi, Chairperson, Pay and Pension Committee, Mr. Shahid Hafiz Kardar, Vice-Chancellor, Beaconhouse National University, Lahore, and Mr. Jamil Nasir, Collector of Customs, for their valuable comments and suggestions on this report.