Bonuses out‚ early retirement in

● New measures to cut civil service salary bill by R27bn over three years

Government performance bonuses are out and early retirement is in for civil servants as finance minister Tito Mboweni plans to cut the burgeoning wage bill.

Mboweni introduced new measures to trim the public sector wage bill by R27bn over the next three years.

Mboweni said the measures to rein in the civil service salary bill would include offering early retirement packages to about 30‚000 public servants between the ages of 55 and 59.

He said national and provincial departments would be phasing out the payment of performance bonuses to civil servants over the next four years‚ which amounted to R2bn a year.

This comes as the government operates in a tough economic environment in which its spending for the 2019/2020 financial year (R1.8-trillion) outstrips its revenue collection (R1.5-trillion)‚ leaving a budget deficit of R243bn.

Public sector salaries stand at R585bn a year. According to the Budget Review document‚ they are projected to cost R627bn by 2020.

Mboweni said allowing older government employees to retire early would save the government R4.8bn in 2019/2020‚ rising to R8bn a year by 2022.

“[At] times‚ this will be complemented by limits on overtime and bonus payments as well as pay progression.”

Mboweni said he was also targeting the hiring of civil servants deployed to SA embassies across the world.

“The system of staffing our diplomatic missions is unjustified and should be reviewed urgently‚” he said.

There would be no increases for MPs in the 2019/2020 financial year.

“As a gesture of goodwill‚ members of parliament and provincial legislatures and executives at public entities will not be receiving a salary increase this financial year.

“My colleague‚ minister Ayanda Dlodlo [of public service and administration] will outline the details of the early retirement framework during the course of the week.”

The Budget Review document states that there will be no penalties for those who take up the early retirement offer‚ with the government absorbing the related costs.

“Government has decided to scale up early retirement without penalties.

“Where feasible‚ older employees will be allowed to retire early‚ with younger employees taking their place.

“Departments are required to realise permanent savings of 50% of the cost attributable to early retirement.

“In December 2018‚ there were 126‚710 public service employees between the ages of 55 and 59 years old.

“This initiative is expected to save an estimated R20.3bn over the 2019 MTEF [mediumterm expenditure framework] period‚ assuming that 30‚000 take up the offer.

“This measure contributes to a more sustainable wage bill.”

Reducing the public wage bill is key to rebalancing the budget and shifting the composition of expenditure away from consumption towards investment.

This has also been a key factor raised by ratings agencies.

After 2018’s public service wage agreement increased wages above inflation, the medium-term budget policy statement projected a R30bn shortfall, but according to the 2019 budget, employee numbers are declining, at a sufficient rate to absorb wage agreement pressures.

This is due to natural attrition, which the acting head of the Treasury’s budget office, Ian Stuart, said had happened more rapidly than expected.

“The older public servants who wish to retire should be facilitated to do so graciously,” Mboweni said at a media briefing ahead of his speech.

“[We will] make sure that people who retire early do not lose out on pension benefits.”

However, Mboweni said the challenge might very well not be the number of public servants, but rather their pay levels. –