Thimphu property owners to pay substantially more taxes  

Private sector faces uncertain future as civil servants receive pay hike

Concerns grow over rising inflation and wage gap between public and private sector employees

In a move that has sparked apprehension among private sector employees, the recent pay hike for civil servants has raised concerns about the ability of common citizens to combat soaring inflation. Many individuals working in the private sector are now considering opportunities abroad as a result of this wage disparity.

People that the paper spoke to said that while the government lacks the authority to regulate private sector pay, it does little or nothing to address inflation and housing costs, despite the Minister of Finance highlighting the government’s commitment to control inflation and house rents, during the presentation of the pay revision bill of 2022, 

“The pay hike has underscored the persistent and widening wage gap between private sector employees and civil servants, with the former suffering,” an employee of a private sector said.

According to her, the responsibility for pay increments in the private sector lies with company heads. “But they are also not able to raise salaries when their companies are unable to generate sufficient revenue. Consequently, many private sector businesses are on the brink of closure,” she added.

A business owner explained that while his employees are expecting a pay raise, the financial condition of the sector post-Covid makes it impossible for the company to afford it.

“Now, those companies that can afford to provide the raise will retain their valued employees, but those unable to do so due to insufficient revenue generation will only survive for a maximum of 4-6 months, which is the time employees require to process their visas for working abroad. After that, all staff members will leave, leading to the demise of private sectors,” stated a prominent businessman based in the capital.

He further emphasized that while the pay revision has “brought blessings for civil servants”, it is only a matter of time before their increased salaries become a curse and contribute to the extinction of the private sector.

“The pay hike for civil servants has a great potential to lead to inflation and high housing rents. Private sector employees are finding it increasingly difficult to make ends meet, with a significant portion of their income going toward basic expenses. This financial strain has forced many to consider seeking opportunities abroad as a means of survival,” he said.

Currently, private sector employees have no disposable income left after covering their basic expenses. Their salaries and basic survival needs are now pushing them into further debt. He added that this predicament is what prompts individuals to contemplate leaving the country in search of better prospects.

As private sector employees grapple with these challenges, the uncertain future of the sector looms large. The government’s promise to control inflation and house rents through legislation may provide some solace, but the widening wage gap and mounting financial pressures make it increasingly difficult for private businesses to sustain their operations.

Meanwhile, in a move aimed at addressing the rising cost of living and improving the standard of living for public servants, the Sixth Pay Commission was constituted. This commission, which was constituted on February 16, 2023, will evaluate the current pay and allowances of public servants and propose revisions to ensure their financial well-being, according to the pay revision 2023 report.

The report further stated that the primary objective behind this pay revision is to guarantee that public servants can maintain a reasonable standard of living with their current salaries. Moreover, the long-term vision of the commission is to provide better compensation to public servants, fostering a more professional and motivated public service that effectively serves the needs of the country. Recognizing that achieving this vision will require gradual steps, the Commission understands the importance of affordability and long-term sustainability in its proposals. Under the recommendations put forth by the commission, there is a proposed 50 to 75 percent increase in the minimum pay  scale for all public servants.

“This revision aims to ensure that public servants can cope with the escalating cost of living and maintain a decent standard of living,” states the report.

In addition to the proposed increase in the minimum pay scale, the commission also suggests that the Royal University of Bhutan (RUB), Khesar Gyalpo University of Medical Sciences of Bhutan (KGUMSB), and the Jigme Singye Wangchuck School of Law (JSWL) transition to a clean wage system

These revisions range from 55 to 80 percent, aimed at providing healthcare workers with improved financial incentives to continue serving in this vital sector.

Meanwhile, .the estimated annual cost of the commission’s recommendations amounts to Nu. 6,000 million (Nu 6bn). To fund this, a portion of the required amount will be sourced through a one-time top-up from Druk Holding and Investments Ltd (DHI), in addition to the dividend to be provided and transferred to the Ministry of Finance (MoF).

Tshering Pelden from Thimphu