CHAPTER I

INTRODUCTION
1.

The Government of Pakistan from time to time appoints a commission to

review the pay and pension status of its employees. The current Pay and Pension
Commission was notified on the 6 th of April 2009, but with effect from the 24 th of
March. The Commission, it was specified, was to submit its report within six months
of its constitution, which timeframe was subsequently extended by another six
months, and was to take into consideration the financial resources of the country
while formulating its proposals and recommendations.
2.

3.

The Commission has the following composition: i.

Dr. Ishrat Husain

Former Governor, State Bank of Pakistan

Chairman

ii.

Mr. Mueen Afzal,

Former Secretary-General Finance,
Government of Pakistan

Member

iii.

Dr. Shams Kassim Lakha,

President, Agha Khan University, Karachi

Co-opted member

iv.

Mr. Zakir Mahmood,

President, Habib Bank Limited, Karachi

Co-opted member

v.

Sardar M. Yasin Malik,

Chairman, Pakistan State Oil, Karachi

Co-opted member

vi.

Dr. Nadeem-ul-Haq
Economist / Management Specialist

Co-opted member

vii.

Mr. Munawar Hamid,

Member
Former Chief Executive, ICI (Pakistan) Limited

In addition to these members, the government appointed ex-officio members

to the Commission, which were: viii.

Secretary to the Government of Pakistan

Finance Division

Member

ix.

Secretary to the Government of Pakistan

Establishment Division

Member

x.

Secretary to the Government of Pakistan

Defence Division
Secretary to the Government of Punjab
Finance Department

Member

xi.

Member

4.

xii.

Secretary to the Government of Sindh

Finance Department

Member

xiii.

Secretary to the Government of the

North-West Frontier Province
Finance Department

Member

xiv.

Secretary to the Government of Balochistan

Finance Department

Member

xv.

Secretary to the Government of

Azad Jammu and Kashmir
Finance Department

Member

xvi.

Additional Secretary (Military Finance)

Finance Division

Member

xvii.

Member (HR)
Federal Board of Revenue

Member

xviii.

An officer of BS-21 from the

Auditor General of Pakistan

Member

xix.

An officer of BS-21 of the

Controller General of Accounts

Member

xx.

Military Accountant General

Member

xxi.

Joint Secretary (Regulations)

Finance Division

Member / Secretary

The terms of reference of the Commission were notified as: a) To evaluate the salary structure, including compensatory allowances and
to assess the need for their revision, keeping in view the market conditions
and affordability.
b) To assess the adequacy of the existing Pay Scales in terms of their span to
provide financial advancement and recommend any other system, if
required, keeping in view the market rates and rates in other countries of
the region.
c) To analyze job content under the public sector in comparison with the
private sector and to suggest a degree of comparability of their salary
structure.
d) To make recommendation on the possibility of monetizing the perks /
facilities, etc.
e) To rationalize the existing Pension System and to remove discrimination.
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f) To recommend an improved system of pension disbursement.

5.

In consequence of a decision of the federal Cabinet, further items were added

to the Commissions terms of reference: g) To revisit incidence of Management Scales and their dispensation with
reference to their equitability and pros and cons on the overall government
tiers.
h) To consider the possibility of restoring the Constitutional protection to the
upright state functionaries.
i) To improve the salary structure of the government employees, consider all
their perks, conveyance, residential facility, medical facilities, etc., for
monetization on the pattern of the private / corporate sector, to reduce
burden on the exchequer and to offer greater choice to the employees in
their daily living. Also expedite its working / report for implementation of
this decision.
j) To give inputs to rationalize telephone billing by revising ceilings on all
official telephone connections and to create the virtual networking of
computer / IT options to reduce expenditure on communication and data
transfer.
6.

The purview of the Commission had a broad remit, covering the federal and

provincial civil servants, members of the armed forces as well as the civil armed
forces, civilians paid from defence estimates, personnel being paid under the
management scales, and employees of those autonomous and semi-autonomous
organizations of the government and corporations that have adopted the Basic Scale
of Pay. The ambit of the Commissions work did not include employees of banks and
development finance institutions, and those autonomous and semi-autonomous
organizations which have their own pay scales or those employees governed by the
Industrial Relations Ordinance 1969 or whose terms of service are settled through
Collective Bargaining Agents.
7.

The Commission had twelve meetings in total, five of which were in the four

provincial capitals and Muzaffarabad (Azad Jammu and Kashmir), respectively. The
Commission met with representatives of various associations of civil servants,
received proposals from the provincial and AJK governments took account of the
pertinent resolutions of the assemblies, as well as considering the proposals from the
federal ministries and issues that were referred to it from the Prime Ministers office.
3

These inputs were sifted and discussed by the Commission, and were added to by the
members themselves, and finally the recommendations were formulated.
8.

The work of the Commission found broad support from the governments of

the federation as well as legislatures. The N.-W.F.P. Assembly adopted a resolution

saying, This Provincial Assembly recommends to the Provincial Government to
make its recommendations to the Federal Government that Pay and Pension
Commission may finalize its recommendations at the earliest and the same take
effect from 1st of January 2010. Similarly, the National Assembly also adopted a
resolution saying, This house is of the opinion that the Government should
immediately finalize the recommendations of Pay and Pension Commission and
should take steps for implementation thereon with effect from 1 st of January 2010. It
is with this level of outside interest and scrutiny that the Commission has done its
work and arrived at certain recommendations.
9.

This report is a result of these consultations and deliberations, and lays out

the process followed by the Commission, the issues that were identified, the options
that were considered, and gives the final, considered recommendations.

METHODOLOGY
10.

The Commission moved forward with the task assigned to it in a consultative

manner in addition to review of the past Commission reports, other country

experiences and drawing best practices from the private and public sectors within
Pakistan. Inherent in its design, was membership from the four provincial
governments and Government of Azad Jammu and Kashmir, as well as active
participation from private sector members. The representatives of the provincial
governments were therefore able to contribute to the proceedings in a constructive
manner, highlighting where needed the provincial perspective on a particular issue.
The second mode of consultation that the Commission benefited from was its visits
to the provincial capitals; the Commission visited Karachi, Lahore, Quetta and
Peshawar, as well as the Muzaffarabad, Azad Jammu and Kashmir. This allowed the
various departments of the provincial governments, Chief Secretaries, Chief Minister
and Governors to provide their responses in a more thoughtful manner on an
institutional basis, something that greatly informed the Commissions deliberations.
The third mode has been the detailed interaction of the sub committees of the
Commission with the specialized departments of the Provincial Governments and the
Federal Ministries such as Education and Health where consensus was built upon the
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proposals in respect of those sectors. The Commission also shared its deliberations
from time to time at other forums like that Senior Management Wing of the National
Management College.
11.

The fourth mode of consultation was to give a hearing to a large number of

associations representing various segments of public sector. These interactions and

hearings were held at all the four provincial Capitals, Islamabad and Muzaffarabad.
They provided an opportunity to the Commissions members to listen to and absorb
the grievances, difficulties, view points of the various groups of the civil servants and
seek their suggestions, inputs and reactions to the Commissions recommendations.
While there were differences of opinion, most of the education and health staff
associations generally agreed with the idea of culling the teachers and health workers
from the Basic Pay Scales and create new pay scales for them. Some reservations
were expressed by the Lecturers Association that this exclusion may hurt their future
prospects if the Basic Pay Scales for all other Civil Servants are revised and they are
left high and dry or ignored. The Commission assured them that all future revisions
in the pay scales will cover all public and civil servants.
12.

The point of view offered by the staff associations and their representatives

related largely to pay and allowances. There were requests for pay increases by
hundreds of per cent, and increases in the amounts of various allowances.
Restoration of former provisions was also asked for, for example restoration of the
Secretariat Allowance, grant of Selection Grade, and Move-Over to the next grade to
civil servants who reach the maximum of the pay scale. These groups also lobbied for
the up grading of various staff positions. The Commission took pains to explain that
meeting all of these demands put forward would result in huge fiscal deficits, large
borrowing, unsustainable debt burden and high inflation. Under such outcomes the
Civil Servants would be worse off as the fixed income groups such as salaried workers
and pensioners are the ones who suffer the most when high inflation erodes their real
purchasing power. The public at large will also feel highly resentful that the country
is put to such onerous burden of indebtedness for the sake of 2.5 million Civil
Servants.
13.

There were also Summaries to the Prime Minister from different ministries

that have been forwarded to the Commission by the Prime Ministers office for the
consideration of the former. There were other proposals received directly from the
ministries and divisions. In this way the Commission had the opportunity to listen to
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a wide range of opinions and voices and take into consideration a diverse set of
proposals concerning pay and pension reform.
14.

The ministries and divisions also, made representations on behalf of their

staff, for example the Cabinet Division proposed that the same allowances and
subsidies should be provided to its officers and staff as are admissible to the staff and
officers of the Prime Ministers Secretariat. The Ministry of interior proposed the
grant of Special Allowance equal to one months pay to the employees of the National
Police Bureau and the National Public Safety Commission using the analogy of the
Islamabad Capital Territory Police and the Motorway and Highway Police. A similar
proposal was received from the Federal Investigation Agency. The Ministry of
Population Welfare proposed 25% of pay as Federal Capital Territory Allowance to its
employees working in the federal capital, and the Statistics Division proposed the up
grading of the posts of Statistical Assistant from BPS 11 to BPS 14.
15.

The pensioners representatives proposed that pensions for the widows should

be a full pension, since they are even more vulnerable after the death of their
husbands, and that the wifes name should be included in the pension book. Inability
of public sector health facilities to provide medicines, and delays in the
reimbursement of expenses incurred in purchasing medicines was an acute problem,
and therefore it was proposed that the reimbursement procedure should be
expedited or a monetized value be allowed for outdoor patient bills. The pensioners
asked for concession on travel by Pakistan Railways or Pakistan International
Airlines, irrespective of class of travel. They were specific in asking for the resolution
of the anomaly between old and new pensioners, and sought benefit of the
Benevolent Fund and Group Insurance as is admissible in the case of Punjab and
Balochistan.
16.

While these hearings, meetings and consideration of proposals took up a

substantial amount of time, they did positively contribute to the discussions within
the Commission and often provided insights that were to come in useful at later
stages. The process also allowed the stakeholders to voice their interests, made the
process more transparent, and assisted the Commission to come up with credible
and realistic recommendations.
17.

In order to thoroughly analyze the existing situation along different

dimensions, and then from that base to chart a course forward, the Commission
decided to work on the basis of the subcommittee system. A number of
6

subcommittees, sometimes with overlapping membership of individuals, were

formed and tasked with examining in-depth the problem at hand. The areas covered
by the sub-committees included comparison of public sector and private sector
wages; pay structure of civil servants in view of their perks and privileges; pay
structure of the armed forces along with perks and privileges; pension system and
sustainability issues; the existing Basic Scale of Pay; the allowances admissible to
government servants; governments housing policy as it pertains to ownership of
residence of government servants; health and education as central sectors for
development; and, the daily subsistence allowance and the accommodation charges
during out-station duty. These subcommittees based their work on an analysis of the
existing situation and known best practices, and worked out different options for
reform in these areas so that different costs could be worked out. The findings were
presented formally during the Commission meetings, followed by thorough
discussions at the end of which the Commission reached conclusions and thus
formulated its final recommendations.
*******

CONSULTATION WITH PROVINCES AND GOVERNMENT OF AZAD

JAMMU AND KASHMIR
The Commission visited Quetta and held a meeting there on the 4 th and 5th of
September 2009, Karachi on the 9th and 10th of September 2009, and Lahore on the
25th and 26th of September 2009, Peshawar on the 29 th and 30th of September 2009,
and Muzaffarabad on the 20th of February 2010.
During these visits and meetings the provincial departments made presentations to
the Commission concerning their perspectives, the Commission met with
representatives of different associations of civil servants, and met the political
authorities.
Balochistan:
The Secretary S&GAD made a presentation, agreeing that the ad
hoc allowances should be merged with pay, and further proposed that the house rent
allowance should be based on the basis of rental ceiling for government hired
accommodation. It was proposed to increase the rate of medical allowance and also
extend it to all employees, that the daily allowance should be enhanced by 100%, and
that the amount for conveyance allowance may also be increased. Increase in utility
allowance and 100% increase in pensions was also asked for. The proposal asked for
the restoration of rest and recreation allowance, the selection grade scheme and
move-over facility, along with a recommendation for the introduction of new housing
schemes. The Secretary informed the Commission that these proposals would cost
about Rs.10 billion against the existing wage bill of Rs.30 billion.
The Police presentation cited the example of the N.W.F.P. governments risk
allowance equivalent to one months pay for the Frontier Police, Islamabad Police
getting one months pay also along with as well as house rent ceiling, and the
example of the Punjab where too the police had been provided a risk allowance equal
to a months pay, and asked for a similar dispensation for the Balochistan police. It
was also proposed to increase the allowances of the police medals to Rs.2000 for the
QPM, Rs.1500 for PPM, Rs.800 for QPM Bar and Rs.600 for PPM Bar.
The Education Department proposed enhancement in the teaching allowance,
for example with BS 19-20 teachers getting Rs.8000 per month, but clarified that
these should be performance based. An increase in the hard area allowance was also
proposed, with Rs.3000 for the lowest grades and Rs.12000 for BS 19-20. It was also
proposed that residential schemes for teachers at district headquarters should be
done with financial support being provided through the Benevolent Fund.
The Health Department informed the Commission that the Anaesthesia
Departments professors were being given an incentive at Rs25000 per month,
Rs.20000 for associate professors, and Rs.10000 to medical officers. The teaching
allowance at a flat rate of Rs.10000 for doctors in basic medical sciences and doctors
in the teaching cadres has been enhanced, with professors getting Rs.30000,
associate professors getting Rs.20000, assistant professors getting Rs. 15000 and
demonstrators getting Rs.10000. The department proposed non practicing allowance
to doctors at the rate prevailing in Punjab, and increases in the rates of conveyance,
gas and electricity allowance. A departmental committee has proposed
comprehensive administrative and financial reforms for paramedics in BS 1-15. The
Chief Secretary was in agreement with the principles of taking the four areas of
police, judiciary, health and education professionals out of the existing pay scale,
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monetization of facilities, performance based remuneration but showed reservations

on the financial affordability of these reforms.
Sindh:
The Chief Secretary agreed with the principles put forward by
the Commission, but showed some reservations about the practical aspects of
monetization. The Education Department explained that the government was in the
process of separating the teaching and management cadres. The Department put
forward some proposals, suggesting that house rent allowance at 45% and
conveyance allowance should be paid irrespective of whether the employee lives in a
big city or not. Backward area allowance at 30% of initial stage of pay should be
given to teachers, three increments on acquiring higher education qualifications, and
up grading of certain classes of teachers. The Department proposed pension
commutation at 50%, family pension at 100%, deceased employees with less than ten
years service to get three salaries per year as gratuity, Group Insurance to be
refunded at retirement and that on retirement pension should be calculated on gross
pay, that is pay plus allowances.
The Home Department proposed, citing the allowances of the Punjab and N.W.F.P. police forces that Sindh Police should do away with the allowances and have
their pay doubled and that daily allowance for 20 days should be allowed. The
proposal for an additional one months pay was made by the Prisons department
also.
The Health Department informed the Commission that the four tier formula
for promotion of general cadre doctors was in place, that for special cadre doctors the
posts had been up graded between BS 18-20, nurses cadre had been up graded from
BS 14 to BS 16 and those in BS 16 to BS 17, and that paramedical staff has been up
graded two to four stages. The department proposed incentives for rural areas and
far flung areas like Tharparkar, a special allowance and accommodation facilities to
female doctors working in taluka hospitals, Rural Health Centres and Basic Health
Units as well as night shift resident medical officers and other staff of teaching as
well as district and taluka hospitals. The Secretary agreed to the idea of removing the
health professionals from the current pay scale as well as performance based pay.
The S&GAD informed the Commission that the government has decided to
outsource the work of developing job descriptions and expressions of interest have
been invited, and on the basis of these the key performance indicators will be
developed. The department agreed with the ideas of the Commission.
The Chief Minister also indicated specially that he was in agreement with the
performance based salary idea of the Commission. The Governor also was in
agreement with the line of action that the Commission was taking, agreeing that
monitoring and performance evaluation was the most important element in order to
judge the ability of employees, and assured the Commission of his full support.
Punjab:
The Additional Chief Secretary was in agreement with the
separation of the four services areas from the current pay scales and provisions of
incentives for their personnel to work in backward rural areas; however he showed
reservations concerning monetization of transport.
S&GAD put forward the view that the existing pay scale is over simplistic,
inefficient and inequitable and lacked a performance based element to it, and by now
has been distorted with special provisions for police, teachers, doctors, etc. The
9

department proposed that job descriptions and key performance indicators should be
developed, review of the salary structure should be a continuous process,
remuneration must be linked with performance, fringe benefits should be monetized
and performance based allowance should be implemented.
The Inspector General of Police informed the Commission that one additional
pay as risk allowance, a fixed daily allowance for 20 days and a ration allowance at
par with the civil armed forces, all this with a total bill of Rs.8 billion had been
allowed by the Government of Punjab. A system of key performance indicators has
already been developed for investigating officers, head constables and constables,
covering professional courses attended, production of witnesses, arrest of proclaimed
offenders, etc. He was in agreement with the idea of taking police out of the current
pay scale system. The police proposed that pay rise should be linked to the consumer
price index, house rent allowance or ceiling should be based on market rates, and
that ration allowance should be at par with the civil armed forces. The department
showed reservations about the monetization of perks.
Higher Education Department informed the Commission that a hard area
allowance of Rs.3000 is being given to teachers in remote areas, that college
principals get Rs.4000 in urban areas and Rs.7000 in rural areas, and that an
M.Phil. allowance at the rate of 50% of the Ph.D. allowance has been approved. The
department agreed with the removal of the teaching cadres from the pay scales in
operation, as well as performance based pay, but showed reservations about
monetization of perks.
The Health Department pointed out that there is an acute shortage of teachers
in basic sciences and clinical subjects, especially anaesthesia, and that no proper and
adequate service structure has been developed for the nurses and paramedics. The
department pointed out the new initiatives; special allowance for teachers of basic
sciences, anaesthesia allowance for doctors in teaching hospitals, special pay package
for certain categories of specialists at district and tehsil headquarter hospitals,
regularization of medical officers, nurses and paramedical staff, preparation of job
descriptions for doctors and paramedics, etc. The department was in agreement with
the concept of performance based pay linked to the key performance indicators, but
showed reservation regarding the monetization of perks. The department has
conducted an exercise with reference to the paramedics, so that the BS 5-20 range is
proposed to be reduced to an eight stage formula.
The Chief Secretary and Chief Minister Punjab supported the ideas that the
Commission shared with them, pointing out that Punjab has taken steps in similar
directions, especially exclusion of the four key services from the structure of the Basic
Scale of Pay.
North-West Frontier Province:
The Additional Chief Secretary pointed out
the discrepancy between the public and private sector wages, and agreed with the
idea of performance based pay. The Establishment Department proposed that there
should be different pay scales for different classes of employees, encashment of
accumulated and rest and recreation leaves should be allowed, medical bill
reimbursement should be allowed, similarly hiring of houses, and proposed that
perks and privileges should be monetized.
Home Department agreed to the exclusion of the police personnel from the
current pay scale and proposed uniform pay scales for Frontier police, Islamabad
police and the other provincial police forces. The department further proposed that
10

the risk allowance should be made pensionable, and that pay and allowances of the
ministerial staff should be the same as field staff.
Health Department informed the Commission that doctors and special cadre
doctors were up graded in the four tier formula across BS 17-20. The nursing cadre
was moved from BS 14 to BS 16 and from BS 16 to 17. Paramedics have been spread
across BS 9-20 under an eight tier formula. Non practicing allowance for doctors has
been enhanced and stipend for trainee medical officers has been increased.
Elementary Education Department informed the Commission that key
performance indicators have been developed for teachers, covering increasing
retention of students, punctuality, monthly attendance and decreased drop out, etc.
The department recommended the introduction of time scales or up grading of posts
for primary teachers, retiring employees should be allowed 50% commutation of
pension, house rent allowance should be at 45% and conveyance allowance along
with house rent allowance should be allowed to all teachers. The Higher Education
Department proposed that college teachers should be equated with university
teachers in terms of emoluments and scholarships, etc.; ad hoc relief allowances
should be merged with pay and pay should be indexed with inflation; and that
incentives should be allowed for backward areas and they should be pensionable.
The Chief Secretary expressed his agreement with the ideas shared with him,
but showed reservations concerning the fiscal cost of the proposed reforms. The
Governor was in broad agreement with the proposals and ideas of the Commission,
and the Chief Minister also encouraged the Commission in this regard.
Azad Jammu & Kashmir:
S&GAD informed the Commission that house rent
allowance is paid at different rates depending on whether it is a big city or the rural
area; conveyance allowance is restricted to employees in big cities; there is a large
gap between private sector and public sector salaries; and, special pay packages and
MP pay for contract employees is not fair.
Education Department (Colleges / Higher Education) informed the
Commission that promotion under time scale is a proposal under consideration with
the Finance Department, and proposed house rent allowance and conveyance
allowance should be admissible to all employees irrespective of location. It was also
proposed that a rural area allowance should be instituted, and that Ph.D. and M.Phil.
allowances should be introduced like they exist for university teachers. On the
schools side, it was proposed that key performance indicators should be introduced,
performance based increments and incentives should be put in place, 20% of basic
pay should be provided as hard area allowance and that house rent allowance and
conveyance allowance should be admissible to all employees across the geographic
location. Similarly it was proposed that medical allowance should be increased, that
pension commutation rate should be raised to 50%, Group Insurance should be
refunded and pension should be calculated on the basis of gross pay.
Police department proposed a risk allowance for the police officers, a fixed
daily allowance provision and increased ration allowance rate across the police force.
Health Department proposed the establishment of a career structure and
salary package for the professionals of the health sector, based on performance,
experience and qualification, and de-linked from the availability of posts. The
department supported the idea of taking the health sector out of the pay scale scheme
11

as it prevails currently, and proposed different pay packages for doctors, specialist
doctors and administrative cadres.
The Prime Minister AJK praised the efforts and the ideas that the Commission
shared with him.

Names of Clerks/Workers Associations/Federations with

whom the Pay & Pension Commission 2009 held Meetings are as
under:Quetta(4th meeting)
1.
Balochistan Secretariat Officers Welfare Association and Balochistan
2.
Secretariat Staff Association. The Officers Association
3.
Mutahida Usataza Mahaz Pakistan and Baluchistan Teachers
Associations
4.
All Pakistan Clerks Association
5.
Paramedical Association
Karachi(5th meeting)
1.
Sindh Professors and Lecturers Association (SPLA).
2.
Sindh Secretariat Employees (Non-gazetted) Welfare Association
(SENWA)
Lahore(6th meeting)
1.
S&GAD Employees Associations
2.
Employees Association of the Education Sector (i.e. College Lecturers
Association and Teachers Association)
Peshawar(7th meeting)
1.
Civil Secretariat Employees Association.
2.
Officers Associations on behalf of all employees (Gazetted and Nongazetted)
3.
Association of the School Teachers
4.
Association of Divisional Accountants
5.
College Lecturers Association
6.
Paramedics Associations
Islamabad(8th meeting)
1.
Central Executive Body of All Pakistan Clerks Association (APCA)
2.
All Pakistan Secretariat Coordination Council
3.
Accounts Officers Welfare Forum
4.
All Pakistan Clerks Association (APCA)
5.
Association for Welfare of Retired Persons (AWRP)
Muzaffarabad(11th meeting)

1.
2.
3.
4.

College Lecturers Association

School Teachers Organization
Pensioners Association
All Pakistan Clerks Association (APCA)
*********
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