Calculating the limit of civil servant allowances

By MUNGAI KIHANYA

The Sunday Nation

Nairobi,

17 October 2021

The government has decided to limit the amount of allowance paid to civil servants in a bid to reduce the government wage bill. This is a good move. The greatest expenditure in the payroll is not salaries. It is allowances. Many public sector workers routinely earn allowances that are several times their basic salary.

The new plan as announced by the Salaries and Remunerations Commission is to cap the amount of allowance to “40 per cent of gross pay”. Now this is not only confusing but can also create a calculation challenge.

Here is the confusion: at first sight, many will assume that, if the basic salary is Sh100,000, then the limit of allowances will be Sh40,000. However, when we add Sh40,000 to Sh100,000, we get a gross pay of Sh140,000. Now the rule says “40 per cent of gross pay”. But 40 per cent of Sh140,000 is Sh56,000. Hence there is still room for more allowance!

The question then still remains: if the basic salary is Sh100,000, what should be the limit of allowances? In other words, what is the highest gross pay allowed? Since the maximum allowance is “40 per cent of gross pay”, it follows that the minimum basic pay is 60 per cent of gross pay.

Therefore, at the limiting point, the Sh100,000 should be 60 per cent of gross pay. So, we ask the question is a different way: if Sh100,000 is 60 per cent, what is 100 per cent? To get the answer, we divide the Sh100,000 by 60 and multiply the result by 100. This comes to Sh166,667.

That is, for a person whose basic salary is Sh100,000, the maximum limit of allowances is Sh66,667. In other words, the maximum allowance for any salary is 66.67 per cent of basic pay.

In my view, however, this limit too low, especially for civil servants based in large urban centres where housing allowance needs to be high. The amount might also not be enough for those whose work requires a lot of field travel – for example land surveyors. When the government started talking about reducing the size of the wage bill in 2014, I sent in a proposal to limit the allowances to a 100 per cent of basic pay.

All in all, a limit on the allowances is a more effective way to reduce the wage bill than trying to cut salaries. This will also control the number of (unnecessary) trips made.