President Aquino gives nod to incentive hike for rationalization plan

A May 16, 2012 press release from the Department of Budget and Management

Abad: Updated scheme to bolster agency efficiency and service delivery

Affirming the administration’s drive for improved public service and fair compensation for government workers, President Benigno S. Aquino III directed the Department of Budget and Management (DBM) to upgrade incentives for all employees affected by the rationalization program for government agencies and departments.

Through Executive Order No. 77 (s. 2012), President Aquino greenlighted amendments to key provisions in E.O. 637, which provides the basis for determining the incentives for personnel affected by the government’s rationalization plan. Under E.O. 77, rationalization incentives will now be computed using the latest monthly salary of affected employees, instead of their pay as of June 30, 2007.

“The President’s directive is welcome news for all public servants who will be affected by the Administration’s rationalization program. Even as we aim to reorganize our agencies to improve employee efficiency and the effectiveness of our services, we also want to be fair in compensating government workers who have long served the public,” Budget and Management Secretary Florencio B. Abad said.

Under the rationalization program, agency employees who perform redundant, duplicating, or obsolete functions will be given the option to retire or separate from their mother departments. However, employees may also remain in their departments or transfer to another agency where their skills are deemed relevant, on the condition that their positions will not be permanent and will instead be co-terminus to the incumbent.

A DBM study revealed that employees subject to rationalization are more likely to choose retirement or separation if their incentives will be computed based on their updated monthly salary.

“Because the monthly pay for government workers has increased since 2007, the incentives due them should likewise reflect these changes. Commodity prices and the cost of living have also jumped considerably in the last five years. These should be accounted for when we implement the rationalization program for all affected employees,” Abad said.

According to DBM, funding for employee incentives based on June 30, 2007 salaries will require only P4.10 billion, while incentives computed using current salaries will amount to P6.23 billion. Funding for the rationalization program in all regular government agencies will be provided by the National Government and will be charged against appropriate funds.

Meanwhile, incentives for affected personnel in government-owned or -controlled agencies (GOCCs) and government financial institutions (GFIs) will be sourced from their respective corporate funds. In case of funding deficiencies in GOCCs and GFIs included in the Salary Standardization Law, however, the government can provide funding assistance to support the updated incentive package.

“Initially, the government will have to spend more just to ensure that affected personnel will receive benefits that match their current pay. However, the cost-efficiencies in the long run are remarkable. For one, the incentive package will be more attractive to personnel due for rationalization, and we won’t have to retain employees whose functions are no longer relevant to their respective agencies,” Abad said.

Meanwhile, the incentives of affected personnel who retired/separated from their agencies beginning July 1, 2007 and before the issuance of E.O. 77 will be recomputed by their agencies to correspond with their salaries as of retirement. The difference therein will be paid to them, subject to DBM’s validation.

The budget chief also clarified that government institutions with approved rationalization plans will not be allowed additional regular positions for at least five years to recoup the payment of rationalization incentives.

Exempted from this rule are positions created with no additional cost to government, as well as population-related positions, including policemen, teachers, and medical and allied medical personnel, among others. Additionally, mandated new functions which cannot be absorbed by existing units will also be permitted, as determined by DBM.

dbm.gov.ph

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