Public entities get greenlight to blend salaries, allowances

PUBLIC entities have been allowed to pay part of salaries and allowances for all employees in both local currency and United States dollars as Government seeks to cushion employees from the effects of inflation and exchange rate movements which have eroded the purchasing power of salaries and allowances.

The part payment of salaries and benefits shall be up to a maximum of 40 percent of combined gross salaries and allowances.

The approval is effective next month, the Secretary for Corporate Governance Unit in the Office of the President and Cabinet, Mr Allen Choruma said in a circular dated July 19.

He said the Corporate Governance Unit has been receiving a lot of requests from public entities for approval for the payment of salaries and allowances in both the official local currency and the United States dollar.

He said in line with the Government’s commitment to improving the welfare and conditions of service of its employees in the public sector, the part payment of salaries and allowances in USD for public entities, the request was approved.

“With effect from July 2023, all public entities as defined under section 2 of the Act, will be allowed to make part payment of salaries and allowances in both ZWL and USD,” reads part of the circular addressed to permanent secretaries of various ministries.

“The part payment of salaries and benefits to employees of public entities shall be up to a maximum of 40 percent of combined (both) gross salaries and allowances. In other words, the aggregate portion payable to employees in USD shall be up to and not exceed 40 percent of an employee’s gross salary and allowances.

“No employee shall be paid an aggregate of both salaries and allowances in excess of 40 percent of gross salary and allowances. The balance 60 percent of salary shall be paid in the official local currency, the ZWL.”

However, the circular noted that some public entities do not generate sufficient revenue in USD to sustain the payment of salaries and allowances in that currency.

To that end, the Unit guides that the ceiling payable shall be up to 40 percent of gross salary and allowances meaning that some entities may not have the capacity to pay the full limit allotted (maximum 40 percent), and should therefore apply a percentage that the entity has the capacity to pay depending on the peculiarity of its circumstances.

This will be subject to a periodic review, should such circumstances change.

The circular added that to ensure sustainability, public entities are reminded to comply with the provisions of the Public Entities Corporate Governance Act section 20 (2) of the Act (30 percent rule) which limits the amounts that may be received by way of remuneration and other benefits to employees to a maximum of 30 percent of the entities revenues or its operational budget.

“Any variation to this rule, will require written approval from the minister in terms of the provisions of the Act.”
“It should be noted that salaries in the public sector cannot be paid wholly (100 percent) in USD as Government is taking various measures to stabilise the local currency against the USD and other major currencies as part of the broader fiscal and monetary measures aimed at the local currency and reducing the cost of living for the generality of the people.”

The local currency continues to strengthen against the United States dollar both on the official bank rate and the parallel market in response to a cocktail of measures being implemented by the Government.

As the economic stabilisation measures continue to hold, on Thursday, the local unit again firmed to $4 537 against the US dollar on the Reserve Bank of Zimbabwe Wholesale foreign currency auction.

Since June 27, the local currency has gained 31 percent against the US dollar.
Over the past few weeks, prices of basic commodities in most retail outlets have dropped by as much as five percent and seem to be continuing on that trajectory in response to the firming of the Zimbabwe dollar.

The recent strategic interventions by the Government to tame volatility in the market include its directive for all import duties to be paid in Zimbabwe dollars except for luxury items, the transfer of external debt obligations from the Reserve Bank of Zimbabwe (RBZ) to Treasury and the introduction of the wholesale foreign currency auction for banks.
Added to that, it allowed duty-free importation of basic goods.

Reserve Bank of Zimbabwe (RBZ)

The Treasury has also directed all Government institutions to collect fees and other service charges in local currency. The Government continues to urge businesses to use the official exchange rates with a recommended 10 percent margin.

Last week, civil servants started receiving along with the normal salary and allowances, a newly increased forex component of US$50 plus an additional local currency payment equivalent to US$150 converted at the prevailing interbank rate.

The increase backdated to June saw the least paid worker pocketing in foreign currency US$350 comprising this month’s US$250 Covid-19 monthly allowance and the new US$50, plus last month’s US$50.

In addition, there will be an extra payment of local currency valued at US$300, split evenly between the backdated payment from last month plus this month’s payment.

Government workers are already enjoying a host of non-monetary benefits including housing schemes, importing vehicles duty-free, free transportation, school fees support for up to three biological children among others.

However, the Government remains committed to the welfare of its workers with negotiations for another increase underway.-chronicle