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					                                    Issue Paper 6: Controlling and Managing Personnel Costs


                    Controlling and Managing Personnel Costs

                                Part A: Introduction
In the past four decades, when most African countries have been independent, three distinct
epochs on the issues of personnel costs in public expenditure may be generally discerned.
The period spanning 1960s to mid-1980s was characterised by rapid growth in public sector
employment and personnel costs. The mid-1970s to mid-1980s were characterised by a rapid
decline in public service pay and collapse of the systems for personnel management and
control. The 1990s has been a decade of efforts to manage and control personnel costs. This
paper focuses on the good practices lessons of experience in this decade of reform efforts in
four East and Central Africa countries, i.e. Kenya, Tanzania, Uganda and Zambia (select
countries). Before presenting the “good practices” however, it is considered useful to provide
an overview of pertinent issues. Therefore, the next section presents the background and
context for good practices in the control and management of personnel costs. The last
section describes the good practices.

                      Part B: Background and Context
Discussion of good practices in controlling the managing/personnel costs in Africa countries
should be in the context of the following:

      rapid expansion of government employment and personnel costs from 1960s and
       1980s;
      rising total personnel costs and declining compensation from the 1970s;
      personnel numbers are falling but wage bills are rising in the 1990s;
      comparatively Africa countries have the lowest Government employees per capita;
      significance of collapse of systems of management and control;
      not-so successful initiatives; and
      promising good practices yet to be undertaken.

Rapid Expansion of government employment and personnel costs: 1960s to 1980s

Rapid growth in public sector personnel costs from the 1960s to 1980s was reflected in
increases in both the numbers of employees and real pay in the sector. Between mid-1960s
and mid-1980s, the total number of central government employees more than trebled in these
countries (see Table 1). Two basic factors underpinned this rapid growth in public service
numbers. First, the expansion in numbers was driven by the felt need to recruit staff to
support growth in basic social services, especially education and health, these were benefits
expected from the Government following independence. Second, the governments undertook
to the role of employer of last resort for increasing numbers of school leavers in a period or
rising urban unemployment.

Table 1: Rise in central government employees in select African countries between
1960s and 1980s.

Country                         Number      Exact Year       Number           Number
Kenya                           60,300      1963)            42,400           (1986)



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        Malawi                        10,745          (1964)          50,008            (1987)
        Tanzania                      89,745          (1961)          301,000          (1989)
        Uganda                        62,000                          310,000           (1989)
        Zambia                        n.a.                            110,634           (1989)
        Ghana                         n.a.                            310,000           (1987)
        Somalia                       n.a.                            56,500            (1990)

    For most years, generally until mid-1970s while rapidly rising, the governments were also
    raising average real pay for the employees. In there, the governments sought to achieve to
    objectives. One to redress for the discriminatory pay levels for the natives under the colonial
    administration, and thereby meet some of the political and economic aspirations of the
    emerging local elite. Two, to exercise “wage leadership” as a dominant employer, in order to
    pressurise private employers to follow and dissuade them from a low-wage exploitative
    tendency1. With both numbers and real average pay on the rise, the public service wage bill
    share of public expenditures was also in the rise. By early 1980s, Africa’s governments were
    generally leading those in other regions in terms of relative size of government employment
    in the economy (see Table 2) and the relative size of the government wage bill (see Table 3).
    This trend was reflected in the select countries.


 Table 2: Relative size of government                  Table 3: Relative level of government wage
 employment (as percent of non-                        bill (as percent of total wages in the
 agricultural employment) by World                     economy) by world economic and regional
 economic and regional groupings.                      groupings.

                            Percentage of             Economic Group and        Percentage of
                            Central                   Region                    Central Government
 Economic Group and         Government                                          Wage Bill
 Region                     Employment
 Developing Countries                                 Developing Countries
  Africa                   30.8                       Africa                  22.6
  Latin America            20.7                       Latin America           14.7
  Asia                     13.9                       Asia                    17.2
  Total Sample             23.4                       Total Sample            19.8

 OECD Counties              8.7                       OECD Countries            8.7
                                                    Source: Heller P. & Tait A. (1983) Government
Source: Heller P. & Tait A. (1983) Government       employment and pay, Finance & Development, IMF/World
    Rising personnel costs Development,
employment and pay, Finance & and declining     compensation
                                                    Bank
IMF/World Bank
    While government in the selected countries continued to expand until the early 1990s (see
    Table 3), the fiscal crisis and high rates of inflation since mid-1970s constrained wage bills at
    levels below what was needed to maintain the real average pay levels for the civil servants.
    The severity of the fiscal crisis also had governments reducing budgetary allocations to
    discretionary operational and maintenance (O&M) expenditures needed to ensure the
    availability of necessary to complement personnel in delivery of services. Consequently, in
    the select countries, was as indeed the case in most non-mineral exporting developing

    1
     Lindauer D.L. & Numberg B., Rehabilitating Government: Pay and Employment Reform in Africa, The
    World Bank, 1994


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                                    Issue Paper 6: Controlling and Managing Personnel Costs


countries the trend evolved in until recently that: government employment was expanding
and the total wage bill was on the rise; but at the same time the average real pay of the civil
servants was on the decline, the salary structure was being decompressed and fewer
complementary O&M) resources were available to enable the employees to perform. This
trend significantly contributed to the decline in the morale, discipline and productivity of
government employees which took hold in the 1980s. Yet, with the persistence of the fiscal
crises, the need to control the wage bill (personnel) costs remains a key policy objective in
these countries.

Table 3: Expansion in total government employment (including teachers) in the select
countries between late 1980s and early 1990s.
Country          Employment in late 1980s          Employment High-Point in 1990s
                 Year              Number          Year              Number

Kenya              1986               424,000             1993               477,233
Tanzania           1988               301,000             1992               355,000
Uganda             1987               310,000             1990               320,000
Zambia             1989               110,634             1997               139,000


Personnel numbers are falling but wage bills are rising

In the 1990s, government personnel numbers are on the decline in all the four select
countries. Uganda has had by far the largest drop in numbers; from 320,000 in 1990 to about
160,000 today. It is noteworthy that Uganda has achieved this by radically restructuring and
downsizing the government establishment. This has involved rationalisation of roles,
functions, structures through a redefinition of the role of government accompanied by hiring-
off, privatisation, contracting out and decentralising to autonomous agencies and local
government, and pursuit of operational efficiencies. Tanzania is well on a similar but
gradualist trend. Kenya and Zambia have adopted the same policy objectives, but the
implementation of comprehensive restructuring and downsizing programmes are not yet
firmly in place. Nonetheless, indications are that personnel numbers in these countries are
also falling significantly.




       Table 4: Reductions in Government Personnel Numbers in the Select Countries
       in the 1990s.

  Country          Highest Employment Level in 1990s         Lowest (1988)
                   Number             Year                   Employment Level




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  Kenya                477,233                  1993                459,000
  Tanzania             355,000                  1992                268,000
  Uganda               320,000                  1990                160,000
  Zambia               139,000                  1997                125,000

These reductions in numbers however do not translate to a fall in total personnel costs. This
situation is best explified in Uganda. Despite the hefty fall in personnel numbers, from
320,00 in 1990 to 160,000 in 1998, the total wage bill has been raised in both absolute and
relative terms over the years. The annual wage bill increase has been an average of 36
percent between FY 1993/94 and FY 1996/97. The wage bill share of total government
expenditure increased from 15 percent in FY 1992/993 to 37 percent in FY 1996/97 (see
Table 5). This is an indication that enhancing the pay for civil servants to living wage levels
requires a much higher increase in the total wage bills.


       Table 5: Uganda Government Employment Wage Bill Trends, 1993-1997

VARIABLE           1992/93         1993/94             1994/95          1995/96           1996/97
Total              214,000         177,000             150,000          150,000           148,000
Employees
Wage Bill:
Amount             65              89                  125              160               220
(billion)
% Change           -               37%                 40%              28%               38%
% Recurrent
Expenditure        15%             20%                 31%              34%               37%
       Source: Okutho G. (1998), Public Source Reform in Africa: The Experience of Uganda, A paper
       presented at the Eastern and Southern Africa Consultative Workshop on Civil Service Reform, Arusha,
       Tanzania.


Africa Countries have comparatively the lowest Government employee per capita

Even as the Government of select and other Africa countries strive to downsize, statistics
available suggest that the region has comparatively the lowest ratio of Government
employment to population (see Table 6). It is noteworthy that OECD countries have an
average the highest ratio in General Government (7.7. percent) except in the area of teaching
and health where the countries of Eastern Europe and former USSR lead (with 5.1 percent).
In these two ratios, Africa is far at 2.0 percent and 0.8 percent respectively. These statistics
indicate that economic growth and development in Africa will give rise to relatively higher
levels of Government employment especially in the provisions of basic social services.




       Table 6: Government employment, as percent of population by World regions in
       early 1990s

 Regions                                No of       General          Government              Teaching
                                        Countries   Government       Administration          & Health



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                                      Issue Paper 6: Controlling and Managing Personnel Costs

                                    Surveyed                     Central      Local
 Africa                             20           2.0             0.9          0.3     0.8
 Asia                               11           2.6             0.9          0.7     1.0
 Eastern Europe & former USSR       17           6.9             1.0          0.8     5.1
 Latin America & Caribbean
 Middle East & North Africa         9            3.0             1.2          0.7     1.1
 OECD                               8            3.9             1.4          0.9     1.6
 Overall                            21           7.7             1.8          2.5     3.4
                                    86           4.7             1.2          1.1     2.4
      Source: Schiavo-Campo S. et al, (1998), Government Employment and Pay: A Global and
      Regional Perspective, The World Bank.

Significance of collapse of systems of control management and management

Uncontrolled growth, volatility and weak management of Government personnel/costs are
underpinned by collapse of the systems of control and management. These systems are
associated with the following problems:

         Poor personnel data and management information: The most pervasive
          problem in control and management of personnel the select countries has been the
          break-down in the systems for collecting, storing and disseminating data on
          government employees. Information available on Government employment has
          been generally incomplete and unreliable. This break-down in the systems has
          availed the opportunities for frauds in the payroll, such as the entry of ghosts
          workers. The prominent features of the crisis in personnel data and management
          information are:

          (a)   poor maintenance of personnel records;
          (b)    fragmented and local payrolls;
          (c)   control gaps in the central payroll; and
          (d)   shortcomings in the central personnel data base; and

         professionalism of a career civil service abandoned service:         The select
          countries, which at independence inherited a British administration model.
          Historically, employment in the government was structured so that there was
          clearly a professional cadre of permanent and pensionable officers, (career civil
          servants) as contrasted with the non-pensionable cadre of support staff. The
          permanent and pensionable status in government employment was reserved for a
          relatively small and stable cadre, entry into the cadre was controlled, and the
          offices were declared by the Head of State. The beginning of loss of control of
          employment and professionalism in the civil service generally coincides with the
          abandonment of the dichotomy between the career civil service cadre of
          permanent and pensionable employees, and the support services cadre;

                   Ambiguous and fragmented institutional framework; Overall the past
                    two decades, there has been progressive erosion of the authority of the
                    traditional institutional pillars of functional responsibility for the exercise
                    of control in the personnel management functions in the select countries.
                    The responsibilities for personnel control and management are scattered




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                                         Issue Paper 6: Controlling and Managing Personnel Costs


                     without clear demarcations of functions or authority levels among a
                     relatively large number of institutions;

                    Indiscipline in the civil service: The one personnel control and
                     management aspect which has very much underlined the inefficiencies,
                     misconduct and malpractices in the civil service is the breakdown in
                     discipline. The breakdown has been attributed to:

                     (a) the politicisation of the service under the single party regimes that
                         ruled in the 1970s and 1980s;
                     (b) weak and ambiguous exercise of authority by responsible government
                         officers;
                     (c) breakdown of the complimentary systems of personnel records and
                         performance reporting;

                    lack of transparency in the promotion practices as merit principles were
                     abandoned.

Not-so-successful initiatives

Governments in the region have attempted all sorts measures to control the size and costs of
personnel. In brief, such measures have included:

                    Census and headcount activities: Most census and headcount in the
                     region, geared to identify “ghost employees” form government payrolls
                     initiatives have not been successful.2 This experience is not confined to
                     the select countries. For example, between 1986 and 1988 Ghana carried
                     out census or “headcounts” of civil servants. which did not yield expected
                     results. The census numbers could not be reconciled with existing payroll.
                     In 1988, Tanzania carried out a census of civil servants for which data
                     was not processed until 1991, by which time it was difficult to ascertain
                     the results. A similar excise in 1994 did not fair better;

                    Cash payments to control ghosts: All the governments in the select
                     countries have at some stage in recent years attempted to suspend bank-
                     based payroll payments and adopt cash payment with the aim of
                     identifying “ghost employees”. However, in every instance, this approach
                     has failed because it was difficult to organise and administrate it
                     effectively. In a number of occasions the cash was in fact lost.
                     Furthermore, with cash payments, cases of fraud with scattered payroll,
                     increase;

                    Early retirement of employees: Recently there was a proposal in Kenya,
                     for example, to lower the mandatory retirement age from 55 to 50 years
                     and allow voluntary early retirement of those who are 45 years. However,
                     lowering the retirement age will reduce the numbers, but then raise the
                     costs of retirement benefits. It was therefore proposed to defer pension

2
 “Ghost employees” refers to presence of names Government payroll when such employees either do not exist
or should already have been removed from the payroll.


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                     benefits for the early retirees until they attain the age of 55 years 3. This
                     was found to be totally unacceptable to these retirees, especially with the
                     thought of the prospect of dying before enjoyment of the benefits. It was
                     also found that the impact of this on the quality of the service would need
                     to be carefully considered. The scheme has therefore aborted.

                    Centrally imposed ministerial personnel expenditure cuts: Directives
                     of such cuts can be on the bias of either an overall ministerial wage bill
                     ceiling, or mandatory targets of personnel expenditure (PE) to operational
                     and maintenance (O&M) expenditure ratio. The Kenya CSRP undertook
                     PE/O&M ratio studies with a view to imposing a 60:40 ratio for ministries.
                     Implementation of these was however not feasible because with the weak
                     personal and public expenditure systems ministries had all sorts of excuses
                     for failure to comply;

                    Reducing the total wage bill: Macroeconomic analysis of the total
                     government wage bill in the select countries yield the conclusion that it is
                     necessary and feasible to reduce the total government wage bill by
                     restraining or curtailing employment numbers. Under one such scenario,
                     the Government of Republic of Zambia was in 1997 persuaded to commit
                     itself to reduce the total wage bill from Kwach 215 billion in June 1997, to
                     Kwach 180 billion in 2002. This goal was to be achieved by reducing the
                     size of the civil service from 139,000 in 1997 to 80,000 by 2002 since
                     then, this policy has been abandoned because it was simplistic and not
                     feasible;

                    Freeze of increases in pay levels: Temporary freeze pay levels is an
                     option that governments have in recent years taken for either or both of the
                     following reasons: (i) facilitate attainment of short term wage bill targets,
                     especially when these targets have been agreed as fiscal performance
                     benchmarks in structural adjustment credits (SACs); (ii) to keep low the
                     costs of retrenchment when these are based on the pay levels. The freeze
                     has usually taken two forms. One, freeze on nominal values. Two, a curb
                     on increase in real pay levels, so that pay increases are limited to
                     compensation for inflation. The latter is the most prevalent practice, and
                     indeed was the default policy of most governments in the region. In 1997,
                     the Government of Zambia explicitly adopted a combination of the two
                     approaches. Thus, pay increased would be limited to compensating for
                     inflation for all personnel, until 1988. Thereafter, however, this policy
                     would apply only for lower ranking and and unskilled staff (classified
                     daily employees). Such policies have, however, rarely held. In 1999, the
                     policy collapsed in Zambia when the President ordered for a 100 percent
                     rise in minimum basic pay.


Promising good practices yet to be undertaken


3
 Republic of Kenya – Office of the President, Directorate of Personnel Management, Civil Service Reform
Medium Term Strategy 1998-2001, April 1998.


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                                     Issue Paper 6: Controlling and Managing Personnel Costs


There are also some promising good practices which have been intimated but, for various
reasons, have yet to be implemented in the select countries. Among these are the following
two:

        Budgetary incentives for MDAs that reduce personnel costs: In Tanzania the
         budget guidelines for FY 1998/99 promised budgetary incentives for MDAs that
         reduced personnel costs. In Kenya, a Ministry of Finance task force has been
         working on a scheme by which MDAs will be allowed to shift savings on PE costs
         within a ceiling to O&M. This practice has however been difficult to implement
         under the cost budget system in the select countries.

        Restoration of budgetary controls: At present, the ministries of finance in the
         select countries control personnel expenditures on a cash budget basis, releasing
         funds (exchequer issues) only on the basis of the actual staff in post. When
         budgetary controls on personnel expenditure are restored, funds will be released to
         ministries on the basis of approved establishment. This will facilitate decentralised
         management of human resources, and the practice of budgetary incentives
         outlined above.

                                 Part C: Good Practices
Overview

Good practices in managing and controlling personnel costs revolve around:

        Controlling the numbers on the government payroll(s);
        Imposing a resources envelope for compensation of personnel;
        Enforcing controls to restrict expenditures within the resources envelope;
        Eliminating expenditure leaks that allow extra-budgetary expenditures on
         personnel; and
        Installing improved systems.

As a matter of fact, total effectiveness is likely to require a combination of all these facets of
good practice. Nevertheless, on the basis of a survey of select countries the following range
of distinct “good practices” have been identified:

          Flushing out ghost employees;
          Special payroll audits;
          Recruitment freeze;
          Slicing away redundant unskilled workers;
          Abolishing vacant posts
          Rationalisation of roles, and functions;
          Application of staffing Norms;
          Zero-base reconstitution of the establishment;
          Firm wage bill freeze;
          Eliminating compensation allowances outside the salary payroll;
          Strengthening payroll, checks and controls;
          Developing more complete and reliable personnel data bases;
          Integrating personnel and payroll systems; and
          A comprehensive approach to ensure sustainability.


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                                    Issue Paper 6: Controlling and Managing Personnel Costs



Flushing out ghost employees

Total elimination of ghost employees from government payrolls is a goal that is yet to be
attained in the country’s covered by the survey. However, remarkably successful initiatives in
flushing out the ghosts are documented in Kenya , Tanzania and Uganda the flushing out
has taken the following approaches;

        Payroll verification exercises: In these exercises, employers are required to
         authenticate their parts of the payroll. Through such exercises, in Tanzania 4,600
         ghosts were identified in 1996, and a further 1,500 in 1998.

        Head-counts: A series of head counts were carried out for various ministries in
         Kenya resulting in deletion of about 6,000 ghost entries in the payroll. A more
         comprehensive exercise in Uganda resulted in removal of ghosts employees who
         remembered more than 10 percent of the total payroll in the traditional civil
         service (see Box 1).

  Box 1: Removal of “Ghost Workers in Uganda

  Because of apparent lack of control on the payroll, the Uganda Civil service was riddled
  with ghosts. Those who left the service, for various reasons, but their names continue
  featuring on the payroll – and actual salary being drawn. The emergence of “ghost” can
  be explained by apparent temptation and collusion between the affected officer and the
  officials responsible for administering the payroll, as a means of supplementing their
  pay.

  To collect this situation, government established a Payroll Monitoring Unit (PMU), to
  verify the entry and exit from the payroll: and the ground rules established by the
  Ministry of Public Service (MPS) on the consequences for Public Officers if caught in
  the creation of ghost workers and the computerisation of the payroll, which enabled the
  ministry to monitor the changes therein. The elimination of ghost workers was been
  particularly successful in the Teaching Service, when between September and November
  1993, the number of teachers came down form 100,400 to 95,389.

  In October 1996, Government launched another Payroll cleaning exercise – code named
  “Operation Cleanup” aimed at removing invalid “ghost” payroll records. Up to 2,800
  payroll records were deleted as a result. In addition, over 1,600 staff were removed from
  the payroll following the earlier Police payroll cleaning exercise. Together, this
  represents the removal of over 10% of the total payroll records in the traditional civil
  service.



Special Payroll Audit

Most past exercises to flush out ghost employees from the payroll have not ascertained
financial losses resulting from irregular payments of salaries, failure to account for balances
in local (cash) payrolls, etc. On the other hand, the routine and limited payroll checks carried
out by Government auditors do not have the scope and depth to document irregularities in the


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                                     Issue Paper 6: Controlling and Managing Personnel Costs


payroll. This explains the existence of ghost workers in Government payrolls in the select
countries. It is therefore a good practice to periodically conduct a special payroll audit. An
example of this is to be found in Tanzania (see Box 2).

    Box 2: A Special Payroll Audit in Tanzania

    In June 1996, at a meeting of inter-departmental consultations on personnel controls
    and information system, the office of the Controller and Auditor General (CAG) was
    required to undertake a special payroll audit. The audit was carried out between
    October 1996 and February 1997.

    The audit covered the examination of salary payrolls as well as payments of allowances
    to various cadres of Government employees in 12 select ministries and departments.
    The objectives were to assess compliance with relevant staff compensation regulations,
    and ascertaining effectiveness of internal controls for safeguarding public funds. The
    audit also included verification of accounting for unpaid salaries and allowances. The
    audit of the systems of the Government Computer Services department in the Treasury
    was not thorough because the CAG staff had limited skills in this area.

    The audit documented extensive loss of Government expenditures on personnel in the
    following ways:

          Irregular payments of salaries and allowances, including payments made to ex-
           employees;
          Failure to account for unpaid salaries;
          Overpayment of salaries;
          Incorrect manual adjustments on the computer payroll; and
          Statutory deductions paid to the wrong institutions.

    The audit also documented weaknesses in the system of personnel expenditures
    including the following:

          Employees with more than one check (personal) number on the payroll;
          Poor maintenance of employees personal records; and
          Employees paid without requisite budgetary authorisation.



Recruitment freeze

In this decade, the select countries have resorted to the policy of recruitment freeze to control
growth of personnel numbers. Before the introduction of this policy measure, there was
guaranteed entry into the government payroll for large numbers of pre-service trainees in all
kinds of public training institutions. This policy as been adopted to varying degrees of
effectiveness in the select countries(see Table 7).


Table 7: Timing, policy specifics and impact of recruitment freeze in the select
countries
COUNTRY         YEAR      POLICY SPECIFICS                   IMPACT     REMARKS


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                                          Issue Paper 6: Controlling and Managing Personnel Costs

Kenya             1992       Total freeze except for teachers        High         Numbers in civil
                             and replacement OF health                            service have, reduced
                             workers.                                             from 272,000 in 1993
                                                                                  to 216,000 in 1997.
Tanzania          1992       Recruitment restricted to               Low          Enforcement
                             replacements, and professional                       mechanisms not
                             and technical personnel in                           clarified.
                             essential services (teachers, health
                             workers, police and prisons), and
                             to be approved by Head of the
                             Civil Service.

                  1995       As above, but replacements also
                             subject to approval by the Head         High         Enforcement
                             of Civil Service.                                    mechanisms clarified.
Uganda            1990       Only scarce professionals               Low          Compliance not
                             (engineers, doctors, etc) to be                      enforced.
                             recruited with specific approval
                             of the Head of the Civil Service.

                  1994       Old establishment abolished and a High               Compliance achieved
                             new one to be created.                               with new establishment
                             Recruitment restricted to new                        controls
                             establishment.
Zambia            1995       One post to be filled for every   Low                Mechanisms to ensure
                             three that fall vacant.                              compliance not
                                                                                  effective.
                  1997       Total recruitment freeze                High         More stringency in
                                                                                  monitoring compliance
                                                                                  with the policy.


Slicing away redundant unskilled workers

Large scale reductions in personnel numbers have in some instances been realised through
implementation of decisions to abolish and slice away the cadre of unskilled workers4. Two
examples of this include:

            In Uganda, on the basis of the government’s decision to abolish the cadre of
             “group employees”, the numbers in this cadre fell from about 110,000 in 1990 to
             about 7,000 in 1997;
            More recently, in 1997 the Government of Zambia decided to decimate the
             “classified daily employees”, then numbering 24,00. By April 1999 and todate,
             some 15,545 of them (about 62 percent) have been removed from the payroll.

Abolishing vacant posts

In governments where the “approved establishment” is the basis for budgeting and release of
funds, for personnel an important first step in controlling personnel costs is abolishing all

4
 The cadre of unskilled workers is known by different names in different countries: “auxiliaries” in Kenya;
“operational service” in Tanzania; “group employees” in Uganda; and “classified daily employees (CDEs)” in
Zambia.


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                                    Issue Paper 6: Controlling and Managing Personnel Costs


vacant posts. Among the select countries this practice has been relevant for Kenya. In 1993
and 1994, a total of 22,734 vacant posts (equivalent to about 10 percent of the total payroll)
in the Government’s approved establishment were abolished. A combination of this measure
and the recruitment freeze has ensured sustained reduction in total government employment
since 1993.

Rationalisation of roles and functions

The strategy of rationalisation of Government (ministries) roles and functions to downsize
and reduce staff numbers has been applied in all the four select countries in the context of
civil service reform programmes. The rationalisation process involves categorising roles and
functions of a ministry into (i) core-which are to remain in the public sector; (ii) socially
critical-which the government must ensure that some agency in the public and/or private
sector provide by decentralisation contracting out, etc; (iii) commercial services to be
privatised or abandoned. Generally, on the first attempt, the rationalisation (ministerial
reviews) have not had the desired results. For example in the reviews carried out in
Government of Kenya, between 1995 and 1997 there were 13 percent cases recommending
increase in posts, and only 7 percent of the recommendations were for abolition of posts. In
Uganda, the initial (1995) exercise in ministerial reviews yielded demands for additional
staff (a total of 27,807) that was nearly 40 percent of the total then on the payroll (38,971).
The results from the initial rationalisation (organisation and efficiency reviews) efforts in
Tanzania and Zambia were also not encouraging.

Still in the some ministries of the select countries, there are cases of “good practice” in
rationalisation of roles and functions. These have resulted in changes in structures and
reduced staffing. This has been particularly the case in ministries of agriculture in all the
select countries. Thus, for example, the Ministry of Agriculture and Co-operative in
Tanzania has reduced its staff numbers from about 19,000 to about 5,000 between 1996 and
1998. The affected personnel have been retrenched or transferred to local governments under
the decentralisation programme. Major reductions in personnel numbers have also been
effected through rationalisation of roles and functions in Uganda Ministry of Agriculture,
Animal Husbandry and Fisheries. In Kenya’s Ministry of Agriculture, Livestock
Development and Marketing , the rationalisation preceded the application of staffing norms
to determine the future reduced personnel establishment. When the exercise was completed,
it was decided to reduce staffing from 24,333 to 17,100.

Application of Staffing norms

Staffing norms provide criteria for determining optimal staffing levels. Their application also
guides MDAs in planning, deployment and utilisation of personnel. The use of staffing
norms has been widely in use especially to control recruitment and deployment of field
personnel in the delivery of basic social services (education, health and agricultural
extension). Staffing norms have also been applied to target across-the-board reductions in
personnel, especially teachers. For example, there is a 1998 proposal in Kenya to cut the
teaching force by a quarter (63,000 out of a total 244,495) by applying a pupil: teacher ratios
of 40:1 for primary schools teachers, and 30:1 for secondary schools teachers. On a similar
basis, there have been proposals to reduce teachers by about 6000 (5 percent of the total) in
Tanzania. Furthermore, through the use of the ratios, areas and institutions that are
overstaffed or understaffed are identified and personnel redeployed on that basis. One of the



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                                        Issue Paper 6: Controlling and Managing Personnel Costs


best illustrative recent exercises in the application of staffing norms was carried out in the
Kenya Ministry of Agriculture, and Livestock Development and Marketing (see Box 3).

Box 3: Application of Staffing Norms in the Kenya Ministry of Agriculture and Livestock
Development.

Following a rationalisation of roles, functions and structures, it was decided in 1997 to arrive at new
staff numbers in the Ministry of Agriculture, Livestock Development and Marketing (MALDM in
Kenya through the application of staffing norms. A common approach to use of staffing norms,
which is simple, attractive and appears objective is to adopt the staffing pattern of the best practice of
organisation’s elsewhere in the world. In this approach for example, it is conventionally accepted that
1:45 teacher-pupil ratio is appropriate for staffing primary schools in the select countries. It was,
however, through such an approach that a previous (1993) consultants’ exercise to determine staffing
requirements in the Ministry of Livestock Development had recommended a three-fold increase in
staff members (from 2013 to 6,392). Furthermore, the 1997 exercise identified two major drawbacks
with such an approach in the MALDM in Kenya. Firstly, the agricultural environment, level of
development and demand for public services in Kenya could not be replica of any other country.
Secondly, no country could objectively claim to have a universal best practice, and there was
therefore a high risk of adopting “sub-optimal” norms. Therefore, uniquely Kenyan staffing norms
had to be defined for the MALDM.

Staffing norms for headquarters, provincial and district administrative and technical
management establishment were determined on the basis of assessment of workload as
indicated by analysis of functions, activities service levels and the organisational structures at
each administrative tier. Staffing norms for technical functions at the district and divisional
levels were based on professional assessments of minimum requirements for delivery of
services at that level. On this basis, for example, it was decided to have eight subject-matter
specialists per district. Staffing norms were also specified for specialist institutions and
services, including training institutes, veterinary laboratory services and farmers training
centres.

Finally, staffing norms were specified for frontline extension workers (FEW) based on FEW:
farmers/pastoralist ratios for each three categories of districts;

       High potential district (1FEW:800 farmers);
       Medium potential district (1 FEW:400 farmers/pastoralist) and
       Medium potential district (1 FEW farmers/pastorlists).
       Low potential district (1 FEW farmers/pastoralist).

At the end of this exercise the long term total staffing for requirements for the MALDM were
specified to be 17,100. This suggested the need for a net-reduction of 7,233 personnel in the
ministry’s establishment:

Source: KK Consulting Associates/Republic of Kenya Staffing Norms Analysis in Ministry of Agriculture,
Livestock Development and Marketing, October 1997




Zero-base reconstitution of the establishment




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One of the most effective good practices in managing personnel numbers when the public
service is characterised by low skills levels and poor performance is to reconstitute the
establishment from a zero-base. Five key steps in this approach include:

              First, through the rationalisation of roles and functions determine the ideal
               structure and staffing for the MDA;
              Second, declare all posts in the new establishment to be vacant;
              Third, advertise all the posts to be filled through interviews;
              Fourth, carry out interviews and fill the posts with the best qualified person; and
              Declare redundant all those not recruited into the new establishment.

This approach was adopted in Uganda in 1993. Reorganisation of government reduced
ministries from 38 to 21. At the same time, the programme of ministerial reviews had
concluded with considerably reduced numbers of established posts in the new ministries. A
Board (The Implementation and Monitoring Board, TIMB) constituted of eminent Ugandans
from outside the civil service was given the task of interviewing and filling posts in the new
establishment. At the end of the exercise, those not selected by the Board, including 17
permanent secretaries, were declared redundant. A similar exercise is currently underway in
Zambia.

Firm wage bill freeze

One potent instrument for control of personnel costs is enforcing a firm freeze on the
Government. It is however, not a readily and easily applied instrument. In fact, few
countries have tried it. The Tanzania Government’s 1996/97 wage bill freeze and outturn
illustrates the problems and difficulties with the exercise of this option. During a May 1996
IMF mission the wage bill was set at Tshs 177 billion. However, when the IMF returned in
August 1996, it was increased to Tshs 185 billion as the original numbers were overly
optimistic an retrenchment and understated the numbers of the police force and employees of
the prison system. The outturn was Tshs 199 billion because the August 1996 figure was still
too optimistic on retrenchment and did not include training allowances for the national
service. 5 Thereafter, however, a wage bill freeze has been firmly held in Tanzania, resulting
in the fall in value of the wage bill in real terms by 6.9 percent and 14.8 percent in FYs
1997/98 and 1998/99 respectively (see Table 6).

Table 6: Tanzania Annual Changes in the Government Wage Bill and Employment,
GY 1994/95 – FY 1998/99
Fiscal Year      Wage Bill     Annual %        Real Change in
                 (in T shs     Change in the   Government
                 Billions)     Real Wage Bill Employment
1994/95          109.7           -             -
1995/96          156.1         12.2%           -9.6%
1996/97          199.2          2.9%           -1.5%
1997/98          218.8         - 6.9%          -3.8%
1998/99          218.0         -14.8%          -2.3%


Eliminating compensation allowances outside the salary payroll

5
    The World Bank, The United Republic of Tanzania: Public Expenditure Review, July 1998.


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Compensation allowances outside the salary payroll have previous been a common feature of
personnel costs in the select countries. These allowances are awarded and paid ad hoc and
without transparency. They can be a substantial proportion of the total personnel costs,
although they may not be reflected in the budget wage bill. In Zambia, it has been estimated
that such allowances constitute up to 160 percent of the total salary expenditure. Therefore,
these allowances can significantly contribute to volatility of total personnel costs on a
monthly basis. Tanzania and Uganda have demonstrated “good practice” in this area;

   In Tanzania, the government consolidated 36 non-salary allowances into the basic salary
    in FY 1995/96;
   In FY 1996/97 Uganda also adopted the concept of a consolidated pay package thereby
    eliminating compensation allowances outside the payroll.

Strengthening payroll checks and controls

A common good practice in the select countries for improving controls and management of
personnel costs has been strengthening payroll checks and controls. The practice has entailed
the following range of interventions:

          Scrutiny of payroll amendments before entry on the payroll: This practice was
           introduced in Tanzania in 1995. Before then, changes to the payroll were handled
           between accountants in ministries and data entry clerks a the Government
           computer departments;

          Proper documentation of all payroll amendments: The problem checking for
           ghost in the Government payrolls in the select countries was in many instances
           hindered by lack of clear evidence on the perpetrators. The introduction of proper
           documentation of payroll amendments as introduced in Tanzania (1995) is
           therefore an important internal control measures;

          Decentralising responsibility for verification and approval of payroll
           amendments to specific officers in MDAs: In Tanzania this responsibility was in
           1997 given to personnel officers and internal audit staff. A similar but further
           reaching initiative has been under implementation in Zambia since March 1998.
           Payroll administration has been moved to line ministries, departments and
           provinces. The objectives include:

              (a) making controlling (accounting) officers clearly responsible for changes
                  in the payrolls;
              (b) easing the identification of discrepancies between payroll numbers and the
                  monthly wage bill through returned salaries;
              (c) enabling both controlling officers and Ministry of Finance staff to carry
                  out variance analyses on the personnel expenditures budget, and take
                  corrective action; and
              (d) facilitating controlling officers to report objectively on all expenditures
                  budgeted and incurred under their vote;

          Stabilising effective institutional arrangements: This entails specifying the
           institutional focal points for enforcing and monitoring compliance with laid down


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                                     Issue Paper 6: Controlling and Managing Personnel Costs


           policies, procedures and controls. In Tanzania, for example, a Management
           Information Systems Unit and a Payroll Control Unit were introduced at the Civil
           Service Department in 1995. A Payroll Control Unit was also established at the
           Ministry of Finance. In Uganda (1995), they found it useful to create one
           Establishment Control Department for all Government employees, including
           teachers; In Zambia, the Ministry of Finance and Economic Development has, in
           1998, introduced a Revenue & Expenditure Monitoring Unit whose functions
           include monitoring payroll deviations; and

          Documenting the existing systems procedures and controls: Documenting the
           system ensures that details of systems procedures and controls are readily clarified
           and understood for implementation by all staff required to do so. The
           documentation also facilitates training on the system. With the documentation it is
           feasible to establish a mechanism to undertake regular checks on compliance with
           the personnel and payroll administration procedures and controls. It is for this
           purpose that a personnel and payroll procedures manual was prepared for the
           Government of Tanzania in 1997.

Developing more complete and reliable personnel databases

Effective management and control of personnel costs requires an accurate and comprehensive
personnel database. Such a database will provide timely and complete information on all civil
servants, and reveal changes in the personnel numbers and costs, including new recruits and
those leaving the service. Then, there can be timely analysis and verification of changes in
the monthly wage bill. However, experience shows that installing such a database will be a
long term undertaking. Still, in Uganda and Tanzania. there are good practices in developing
more complete and reliable personnel databases.

In Uganda (1994) there was transfer of all local and manual payrolls to a central
computerised payroll to facilitate effective monitoring and control of entries in the payroll. It
estimated that about 20,000 ghosts in the Uganda teacher’s manual payroll were eliminated
by this computerisation and centralised control.

In Tanzania, an initiative was initiated in mid-1988 to establish a centralised and
computerised personnel data base. Specially defined forms were dispatched to all employees,
through their departments and work stations. Full completion departments and transmission
back to the civil service. Department was mandatory. Those not complying on it were
threatened with withdrawals of salaries. By April 1988, a 99 percent response had been
confirmed. And since then the data returns have been processed into a computerised
personnel data base.




Integrating personnel and payroll systems

An integrated personnel and payroll system is has the objective to improve personnel and
payroll processing, retrieval and elimination of data redundancy and duplication. The three
specific features of such system are:


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                                     Issue Paper 6: Controlling and Managing Personnel Costs



        automating a central personnel data base;
        linking this data base to the three main personnel control functions, i.e. complement
         (establishment control), payroll administration and personnel expenditure budget;
        system facilitates concurrent updating of the personnel data base and the payroll.

Such a system as is currently under implementation in Tanzania will provide support for the
following:

        an approved establishment list operated and managed by the central personnel
         department which ensures that any request for recruitment can only be approved if
         there is a vacant post and if funding for the post has been approved;
        an up-to-date staff list which includes all government employees. This facilitates
         checks to be performed to ensure that staff positions conform to approved posts,
         MDA by MDA, and staff numbers are held to agreed ceilings as set out through the
         personnel budgetary process;
        improved control of amendments and changes to the payroll so they can only be made
         after verification and authorisation;
        timely and cost-effective cross-checking of the payroll against the approved
         establishment list, which ensures that discrepancies are detected and eliminated, and
         that overall numbers and pay levels are kept within agreed target levels.

A comprehensive approach to ensure sustainability

To ensure sustainability control and management of personnel costs, a comprehensive
approach is needed. Such an approach is long term and will encompass most of the good
practices outlined above. This is a lesson of experience we can draw from Uganda. Here,
measures to improve control and management of personnel costs started in early 1990s and
are still continuing. The wide range of good practices documented there explain the
consistent reduction in personnel numbers over the years (see Table 8).

Table 8: Changes in total Uganda Government personnel numbers, 1990-1997
Service Group              1990      1991     1992      1993      1994                 1997
                           July      July     July      Sept      Sept                 Sept
Traditional Civil Service  70,000    40,000   36,000    29,500    29,500               15,922
Teachers                   120,000   120,000 120,000 100,000 93,526                    92,954
Police and Prisons         20,000    23,000   23,000    21,000    26,562               19,255
Group employees            110,000   86,000   50,000    26,500    21,881                n.a.
District-based             n.a.      n.a.     n.a.      n.a.      n.a.                 30,737

TOTAL                          320,000     296,000    299.000    177,000    165,863    158,978



                                   Select References
1.       Brown K., Kiragu K., and Villadsen (June 1995) Uganda Civil Service Reform Case
         Study, A report to Special Programme for Africa (under assignment from the UK
         Overseas Development Administration and DANIDA.


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                                 Issue Paper 6: Controlling and Managing Personnel Costs



2.    Gemmell, Norma ed. (1993), The Growth of the Public Sector: Theories and
      International Evidence, Edward Elgar Publishing Company, Hants, England

3.    Okutho, George (March 1998), Public Service Reform in Africa; The Experience
      of Uganda, A paper presented to the Eastern and Southern Africa Consultative
      workshop on Civil Service Reform (Unpublished) Kampala.

4.    Landauer David L. and Numberg Barbara, ed (1994), Rehabilitating Government:
      Pay and Employment Reform in Africa, World Bank, Washington D.C.

5.    Green, Malcolm (July 1997), Public Service Management in Zambia: A Review of
      the Government’s Public Service Reform Programme, A report under assignment
      to the World Bank.

6.    Republic of Kenya/Office of the President (April 1998), Civil Service Reform:
      Medium Term Strategy 1998-2001, Directorate of Personnel Management.

7.    Schavo-Campo S., de Tommaso G. and Mukherjee A (1998). Government
      Employment and Pay: A Global and Regional Perspective, The World Bank,
      Washington D.C.

8.    Rugumanu, Severin, ed (1998) Tanzania National Symposium on Civil Service
      Reform, University of Dar es Salaam Press.




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