Federal Government Plans 25% Salary Hike and New Allowances for Employees

The federal government is set to implement significant salary increases and new allowances for its employees, with a planned rise of up to 25%, effective from July 1, 2024, according to reports.

This comes amid a 23% increase in the government’s revenue collection during the first five months of the current fiscal year, falling short of the 40% growth required to meet the Rs12.97 trillion revenue target by June 30, 2025.

To address the shortfall, the government will introduce contingency taxation measures, essentially a mini-budget, as part of its ongoing agreement with the International Monetary Fund. However, this has done little to ease concerns among government employees, especially as the narrative of lower inflation fails to resonate, despite the consumer price index (CPI) falling to a 78-month low of 4.9% in November. This decline is largely attributed to a higher base effect from last year’s peak inflation of 29%.

The Prime Minister’s Office and the Ministry of Finance have reportedly been flooded with requests from various stakeholders and employee groups seeking additional compensation, especially following significant salary increases and allowances granted to judges in recent months.

In response to the growing demand, Prime Minister Shehbaz Sharif has set up an eight-member special committee, headed by Finance Minister Muhammad Aurangzeb, to review existing allowances and propose new ones for government employees during the current financial year. The committee also includes representatives from the finance, cabinet, and defense ministries, as well as members with close ties to senior civil servants.

The committee’s main task will be to evaluate proposals from the Finance Division concerning revisions or new allowances for government employees, with recommendations to be presented to the cabinet when the annual budget is approved.