In a December 22, 2022, article under the same title, published on the http://leadershipreimagination.com website, I suggested that the untidy roll out of the new compensation system provided lessons for leaders, (all leaders, not just the Minister of Finance). Among the lessons I highlighted were the value of humility and the importance of clarity in communication.
In discussing the issue of humility, I considered the fact that in the months leading to December 2022, the government displayed what I assessed to have been a level of haughtiness and cocksureness about the process which left little room for error. The government appeared convinced that all was well with how the negotiations had been proceeding and unions, representing workers, which were unwilling to sign the agreement were being obstructionist and unnecessarily suspicious.
As it turned out, in the days leading to the first pay cycle under the new system, there was a wave of confusion and uncertainty, and, as predicted by some commentators, union leaders, politicians, and analysts, there were errors in salary calculations and disappointment with salaries, even though some workers appear to be satisfied. But the probability of errors and disappointment was never raised by the Minister of Finance, until a few days before the salaries were paid.
The importance of an approach characterized by humility remains vital in this, and all leadership situations. Humility involves, among other things, openness to the perspectives of others, showing regard for the collective wisdom, considering the probability of failure, and thus putting in place contingency measures, as well as adopting a communication posture which is devoid of bluster and over-confidence. In an article, published in the journal of Human Resource Management in 2018, entitled “Leadership Behaviours that Nurture Organizational Trust: Examining the Fundamentals”, I reported on findings of a research among teachers which showed that among the leadership behaviours that they regarded as having the capacity to build trust between them and their principals is the principals’ display of regard for their wisdom (gained from their knowledge, experience, and engagement with their context). Valuing the wisdom of others is a stellar act of humility and commonsense.
“No one would be worse off”
But while errors would be expected, and permissible, in the first, and even the second cycle of the new payments, the Minister of Finance was categorical in his assertion that no employee “would be worse off”, meaning that no employee’s take-home pay would be less than what it was prior to the new system. This assurance was repeated by the Head of the Jamaica Civil Service Association (JCSA) -the union representing the largest block of public sector workers. Based on disclosures made by some public sector workers, it is apparent that some are worse off.
Let me illustrate how an employee could be worse off. The government says the minimum percentage increase any worker will receive in Year 1 is 10%. Working with that 10% let us look at Althea’s salary of $2.1M per annum along with upkeep of $850K, before and after the new system with a 10% increase in salary and a 25% tax on the upkeep.
Illustration of Take-home Pay under Old Compensation System
|Basic Annual Salary||Upkeep||Total Salary||Tax-Free Portion||Portion Taxable||Balance after Tax (Annual)||Total Annual Non-Taxable Portion||Total Annual Salary after tax||Monthly Salary|
|$2.1M||$850K||$2.95M||$1.5M||$600K||$420K||$2.35M||$2.770M ($420K + $850K+ $1.5M)||$2,770 / 12 $230,833|
Illustration of Take-home Pay under New Compensation System
|Basic Annual Salary (with 10% increase)||Upkeep||Total Salary||Tax-Free Portion||Portion Taxable||Balance after Tax (Annual)||Total Annual Non-Taxable Portion||Total Annual Salary after tax||Monthly Salary|
|$2.31M||$850K||$3.160M||$1.5M||$1.66M||$1.162M||$1.5M||$2.662 ($1.162 + $1.5)||$2.662M / 12 $221,833|
What the tables above illustrate is that despite a 10% increase on basic salary, the fact that upkeep is now taxable at 25%, means that Althea is taking home $9,000.00, which is the difference between $230,833 and – $221,833. This means that her previous salary (under the old system) has decreased by almost 4%. This means she is worse off.
Given that the government and the head of the JCSA had given this unqualified assurance, that no one would be worse off, the government has a duty to ensure that its word is fulfilled. If it fails to keep this solemn undertaking, then it will simply further worsen the level of mistrust that the public, generally, feels towards the pronouncements of politicians.
The level of mistrust is already being worsened and the refusal of several unions to sign the agreements is testament to that fact. Among the unions that are still negotiating are those representing teachers and police. These two professional bodies account for over forty thousand (40,000) public servants.
Clarity in Communication
The problem of lack of clarity in communication of which I wrote in December, continues to affect the implementation of this new compensation system. The erosion of trust arising from the fact that it is not true that “no one” would be worse off, has implications for the speed at which the “doubting” unions will sign and one of the tactics / arguments being used by the Minister of Finance to hurry them to sign will likely add to the trust deficit and is worsening an already bad communication framework.
The government has asserted that if unions do not sign by the end of March 2023 the payments of retroactive sums related to the increases would be paid over several years. At the same time, the government has said that no provision is made in the 2023/24 Estimates of Expenditure for these payments. In addition to those two assertions being contradictory, the government has not explained the reasons it asserts that retroactive payments cannot be made whenever the negotiations are completed.
The reasons, ostensibly relate to government’s “fiscal space” and the assessed impact on various financial metrics that the release of the funds related to retroactive payments would have. I, however, question the validity of the government’s argument. With a budget in excess of a trillion dollars, retroactive sums totaling up to $10 billion, amount to less than 1% of the budget. I therefore fail to see what adverse impacts an additional 1% could have on the national budget or financial targets. The government needs to explain its position in much detail, or it risks being perceived as trying to bamboozle public servants into signing quickly.
Suggested ways forward
Given the mixed results the implementation of the new compensation system has had (with some workers being better off and some being worse off, and presumably some being in the same position), the fact that some unions are holding out, and government is trying to get all on board, there are four key steps that I suggest should be taken to overcome the current uncertainty, namely:
- Government should carry out research to collect and provide actual and factual data showing the percentages of those who are better off, worse off, and those with no changes in their take-home pay. This information will show the exact impact of the changes and could thus help to give credibility and boost confidence in the new system or highlight gaps to be fixed.
- Government should ensure that for those workers who claim to be worse off, the departments and agencies in which they are employed provide the funds to rectify their payments and ensure that these fixes are sustained.
- The Minister of Finance should offer the reasons for his assertion that it is “not possible” to accommodate payments to teachers, police, and others, in one payment (instead of several pieces over several years) whenever they sign their agreements. (The fact is that for the 2022/23 Fiscal Year, the government produced as many as FOUR supplementary Estimates of Expenditure. Whither a repeat?
- Departments and agencies should introduce financial literacy (and money management) workshops. There are many employees who cannot read their pay slips or calculate what increases will mean, so if they are underpaid they cannot unravel the reasons.
Professor Canute Thompson is Professor of Educational Policy, Planning, and Leadership at the School of Education, The University of the West Indies, Mona Campus, and Head of the Caribbean Centre for Educational Planning. He is author of two award-winning books and articles, among his collection of eight books and over a dozen journal articles, and the operator of leadershipreimagination.com website