Statement issued by the The Independent Commission for the Remuneration of Public Office Bearers
ANNUAL REMUNERATION RECOMMENDATIONS FOR 2013/2014
2. The Commission at its meetings of 07 June 2013 and 15 July 2013 discussed the Annual Remuneration Recommendations for 2013/2014. Subsequent to these meetings, the Commission consulted with the Minister of Finance, the Minister of Justice and Constitutional Development, the Chief Justice, and the Lower Courts Remuneration Committee (in terms of the provisions of Section 2 of the Judges Remuneration and the Conditions of Service Act No. 47 of 2001 and Section 12 o
f the Magistrates Act No. 90 of 1993). Consultation was also extended to the Minister of Cooperative Governance and Traditional Affairs (“Cogta”) and the Minister of Public Service and Administration (“DPSA”).
3. The Commission at its meeting of 14 September 2013 discussed at length the stakeholders’ responses on the Commission’s Annual Remuneration Recommendation for 2013/2014 as received.
4. The Commission during the meeting noted the comments and inputs from the relevant stakeholders and considered other factors that are within its mandate in finalizing its Annual Remuneration Recommendations for 2013/2014.
5. In terms of Section 8 (3B) (a) the Chairperson of the Commission recused himself from this deliberations given his conflicted position.
6. The Commission considered the following factors in arriving at its annual remuneration recommendation for 2013/2014:
- Section 8(6) of the Commission Act
- The level of the Consumer Price Index (CPI) and its forecast
- Market salary increases during the past year
- Forecasted salary increases for the year ahead
- The economic and social environment
- Past recommendations together with the President’s determinations
- The inputs from key stakeholders in terms of the mandatory consultation requirements
- Other relevant factors
7. The Commission is obliged by statutory enactment to make recommendations for salary adjustment for public office bearers. After taking into account all relevant factors mentioned here above together with applicable legislations, the Commission is recommending adjustment on a sliding scale as indicated in the table below:
|TOTAL REMUNERATION PACKAGE||SLIDING SCALE %|
|Below R 500 000||7%|
|Between R500 000 – R 800 000||5%|
|Between R800 000 – R1 000 000||4%|
|Above R1 000 000||0%|
8. These “cut-off” thresholds were determined by carefully examining the salary scales and mid-point differentials between various levels of positions. Under these “cut-offs”, there are no circumstances of overlapping “salary scales” of positions.
9. The effective date for salary adjustment is 01 April 2013 and for local government public office bearers is 01 July 2013. The adjustment is recommended in order to align the recommendation with the financial year of public office bearers’ institutions.
10. In recommending the sliding scale, the Commission intends to:
a) Overcome perpetual perceptions on remuneration inequities reinforced by an increase of the same percentage for all categories of public office bearers,
b) Address a call by Commission stakeholders on the widening wage gap between the remuneration levels,
c) Ensure gradual internal equity amongst the recipients, and
d) Set an example to the private sector.
11. The Commission further recommends that a basic salary component equal to 60% of the total package, which constitutes the pensionable salary of Magistrates be increased to 70% with effect from 01 April 2013 similar to Senior Managers in public service.
RECOMMENDATIONS OF AMENDMENT OF PENSION BENEFIT CAP FOR MEMBERS OF PARLIAMENT AND PROVINCIAL LEGISLATURES
1. The Commission in terms of Section 8 (4) (a) and (b) of the Commission Act shall publish in Government Gazette recommendations concerning, amongst others, the benefits of any office-bearer as defined in Section 1 (a), (b), (c), (d) and (e). The benefits may include the pension benefits as prescribed by Section 8 of the Remuneration of Public Office-Bearer Act, No. 20 of 1998 (the Remuneration Act).
2. Section 8 (1) of the Remuneration Act provides that pension benefit shall be paid out of and as a charge against the pension fund of which an office bearer is a member, such pension and other benefits as may be determined in terms of the law or rules governing such pension fund.
3. Section 8 (2) of the Remuneration Act prescribes that the amount of the contribution to be made to the pension fund by the national government, of which a Deputy President, a Minister, a Deputy Minister, a member of the National Assembly or a permanent delegate is a member, shall be determined by the Minister of Finance after taking into consideration the recommendations of the Commission, and such amount shall annually be paid from monies appropriated by Parliament for that purpose.
4. Section 8(3) (a) of the Remuneration Act prescribes that the upper limit of the contribution to be made to the pension fund of which a Premier is a member, shall be determined by the President by proclamation in the Gazette after taking into consideration the recommendations of the Commission.
5. Section 8 (4) (a) of the Remuneration Act prescribes that the upper limit of the contribution to be made to the pension fund of which a member of the Executive Council or a member of a provincial legislature is a member, shall be determined by the President by proclamation in the Gazette after taking into consideration the recommendations of the Commission.
6. During 2008 the Commission published its Second Major Review Report that dealt with, amongst others, the pension benefits for office-bearers. In relation to members of National Executive, Parliament, Provincial Executive and Provincial Legislatures the following pension contributions were recommended on pensionable salary:
|Employer contribution to retirement||37.0 %|
|Employer contribution to Additional Service Benefit||12.0%|
|Employer contribution to Risk Benefits and Administration expenses||5.5%|
|Total Employer Contribution||54.5%|
7. The remuneration packages in respect of members of Parliament and Provincial Legislatures includes an allocation of 22.5% to fund employer pension benefit contributions and the remaining 32% of the contribution is therefore not part of the total remuneration package. The state contributes cash on an annual basis into the pension fund in respect of members.
8. All members will cease to contribute after 15 years and for younger members, the contribution is maintained by the State until the benefit cap of 92.5% of pensionable salary is fully funded for.
9. This arrangement aims to recognise that many members who were part of the struggle did not have adequate resources set aside for the provision of retirement benefits. This older generation will therefore retire after 15 years on a comprehensive pension benefit.
Legislative Sector Forum Presentation
10. In 2011, the Commission was approached by the Legislative Sector Forum (LSF), with a request to reconsider the 92.5% of maximum benefit cap in terms of the rules of the Fund. The LSF was specifically requesting the Commission to review the method of determining the “Cap”.
11. The LSF submission addressed the challenge faced by Members who were approaching the “benefit cap” or had already reached it. They mentioned that Members over the age of 60 who had in excess of 17 years’ service were particularly at risk of reaching the cap during 2012 (notwithstanding the design to reach the cap after 20 years of service) before the next general elections scheduled to take place in 2014.
12. Many affected members were retiring in advance of the General Election and their services and experience are at risk of being lost. Their proposals were aimed at changing the determination of the benefit cap and hopefully retaining the services of those experienced members.
Commission recommendations on pension benefit of members of Parliament and Legislatures including National and Provincial Executives
13. The Commission recommends that when calculating the value of the benefit cap, the Member’s maximum pension of 92.5% of pensionable salary be capitalised using an annuity which ensures the benefit escalates in line with inflation, and has, included a minimum benefit payment period of 10 years. Based on current market conditions, this has the effect of increasing the value of the cap, meaning that it lessens the chance of a Member’s Current Fund Credit having to be reduced by limiting the value of the Equalisation Reserve payable in respect of each member.
14. This recommendations is furthermore consistent with the principles recommended during the Second Major Review in 2008 by the Commission and does not alter the benefit arrangement payable to the Member. It is also in line with the best practice in retirement industry and its cost does not appear to be insurmountable.
15. The current benefit arrangements for members are extremely generous and this view is informed by the consequence of the shortfall in previous arrangements to deal with the newly elected members following the 1994 election. The benefit arrangements as they stand currently are, in the Commission’s view, inappropriate and unduly generous for newly elected members. The arrangements are also extremely complex and therefore not valued by Members. The Commission believes that a more sustainable, and significantly simpler, and reasonable benefit arrangement is needed for newly elected POBs which should be addressed as part of a further major review.
ONCE-OFF GRATUITY OR EX-GRATIA PAYMENT TO PUBLIC OFFICE-BEARERS
1. Following the publication of the Commission’s recommendations on 17 April 2008, Legislative Sector Forum made representation to the President for the payment of a “once-off gratuity” to a Member of Parliament or Provincial Legislature at the end of a term in the instance where such member is not re-elected following an election.
2. The President forwarded the request to the Commission for consideration. Following a consultation process with the Minister of Finance, the Commission concurred to the payment of “once-off gratuity”. On 15 October 2008 the Commission made a recommendation on the payment of a “once-off gratuity” for a member of Parliament or Provincial Legislature who has served five years or more and whose term of office has ended be entitled to “once-off gratuity” equals to four months pensionable salary for every five years of service or pro rata of the five year period. The Commission’s recommendation was endorsed by the President determinations as published on 12 November 2008.
3. In May 2011, the Commission was again approached by certain stakeholders, this time the Minister of Cogta as well as Salga, for the payment of a similar “once-off gratuity” (although this time it was 3 months pensionable salary) to non-returning Councillors, following 2011 Local Government elections. The gratuity benefit at the time was motivated as remuneration needed by non-returning Councillors to “bridge” their remuneration shortfalls and consequent financial constraints following their non-election, whilst making alternative employment arrangements or waiting for the processing of their retirement benefits.
4. The Commission consulted with various relevant stakeholders and the Commission was assured by the Minister of Finance that such gratuity was affordable, and agreed to the request. On 29 August 2011 the Commission recommended to the President a “once-off gratuity” for non-returning Local Councillors who have served a full term from 01 March 2006 to 18 May 2011 should be paid a once-off gratuity of three months pensionable salary from National Fiscus. The Commission’s recommendation was endorsed by the Minister of Cogta on 06 December 2011. The stakeholders within local government were informed of the payment of once-off gratuity through Departmental circulars dated 17 February 2012 and 27 March 2012.
5. On 15 July 2013 the National Department of Traditional Affairs and National House of Traditional Leaders made the presentation to the Commission on “Ex-gratia” payment for traditional leaders serving in various houses of traditional leaders.
6. Their submission indicated that currently there is no uniformity in respect of the payment of gratuities to traditional leaders serving in the various houses of traditional leaders at the end of their term. Such payments are largely dependent on the discretion of the relevant authority. Furthermore, there have been instances where members would receive “Ex-gratia” payments from both the National and Provincial House of Traditional Leaders.
The Commission recommendations:
7. The Commission at its recent meeting held on the 14 September 2013 resolved that the payment of “once-off gratuity / ex-gratia “ is not a benefit arrangement that should feature as part of its Recommendations. Commission could not at this stage motivate such benefit arrangement as presumably future non-returning public office bearers would ensure, through proper planning, that their financial affairs are in order at the time of their possible non re-election to Parliament, Legislature and National and Provincial House of Traditional Leaders.
8. Whilst a precedent appears to have been established for the payment of “once-off gratuity / ex-gratia” benefits payable to members of Parliament, Legislature and National and Provincial House of Traditional, as well as to Local Government Councillors. Circumstances at the time were different, for example, the retirement arrangements in place for public office bearers in 2008 were substantially different to those in place currently.
9. The Commission could consider such request in future, if properly motivated by stakeholders, and subject to proper and full consultation with the Minister of Finance for purposes of establishing affordability.
The Commission submitted the aforementioned 2013/2014 recommendations to the President and Parliament. Comprehensive information of the recommendations is contained on Government Gazette No. 37177 as published on 18 December 2013. The Gazette is also available online atwww.gpwonline.co.za or remcommission.gov.za.
Statement issued by the The Independent Commission for the Remuneration of Public Office Bearers