96% Salary Increase In Value Over Working Life Designed For Goverment Workers

The near 100% increase in value (what the salary can buy) of workers’ salary was probably meant to cater for increased family size of workers, years after entering the job.

Understand how your salary is designed under the Single Spine Salary Structure (SSPS) to meet your future needs.

But does the supposed designed increase reflect the reality?

What is the meaning of Single Spine Salary Structure relativity ratio?

What is the difference between Single Spine Salary Structure relativity ratio and annual salary increases?

The single Spine Salary Structure was introduced and implemented in the year 2010 in Ghana by the Government of Ghana to rectify the discrepancies between the various salary structures that were used in public service. The spirit of the single spine salary structure was to make sure that everyone received equal pay for equal work. The single spine salary structure was designed to capture all public sector workers on to one salary policy or structure. One fundamental actuarial number that was inserted into the salary structure is RELATIVITY RATIO. The relativity ratio that was kept in the salary design is 1.7%.

The salary is designed to compensate for experience gained on the job, reward long service and possibly cater for the growing family of the worker, unlike at the point of entry.

The 1.7% relativity ratio in the single spine salary structure is represented by the term ‘STEPS’. A change in the steps of public sector worker’s salary is simply a 1.7% increase in the salary of such worker. Apart from the monetary gains that accompany an increase in the steps of a worker’s salary, the increase in steps also indicate seniority in public sector workers. In terms of the monetary increase that comes with the annual increase in the workers step (relativity ratio), it is done on a compounding basis. This means every 1.7% increase annually is made to the immediate past year’s salary.

It is worth noting that any worker who works for twenty years, twenty-five years, thirty years, thirty-five years and forty years would have the value of his or her salary increased by 40, 50%, 66%, 80% and 96% respectively, using a compounding rate of 1.7%. That is, working for twenty years, the value of the base pay would become (1+1.7%)^20 = 1.40 and the value of the base salary after forty years would be (1+1.7%)^40 = 1.96. Also, when the 1.7% salary relativity ratio is compounded, the values of entry level salaries after twenty-five years, thirty years and thirty-five years would be (1+1.7%)^25 = 1.50, (1+1.7%)^30 = 1.66 and (1+1.7%)^35 = 1.80 respectively.

The bone of contention is whether the philosophy behind the use of a 1.7% salary relativity ratio in the salary structure, to cater for long service, maintaining and/or increasing the value of the salary from the point of entry, is realistic and/or could be achieved. Ghana is a country where the annual year-on inflation could significantly be more than any annual adjustment the government or employer effects on the salaries of the previous year. Aside from the salary relativity ratio in the public sector salary structure, the employer of the public service, the government, normally negotiates with the country’s Trade Unions Congress (TUC) a percentage increase on the previous year’s salary to cater mainly for inflation and other national indicators. However, these annual percentage increases together with the salary relativity ratio could be significantly less than inflation. This, therefore, would mean that both the annual percentage increases and salary relativity ratio are just nominal (numbers) increases and those two increases do not add any extra value to a person’s existing salary. Individuals’ salaries would increase in figures but may not have the purchasing power to buy goods and services that could be acquired in the past.

A lot of public sector workers know about these two types of increases and so plan with them. However, planning with these two types of increases could be the reason most public service workers become worse off annually. The reason being that while they believe the value of their salary would increase, based on the fact that the nominal amount of salaries paid would increase, the actual value of future salaries (purchasing power) would decrease drastically, due to inflation, even while their family size and needs increase astronomically.

It is an irony that while the family size of a worker increases as well the experience gathered on the job increases, the value of public sector worker’s salary rather decreases, however, not in terms of the nominal amount paid as salary. The only way the purpose for which the Single Spine Salary Structure relativity ratio which was inserted can be achieved would be when the annual salary increases alone, as negotiated by Trade Unions Congress (TUC), is the same or more than reported annual year-on inflation rates.

The implementation of the Single Spine Salary Structure in the year 2010 was met with high hopes of increased living standard after public sector workers endured many years of low salary. The government of Ghana and other international financial Institutions have listed salaries and compensation as a burden on the states budget. The goverment of Ghana has recently announced an intention to review the Single Spine Salary Structure.

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