‘Salary increase can deplete savings’ – Mayor Sammy Co

City Mayor Samuel Co has expressed serious concern over the impending mandate by the salary standardization law, which will increase the basic pay of government employees by 100% in four years time. As authorized by the salary standardization law, the salary increase of government employees will be implemented in four tranches at 25 percent from July 2010 until July 2014.

Co, League of Cities of the Philippines (LCP) vice-president, said the 122 members of LCP is looking for alternative schemes to cushion the impact of the projected salary increases.

The mayor disclosed that the prescribed rates could pose problems as some cities increase their locally generated income by an average of only 11% per annum.

Co asserted it is possible that any local government will have zero projects as savings will be depleted by salaries, and that funds are channeled to augment the high increases.

It was gathered that to follow the prescribed increase rate, it is important that local government units have the financial capability and resources to pay.

However, the personnel expenses of a particular local government unit (LGU) must not go beyond 45 percent of the Internal Revenue Allotment (IRA) it receives from the national government.

Observers opined that LGU’s should lower personnel services to below 45 percent to be able to implement the salary increase. Some LGU’s, though, find trouble in lowering personnel expenses as some communities demand for more government workforce.

The Salary Standardization Law III was signed into law by former president Gloria Arroyo June last year. Salary increases started in July 2009 covering “everyone in government service,” including teachers in the state universities and colleges.

Effective last July this year, the second round of salary increases for government workers is counted. The increases will benefit more than 1.5 million government employees.

The salary increases are drawing funds generated by the expanded value added tax law (EVAT) which increased the VAT on taxable items to 12 percent.