PERSONNEL EXPENDITURE REVIEW

DEPARTMENT OF PUBLIC SERVICE AND ADMINISTRATION

PERSONNEL EXPENDITURE REVIEW

A FINAL DRAFT

TABLE OF CONTENTS

PREFACE 3

CHAPTER 1: TRENDS IN PUBLIC SERVICE EMPLOYMENT AND COSTS 5

The structure of employment in the Public Service 5

Analysis by sector 6
Analysis by race, gender and age 6

Personnel expenditure in the Public Service 6

Trends in personnel expenditure 6

Personnel expenditure by sector 7
Personnel expenditure by Health and Educator sector by province 7

In conclusion 7

CHAPTER 2: PUBLIC SERVICE SALARIES AND BENEFITS 8

Evaluating past strategies for general salary increases 8

The position of lower graded employees in the Public Service 8
Attraction and retention problems 9

Macro benefits in the Public Service 10

Situation analysis 10
The status of current medical aid and housing assistance 10
The status of the current pension arrangement 11
The status of the outgoing Public Service leave system 11

CHAPTER 3: STRATEGIES TO CONTAIN PERSONNEL COSTS 12

Background 12
The Public Service Wage Policy 12
The Public Service pay progression system 12
The review of a strategy to close the wage gap 13
The restructuring of the Public Service macro benefits 14

The implementation of the new Public Service leave system 14
The review of other macro benefits in the Public Service 14

The review of the medical aid system 14
The review of the housing benefit in the Public Service 15
The review of the pension arrangement in the Public Service 15

Facilitating the transformation and the restructuring of the Public Service 16
The retirement of employees aged 65 and above 17
The review of temporary appointments and non-renewal of expired contracts 18

CHAPTER 4: TRANSFORMING SERVICE DELIVERY 19

General 19

Service delivery innovation 19

Background 19
Best practices 20

Challenges 22

The proposed strategy to deal with employees that are affected by the restructuring process 22

The process 23

In conclusion 25

CHAPTER 5: STRATEGIES FOR KEY SECTORS IN THE PUBLIC SERVICE 26

General 26
The social service clustered 26
The security and defence cluster 27
The infrastructure, agriculture and allied cluster 27

PREFACE

In 1999 the Department of Public Service and Administration conducted a Personnel Expenditure Review (which hereinunder is referred to as PER 1999) with a view to:

Determine and report on the status of personnel expenditure in the Public Service.
Inform recommendations regarding strategies to be adopted to contain or maintain government spending on personnel such that it does not undermine the implementation of reconstruction and development programmes in the medium to long term.

The PER 1999’s main focus was on establishing the status of government expenditure on personnel in relation to other expenditure with a view to identify areas that can be tackled to improve the quality of government spending and ensure that government meets its strategic objectives without being undermined by escalating personnel costs. In this regard, it (PER 1999) highlighted that personnel expenditure has been constantly increasing at a rate of 11.4% per annum or 4% in real terms as a share of total government spending in the 1996/1999 period. This, the PER 1999 alleged, could be blamed on:

The rapid expansion in the use of benefits in the absence of efficient provision systems.
The rationalisation of national and provincial budgets that was not guided by management plans to justify expenditure and the methods used to deliver requisite services.
The strategy to close a wage gap between the highly and the lowly paid.
The system of automatic rank and leg promotions that has not been performance based and only enjoyed by a fraction of personnel in the Public Service.
An increase in the employment of professionals especially in the education and health sectors.
The disproportionate distributions of human resources in State departments leading to redundancy while there are shortages in certain areas.

In the light of the above, the PER 1999 recommended the following strategies:

The annual review of personnel expenditure with a view to track progress and impact of cost containment programmes until it has stabilised.
The development and implementation of the Public Service Wage Policy that defines the broad principles to underpin any of the remuneration-related strategies.
The development and implementation of a national framework that defines the alternative service delivery mechanisms that will improve public service delivery.
The design of sector-specific strategies that will enhance and transform service delivery.
The improvement of personnel management at departmental level.
Improve information on personnel expenditure and human resources.

The aim of this paper is to form a basis for a debate regarding government’s choice of strategies aimed at improving service delivery with a view to ensure a better life for all. In this regard, this paper is divided into 5 Chapters that reflect on:

The Public Service structure, employment trends and personnel expenditure.
The status of current approaches to annual salary increases and macro benefits in the Public Service
Progress achieved in improving the quality of spending and containing personnel costs in the Public Service.
Progress achieved in facilitating the transformation of service delivery.

Each of the Chapters provides an analysis of available data with a view to highlight progress achieved in relation to the implementation of PER 1999’s recommendations.

CHAPTER 1

TRENDS IN PUBLIC SERVICE EMPLOYMENT AND COSTS

The structure of employment in the Public Service

The structure (which explains the skills and the functional distribution of employees) of Public Service employment is, to a greater extent, dependent on the functions that government is expected to perform and the manner in which it decides to deliver these services. Although the classification of sectors has changed, the situation regarding the profile public institutions and their personnel has not registered a significant change (see Table 1.1 below).

For example, major professions in service delivery departments account for two-thirds of employees (nurses in the health sector and educators in the education sector), elementary employees account for two-thirds of employees in the infrastructure and agriculture sectors (which are currently grouped under "General Public Admin" sector.

Analysis by sector

Table 1.1: Employment by sector

Salary Level	Total Employed		Health & Welfare		General Public Admin		Safety & Security		National Defence		ELRC
	1999	2000	1999	2000	1999	2000	1999	2000	1999	2000	1999	2000
	Head count		PERCENTAGE SHARE
1 to 2	208,328	194,693	30.4%	30.2%	58.3%	58.0%	5.4%	5.8%	5.9%	6.0%	0.0%	0.0%
3 to 5	234,197	219,975	32.5%	32.6%	21.5%	21.7%	13.5%	14.4%	17.5%	17.4%	15.0%	13.9%
6 to 8	549,040	544,912	14.8%	15.0%	8.2%	8.9%	21.8%	21.6%	4.1%	4.0%	51.1%	50.5%
9 to 12	75,578	79,705	14.5%	16.9%	13.9%	13.2%	10.9%	9.9%	8.1%	7.8%	52.6%	52.2%
13 to 16	2,790	4,674	18.5%	15.5%	39.3%	43.9%	37.0%	34.8%	5.1%	5.7%	0.1%	0.1%
Total	1,069,933	1,043,959	21.7%	21.7%	21.4%	21.2%	16.1%	16.3%	7.6%	7.5%	33.2%	33.3%

Source: PERSAL data as at 31 December 2000

Table 1.1 highlights that:

There hasn't been any significant change in the structure & profile of the Public Service.
There are slight moves towards increasing managerial capacity while freezing the filling of vacancies at lower levels (1 to 2).
Services departments (health, education and safety & security) still claim more than 65% of highly skilled public servants.
The education sector still makes up a third of the Public Service.
The agriculture and infrastructure sectors still claim more than 61% of elementary workers in the Public Service.

In this regard, the employment structure and profile is associated with the different degrees of labour intensity in each sector.

Analysis by race, gender and age

Whereas the Public Service has been able to reach an even split between females and males, managed a correct representation in respect of race in most occupational groups, there is still poor representation of the female group in the management cadre that is currently dominated by males and whites. This is a reflection of the remnants of the past practices that warrants a concerted effort towards changing mind sets and fast-tracking development programmes with a view to level the playing field for all.

Personnel expenditure in the Public Service

The assessment of personnel expenditure was a response to Cabinet’s request as a reaction to a dramatic increase in personnel expenditure from 36% in 1996 to 51% in 1998/99. This had a major impact on government success to deliver on social programmes and a range of other issues.

Trends in personnel expenditure

Whereas in PER 1999 indications were that the ratio of government spending on personnel to capital or other expenditure was much higher, Personnel expenditure has, since 1999, began to show signs of stability (Table 1.2). It is currently at 49.7% of government non-interest spending.

Table 1.2: Actual personnel expenditure
Financial Year	Actual personnel expenditure(billions)
96/97	R43.9
97/98	R59.3
98/99	R75.6
99/00	R78.9

Source: PERSAL data as at 30 September 2000.

It should be noted, however, that the current perceived stability might not translate into good news. It might be an indication of the results of any of the following:

The current "clean-up exercise" on PERSAL data.
The non-payment of rank and leg promotions.
Loss of about 60 000 employees.

Personnel expenditure by sector

Similar to the display of different employment structures by sectors is a display on different expenditure patterns by same which is related to their respective needs with regard to service delivery methods and requisite skills.

Personnel expenditure in the Health and Educator sector by province

Since the PER 1999, expenditure trends have shown indications of stability or a decrease in personnel expenditure and an increase on other expenditure in large services departments (e.g. health and education – see Table 1.3)

Table 1.3: Ratio of Personnel expenditure to other type of government spending

Province	Education						Health
	99/00 In '000			00/01 In '000			99/00 In '000			00/01 In '000
	Personnel Costs	Other Costs	% Pers of total	Personnel Costs	Other Costs	% Pers of total	Personnel Costs	Other Costs	% Pers of total	Personnel Costs	Other	% Pers of total
KwaZulu Natal	6,721	577	92%	7,345	813	90%	3,332	1,778	65%	3,467	2,248	61%
Eastern Cape	6,487	352	95%	6,673	706	90%	2,407	1,160	67%	2,230	1,149	66%
Mpumalanga	2,587	222	92%	2,654	253	91%	721	426	63%	755	431	64%
Northern Province	5,402	454	92%	5,623	589	91%	1,505	755	67%	1,533	895	63%
North West	3,129	278	92%	3,320	304	92%	988	401	71%	1,107	494	69%
Free State	2,472	314	89%	2,652	421	86%	1,096	508	68%	1,187	642	65%
Western Cape	3,318	517	87%	3,547	531	87%	1,954	1,172	63%	2,092	1,311	61%
Gauteng	5,345	965	85%	5,824	1,012	85%	3,233	2,377	58%	3,599	2,517	59%
Northern Cape	781	115	87%	794	170	82%	269	160	63%	280	147	66%
	36,242	3,794	91%	38,432	4,799	89%	15,505	8,737	64%	16,250	9,834	62%

Source: PERSAL data as on 31 December 2000

With the average of 62% and 89% of total expenditure on personnel expenditure, the health and education sectors seem to be succeeding in reducing personnel expenditure. This, however, must not lead to an assumption that all is well and good in these sectors. Such an assumption can be more appropriate if the results of an investigation on the level and quality of public health and education services in comparison with private health care and education services support it.

In conclusion

In determining the structure and profile of the Public Service, it is necessary for State departments to bear in mind the fiscal and other requisite resources for the delivery on these programmes, the role that can be played by other sectors (e.g. private sector), existing skills levels in the economy, developmental issues as well as the impact that their actions might have on employment levels in the country.

CHAPTER 2

PUBLIC SERVICE SALARIES AND BENEFITS

The absence of a wage policy that forms a basis for strategic decisions regarding general salary increases and strong principles for the provision of macro benefits in the Public Service is largely to blame for the rising salary and benefits costs since 1994.

Evaluating past strategies for general salary increases

In the period 1994 and 1999 there has been dramatic increases in salaries at lower levels, a practice (varied salary increases) that signified attempts at addressing the imbalances of the past while salaries for other salary levels remained unchanged or became eroded.

The varied salary increases, though implemented for a good course, have resulted in a decline in the salaries for professionals leading to attraction and retention problems. In response to this problem, departments embarked on approaches that included effecting upgrades with a view to counter retention problems. This move made departments to shed jobs instead of effecting strategies to improve productivity.

Furthermore, varied salary increases have had a negative impact on the position of lower graded employees in the light of transformation changes that are likely to affect most of them.

The position of lower graded employees in the Public Service

Resulting from the above mentioned varied salary increases by grade, elementary jobs in the Public Service rank in the top quintile for all unskilled employment. This, coupled with slow progress on reforming work organisation and in reforming the labour market, has led to increased disparities with the private sector (see Table 2.1 below).

Table 2.1 Salaries in elementary jobs in the formal sector, 1999
Occupation	Average salary	public service salary – level 2
Cleaner (Pat A1/ Per 18)	1,911	2,117
Labourer (Pat A1/Per 19)	1,941	2,117
Shelf Packer (Pat A3/ Per 16)	1,942	2,117
Teamaker (Pat A2/ Per 17)	1,995	2,117
Night Watchman (Pat A1/ Per 18)	2,085	2,117
Guard (Pat A2/ Per17)	2,222	2,117
Waiter/ Waitress (Pat A2/ Per 17)	2,335	2,117
Messenger (Pat A3/ Per 16)	2,617	2,117
Cook (Pat A3/ Per 16)	2,628	2,117

Source: FSA salary survey (information on the private sector) and PERSAL data on the Public Service data.

In the light of current trends to outsource functions that are not regarded as part of the core functions of State departments, employees in elementary jobs are most likely to be affected by the restructuring processes. Their current position in relation to their counter parts in the labour market may deprive them of chances for absorption by other sectors outside the Public Service, thereby defeating the objectives of one of the strategies to facilitate the restructuring of the Public Service (intersectoral transfers).

Attraction and retention problem

As indicated above, the varied salary increases by grade has also led to erosion of or a decline in the salaries for professionals and senior management (see Table 2.2 below).

Table 2.2: Salary increases in real terms, July 1997 to July 2000
Salary level	Salary to July 1999	Real increase since July 1997
1	22,464	7.70%
2	25,398	3.70%
3	29,172	1.60%
4	34,557	1.60%
5	40,881	1.60%
6	50,610	1.60%
7	63,042	1.60%
8	78,291	0.30%
9	93,924	-1.50%
10	117,234	-2.40%
11	136,767	-2.90%
12	164,607	-3.30%
13	179,919	-9.70%
14	207,249	-11.40%
15	245,898	-13.50%
16	320,286	-13.50%
Total	n.a.	0.50%

Source: PERSAL data

This has had a negative impact on the implementation of programmes in the transformation agenda. Government is currently in need of professionals and senior managers that are technically astute and are capable of negotiating and fostering the establishment of partnerships with a view to drive the transformation agenda. As a first start in the process, a Senior Management Service has been developed and implemented as a strategy to improve the attraction and retention of skilled managers.

Macro Benefits in the Public Service

Situation analysis

In the period 1994 to 1996 indications are that government expenditure on Public Service macro benefits (pensions, medical aid and home owner allowance) have increased from 25% to 35% of total remuneration (please see Table 2.3 below).

Table 2.3. Growth in real terms of expenditure on home-owner allowance and medical aid, and on pensions
Budget Year	Home-owner Allowance and Medical Aid	Pension
(not including SAPS or KZN)
95/96	17%	-7%
96/97	33%	30%
97/98	24%	41%
98/99	7%	-1%
Expenditure in 1998/9	R5,4 bn.	R9,0 bn.
Expenditure in 1999/2000	R5,6 bn	R8,2 bn

Source: PERSAL data

The above dramatic increase has been alleged to result from an increase in the take-up flowing from the incorporation of the former public services into a single Public Service as dictated by the Constitution and inefficiencies in the medical and housing schemes. The inefficiencies in the schemes are said to result from the fact that public servants have to individually negotiate with relevant service providers, a practice that deprives the Public Service an opportunity to utilise its collective market power with a view to obtain better deals.

The status of current medical aid and housing assistance

Despite the substantial growth, benefits such as medical aid and home owner allowance, are skewed towards employees in higher salary levels (see Table 2.4 below), urban areas and non-African employees and subsequently benefits only a third on public servants. This causes equity and affordability problems in the light of constitutional dictates for equitable and affordable systems.

Table 2.4. Major occupational groupings in the public service, 1999
Occupational grouping	Total employment
	(thousands)	% share of total public service employment	Average no. employees per sub-occupation	average salary level	Average monthly salary	Average monthly package	Benefits as % of package
major professions	671	61%	83,890	6.3	4,500	5,700	27%
Elementary	212	19%	8,500	2.1	2,100	2,700	26%
Administration	105	9%	3,600	6	4,200	5,400	27%
skilled production	62	6%	1,000	3.8	2,800	3,600	30%
small professions	49	4%	300	6.6	4,800	6,200	29%
Management	13	1%	n.a.	11.8	13,300	18,100	37%
Total	1,105	100%	3,700	5.4	3,700	4,800	28%

Source: PERSAL data as in December 1999

The status of the current pension arrangement

Despite the fact that it is accessible to all public servants, the current pension system on the other side is also still inefficient in that it leads to both higher costs and inappropriate incentives. For example:

The police, defence and correctional services continue to receive 20% more benefits than other public servants resulting in an additional R1 bn to government costs.
The pension increase for employees with over ten years of service may have become inappropriate in the light of trends in sectors outside the Public Service.
The current contribution rate by the employer is higher than for the average private employer.

The status of the outgoing Public Service leave arrangement

The outgoing leave arrangement had loopholes that encouraged a perverse practice of accumulating unlimited leave credits with a view to cash-out at termination of service or retirement (see Table 2.5) and the "use it or loose" approach in respect of sick leave.

Table 2.5: Leave gratuities paid
Budget Year	Amount paid ( millions)
97/98	R151.8
98/99	R269.1
99/00	R334.5

Source: PERSAL data
CHAPTER 3

STRATEGIES TO CONTAIN PERSONNEL COSTS

Background

The PER 1999 cited the ineffective system for providing pay progression in the Public Service, the strategies for closing the wage gap between the highly and the lowly paid employees and an increase in the take up of Public Service macro benefits as a main cause for escalating personnel costs. In this regard, a Public Service Wage Policy, as recommended by the PER 1999, provides for a basis for the institution of equitable and affordable systems with a view to contain and maintain personnel costs without a negative impact on the employment levels and service delivery.

The Public Service Wage Policy

The wage policy as a basis for affordable systems seeks to improved quality of spending and hence it talks to the following:

The review of the Public Service pay progression system.
The restructuring of the Public Service macro benefits with a view to institute equitable and affordable systems.
The need to facilitate the restructuring of the Public Service with a view to release resources for service delivery.
The need to retire employees that are over 65 years of age
The move towards the non-renewal of expired contracts.

The Public Service pay progression system

The Public Service has, since 1997, extended the rank and leg promotions to most of the occupational groups but with the exclusion of the educator sector personnel that account for at least one-third of the Public Service employees.

Although the system was developed with a view to retain professionals and some of the skilled employees, it has been unable to ensure sustainable and improved individual and organisational performance mainly because it was not supported by a performance management system and the fact that its focus was on recognising the length of an employee’s service. In this regard, it had led to long-term liabilities for the employer since the promotions had carry-through cost implications even during periods when the employee’s performance levels had changed. Furthermore, the fact that it excluded the educators worsened the situation in that it created a rift among the employees employed in different sectors.

To counter the above mentioned implications, an agreement was been concluded regarding the scrapping of the rank and leg promotion system with a view to investigate and implement a pay progression system that will be supported by an effective performance management system no later than 1 July 2001. The principles to underpin the development of a new system are flexibility, affordability and sustainability.

The review of a strategy to close the wage gap

As indicated earlier, the strategy to close the wage gap between the highly and the lowly paid has not yielded some positive result in improving service delivery. The strategy has not led to improved productivity and has, subsequently, made the quality of government spending to be questionable in this regard.

In the light of the above, government has implemented a strategy that will improve the quality of spending by replacing the varied salary increases that favour employees in elementary jobs for strategies that assist in attracting and retaining professionals.

This strategy (as contained in the Public Service Wage Policy) talks to the discontinuation of the varied salary increases where the largest percentage increase was for employees in lower salary levels. The implementation of the said strategy is evident in the 2000/2001 general salary increases (please see Table 3.1 below).

Table 3.1: General Salary Increases for 2000/2001
SALARY LEVEL	1999/2000 SALARY	2000/2001 SALARY	% INCREASE	REAL % INCREASE
1	22,464.00	24,036.00	7.00%	1.10%
2	25,398.00	27,174.00	7.00%	1.10%
3	29,172.00	31,212.00	7.00%	1.10%
4	34,557.00	36,801.00	6.50%	0.60%
5	40,881.00	43,536.00	6.50%	0.60%
6	50,610.00	53,898.00	6.50%	0.60%
7	63,042.00	67,137.00	6.50%	0.60%
8	78,291.00	83,379.00	6.50%	0.60%
9	93,924.00	99,558.00	6.00%	0.10%
10	117,234.00	124,266.00	6.00%	0.10%
11	136,767.00	144,972.00	6.00%	0.10%
12	164,607.00	174,483.00	6.00%	0.10%
PROF. 13	187,113.00	198,339.00	6.00%	0.10%
PROF. 14	215,538.00	228,468.00	6.00%	0.10%

Source: PERSAL data.

To provide a balance between the Public Service’s need for professionals and senior managers with a view to fast track the development and implement programmes on the transformation agenda and the reality regarding a decline in the need for elementary workers in certain instances, there is a dire need for a strong collaboration between partners to ensure the success of the moves.

The restructuring of Public Service macro benefits

In the light of equity, efficiency and affordability problems associated with the current systems for providing medical aid, housing and accommodation assistance, pension and leave arrangements, a collective agreement was concluded to facilitate a search for equitable and affordable options with regard to medical aid, housing, accommodation and pension arrangement in the Public Service as well as the implementation of the new Public Service leave system. For governance purposes, the agreement provides, in this regard, for the establishment of task teams that are comprised of representatives from both the employer and the organised labour’s side.

The implementation of the new Public Service Leave System

The new Public Service leave system (implemented from 1 July 2000) aims at eradicating the

To eradicate the problems of the perverse incentives mentioned above, the new leave system provides for:

The alignment of the Public Service leave system with the provisions of the Basic Conditions of Employment Act, 1997.
The introduction of a four-calendar-months’ maternity, family responsibility, adoption and disability management leaves.
The discontinuation with the system of unlimited accumulation of annual leave credits.

The results of implementing the new system are expected to show positive results in a year’s time.

The review of other macro benefits in the Public Service

In response to a need to review the manner in which the macro benefits in the Public Service are packaged and structured, the employer and employee representatives admitted in the Public Service Co-ordinating Bargaining Council concluded an agreement (PSCBC Resolution 7 of 2000) that provides for the establishment of task teams to review the Public Service systems for providing housing, medical aid and pension benefits to public servants. This Resolution provides terms of reference for and objectives of the process to be followed.

The review of the medical aid system

Objectives of the review process include investigations on:

The feasibility of introducing the use of collective purchasing power with a view to leverage better deals for public servants.
The impact of extending medical aid cover to all that are in the employ of the state.
Best practices on ensuring the institution of mechanisms for proper control and effective management of costs for both the employer and employees.
The feasibility of capping the current employer contribution amount or de-linking the determination thereof from the medical inflation index.
The accreditation of medical aid schemes to ensure the utilisation of schemes that provide for the treatment of public servants and their dependants that are affected by HIV/AIDS.
How the medical aid arrangement in the Public Service can help in strengthening the public health system.
The post-retirement medical aid benefits.

NBC has been commissioned to conduct an investigation in this regard. The results of the investigation are expected in December 2001.

The review of the housing benefit in the Public Service

This process include investigations on:

The impact of extending access to all that are in the employ of the state.
Mechanisms to address the needs of the lower graded employees and employees residing in rural areas.
The feasibility of accessing employees' actuarial interest as collateral.
The feasibility of using the housing benefit as a strategy to attract and retain skilled personnel in rural areas.
The feasibility of using the employers' collective bargaining power with financial institutions for a better deal.

The task team has agreed to hold a "Housing Indaba" with a view to solicit and share information with a view to inform the development of options for consideration.

The review of the pension arrangement in the Public Service

This process include investigations on:

Advantages and disadvantages of current defined benefit system in relation to a pay-as-you-go and other systems.
The use of the employees' actuarial interest in the pension fund as collateral.
A reduction of the current employer contribution with a view to release resources for other government programmes in the Public Service (e.g. orphans and spouses benefits).
A feasibility of buying back pensions at favourable rates for those who were previously denied admission to the pension fund in terms of the previous frameworks.

Cabinet has been approached with proposals on the introduction of orphans' pension in the event of the demise of a member as well as the remaining spouse and Funeral cover for members, spouses/life partners and dependant children.

Facilitating the transformation and the restructuring of the Public Service

Government has, through innovative practices, to facilitate the transformation or improvement of service delivery in the country at minimum cost for the tax payer. This could only be achieved through the utilisation of innovative practices that require the review of existing methods of delivering public services with a view to optimise the utilisation of resources and improve the quality of spending.

The review of service delivery methods warrants a look at how best State departments can be structured for purposes of improving service delivery. The review of structures has an obvious impact on existing human resources which, when not well managed, can thwart the good intentions of the restructuring process.

In the light of the above, it is imperative for government and related partners to have a common understanding of issues that need to be taken into consideration during the restructuring process, hence a need for a debate and consensus on:

A framework with which to guide the restructuring process. This should define the relevant process, roles and responsibilities of each partner.
A mechanism on how to manage resources that are affected by the restructuring process.
A strategy to facilitate provide assistance to employees exiting the government service while minimising any possible negative impact on the economy and the relationship between government and the general public.

Regarding the urgency for a mechanism with which to manage employees that have been affected by the restructuring process or to provide assistance to employees exiting the government service, government and employee organisations have concluded a Framework Agreement on restructuring the Public Service and a proposal on how to give effect to the Framework Agreement has been tabled at PSCBC for negotiations.

The retirement of employees aged 65 and above

Cited as on of the short-term mechanism to facilitate the right-sizing of the Public Service is a need to retire employees aged 65 and above. This section is an overview of progress achieved in implementing the recommendations of the PER 1999. Table 3.2 is testimony to the progress achieved to date.

Table 3.2: Perm: Number Of Public Servants Aged 65 & Above
Provincial Administration	1999/2000	2000/2001	% Reduction
Eastern Cape	1,105	459	58%
National Departments	425	137	68%
Gauteng	295	118	60%
KwaZulu-Natal	224	123	45%
Northern Province	209	80	62%
Free Sate	119	53	56%
Western Cape	77	8	90%
North West	56	44	21%
Mpumalanga	55	60	-9%
Northern Cape	13	3	77%
TOTAL	2578	1085	57.9%

Source: Vulindlela Report as at 30 September 2000

Notwithstanding the progress achieved, there has been slow progress in some provinces or departments. This could be attributed to the issue of:

Employees who are holding strategic or critical positions and in respect of whom replacements are hard to get. Examples in this regard include replacements for employees employed in medical science, engineering, artisan and administrative fields.
Employees who, in terms of their previous membership to the Temporary Employees Pension Fund, has a right to retire when they turn 70 years of age.
The slow progress in implementing the PSCBC Resolution 7 of 1998 in respect of employees who were refused membership to any pension fund.
The manner in which some state departments/institutions are structured and poor information management systems.

In the light of the above problems, there is a need for an agreed position between partners on how to deal with the issue without any disruption of service delivery and the relationships between labour and government.

The Review of temporary appointments and Non-renewal of expired contracts

The purpose of the review of contract and temporary appointments was to identify and not to renew appointments in respect of persons occupying positions that not critical for service delivery.

Table 3.3 displays the current status in respect of the number and costs in respect of employees on contract and temporary appointments.

Table 3.3: Contract & Temporary Appointments By Occupation Group

	Contract		Temporary
Major Occupational Group	Head Count	Costs (Rmillions)	Head Count	Costs (R millions)
ELEMENTARY OCCUPATIONS	1535	41.4	5232	142.5
ADMIN OFFICE WORKERS	1174	47.3	1583	60
PROFESSIONALS & MANAGERS	4083	328	3656	314
TECHNICAL & ASSOCIATED JOBS	219	9.3	73	4
SERVICE JOBS	48	1.5	39	1.5
SOC, NAT, TECH & MED SCIENCE	1203	44.3	885	36.6
CRAFT-RELATED JOBS	60	2.6	65	3.3
DRIVER OPERATOR: SHIPS	63	1.9	126	4
SECURITY & CUSTODIAN	28	2	1	0.04
IT PERSONNEL & OTHER OCCUPATIONS	616	30.9	192	8.3

Source: PERSAL data.

The challenge in this regard, is collaboration with labour, to strike a balance between temporary and contract appointments that must be retained and those that need to be discontinued.

To facilitate a debate in this regard, there is a need to see whether most of the temporary and contract appointments are located (see Table 3.5).

Table 3.5: *Contract & Temporary Appointments By Sector*
	Contract		Temporary
	Head Count	Cost (Millions)	Head Count	Cost (Millions)
CORE CIVIL SERVICE	240	27.4	66	3.2
CRIMINAL JUSTICE	128	8.6	382	13.8
ECONOMIC SERVICES	3147	116.0	508	22.7
INFRASTRUCTURE	3257	122.2	259	9.16
SOCIAL SERVICES	8430	413.4	10888	537.4
OTHER	99	10.3	4	288

Source: PERSAL data.

It should be noted, however, that there hasn’t been any initiative to focus on the review of contract and temporary appointments.

CHAPTER 4

TRANSFORMING SERVICE DELIVERY

General

This Chapter looks at the various mechanisms adopted in the Public Service to accelerate and improve service delivery and to ensure a responsive and affordable Public Service. It highlights the various initiatives and challenges met in the process and makes suggestions on the way forward. The Chapter emphasises that:

Government has to explore and utilise innovative mechanisms of provision to ensure that the public gets better services;
The desirability and feasibility of different innovative service delivery mechanisms depend on the contextual realities that obtain and that as a result innovation should be informed by a careful analysis of its applicability to the given context; and
There should be sound labour practices that guide the process of dealing with human resources where these are affected by the introduction of innovation.

Service Delivery Innovation

Background

The public service in South Africa is engaged in restructuring efforts while at the same time facing immense pressures of providing quality services. Some of these pressures are largely attributable to the huge historical backlogs that obtain in certain communities while others are just a result of the scale of the demands being placed on government’s provision of services. There is increasing recognition that if government is to enhance its capacity to deal with these pressures, it would need to consider innovative ways of providing services. Efforts to restructure the public service are thus driven by the need to have in place organisational configurations, systems and service models and processes which will better position the public service to deliver quality services to the public.

A further pressure is that of ensuring that such restructuring not only leads to better and quality public services but that it also reflects the democratic values enshrined in the constitution. Therefore, given all these considerations, it becomes clear that with our restructuring efforts, many issues are at stake, ranging from effectiveness, efficiency, equity, political responsiveness, accountability, representivity, transparency, customer orientation etc. The need to deliver quality and equitable services now, and in excess of the objective capacity limits of the public service, is the context in which the government is championing the issues of innovation, partnerships and electronic governance. Together, in conjunction with other proposed organisational and management reforms, it is envisaged that these concepts will help us deal with the immense service delivery challenges facing government.

A number of government departments are already embarking on different forms of innovation, guided by the need to provide quality and accessible services to the public. However, it is important to note that what is innovative, effective and cost-effective depends on the contextual peculiarities of individual sectors, departments and regions. What makes sense as an innovative mechanism for the social services sector may thus not be applicable to the economic services sector. In the same vein, a desirable and feasible mechanism for improving service delivery in one province may not be a good idea at all for another province.

What government is therefore prioritising is firstly raising levels of awareness around and promoting the use of such creative ways of providing services, and secondly providing a conducive management and administrative environment in which the different sectors, departments and regions can find the space to utilise whatever mechanisms of improving service delivery they find appropriate, as long as the public interest is protected and the mechanisms are pursued in an appropriate and accountable manner.

Best practices

Experiences in the country and elsewhere indicate that such mechanisms can include:

Establishing new forms of collaboration between departments. Such collaboration can take the form of a pulling together of resources between departments whose services share specific interfaces. It could also take the form of shared services centres, whereby departments centralise selected business units for purposes of improved effectiveness, efficiency and ease of access by the public and.

The Gauteng Provincial Administration through Project Imbumba, also known as the Gauteng Shared Services Project is already exploring this arrangement. Inter-departmental collaboration could also take the form of one-stop/multi-purpose centres whereby a number of departments provide services to the public within one physical structure. In the Northern Cape, for instance, the Provincial Government is already operating a number of such centres where the public can, for instance, apply for welfare grants and identity documents, pay for municipal services, access professional social counselling, and make UIF-related enquiries within one building. Apart from the convenience of accessing the services in one place, the physical structures in the N Cape are also located in the townships, which means that residents do not have to travel to town for these.

Negotiating partnering arrangements with other levels of government and the private and non-profit sectors. The partnerships may take forms which are both formal and informal. They could be advisory arrangements, support-sharing arrangements, operational or work-sharing arrangements, and collaborative or decision-making arrangements. Many of these collaborative arrangements already exists in the current dispensation. Nedlac offers one example where there is shared decision-making between government, organised business and labour in regard to labour and economic development.

However, partnering could also involve contracting a non-government entity to deliver specific services on behalf of government and for a particular period. It is a mechanism premised on the notion that some non-government entities may be able to render some services more effectively and efficiently than the public service. The development of capital infrastructure such as buildings, roads and dams can be achieved through such arrangements.

Introducing Mobile Service delivery whereby services can be taken closer to the public for easy access: This has been used particularly by the Health Department to offer health services where access has not been easy. Vehicles are utilised to render a service in distant and remote areas.

Establishing Public Agencies with varying degrees of autonomy and distance from the Public Service. Some of these may be run on commercial principles whilst delivering specific services. There already exists some entities of this nature in the public service. The South African National Roads Agency is one example.

Establishing employee owned companies: In order to empower employees who would otherwise be under-utilised, this mechanism seeks to create an arrangement between Government and an employee or group of employees to contract delivery of some service(s) to a government department. This is based on an agreed upon period during which the employee company takes over the service delivery process at an agreed price and interest rate. Government is currently exploring the feasibility of establishing Regional Empowerment Companies which will involve ownership by employees and which may initially enjoy preferential tendering arrangements with government up to a point where they are well established and capable of operating alongside private sector lines.

Exploring creative resourcing strategies to better utilise the existing skills base and skills synergies.

Exploiting opportunities availed by appropriate forms of technology. Such technological forms can facilitate the modernisation of service delivery, promoting better and timely forms of collecting public opinion on policies and service delivery as well as better mechanisms of procurement. The Department of Water Affairs has already embarked on a process of exploiting technology to improve their water management processes. The idea is to use technological systems to manage the registration of all significant water users, and to license the use of water in such areas where the resource is deemed to be under stress. In the same vein, technology is also being used to classify water resources as well as to determine and monitor reserves.

The above is neither an exhaustive list of possible mechanisms nor a prescribed recipe which all sections of government will be expected to adopt. The key point to emphasise is that none of them can be viewed as a universal solution that transcends contextual conditions. The issue of sectoral or geographical context is very key to assessing the merits and demerits of each of the mechanisms. It is therefore important to ensure that specific mechanisms are not just adopted or written off simply because they have succeeded or failed in certain contexts. It is crucial to state that they must at all times be subjected to stringent review and evaluation processes. They should be used on the basis of sound and clear principles based on the key strategic priorities of Government and values of a democratic state.

As pointed out above, a number of government departments are already piloting some of these service delivery mechanisms. Most of these are still taking root and will be carefully monitored and evaluated to determine progress. Some of the challenges encountered include are listed below.

Challenges

Most of the above initiatives were confronted by challenges that related to:

Employee relations in the absence of a national framework to guide the management of redundancy and exits resulting from the implementation of programmes.

Inflexible regulatory provisions such as the tendering procedures.

The employees who are displaced by the process are employees in elementary jobs who cannot find alternative jobs elsewhere in the labour market thereby adding to the country’s unemployment rate.
The impact of the HIV/AIDS pandemic especially in the sectors that have been identified as most vulnerable if there are no proper responses that have been identified for countering the impact.
The lack of a national framework to guide the restructuring process in the Public Service.

The proposed strategy to deal with employees that are affected by the restructuring process

Given the above considerations, a proposal on a national framework (defining a process to be followed) has been tabled at PSCBC for negotiations. This framework will guide departments in dealing with the human resource implications of restructuring. The objective of this set of procedures is:

To establish the optimum level of staffing per department in order to provide an effective and efficient service within approved departmental plans.

To provide a transparent procedure for the effective utilisation of personnel, together with redistribution and redeployment where necessary.

To provide alternatives in addressing the question of displaced employees.

These procedures are informed by the following fundamental principles:

All employees who are affected by the restructuring process will be treated fairly and in terms of relevant legislation and collective agreements.
All avenues should be explored to ensure the continued employment in the Public Service of employees who are classified as in excess in terms of these procedures.

The redeployment of employees declared in excess in the process of restructuring is compulsory. Employees who occupy posts, which are classified as in excess in a department, are not automatically redundant.

The process

In restructuring state institutions/departments, the employer will be guided by:-

Affirmative action measures for designated groups, including the requirements of the Employment Equity Act, namely Blacks (which include Indians, Coloureds and Africans), women and disabled employees; and
representivity.

The process must be undertaken in terms of the Strategic Business Plan of a department. Linked to these plans, departments must develop a human resource plan that must be in compliance with the requirements in Part III D of Chapter 1 of the Public Service Regulations.

In terms of the implementation, the following would need to be done:

Conduct an analysis of all staff members’ skills/competencies, leading to a compilation of employees’ profiles

Requirements per post must be developed and clearly stated. These must be based on the departments’ organogram for the year in question.

Employee’s profiles must be matched against the requirements of the posts and appropriately placed.

If one or more employees are contesting a post, given the fact that all of them are suitable candidates, the principle of seniority shall apply i.e. the employee with the most number of years of continuous service shall be assigned the post.

An internal/departmental committee (which should include trade union representatives as observers) is established to oversee the process of matching, placement and dealing with any disputes at that level.

Before declaring an employee in excess i.e. an employee who cannot be accommodated within the department concerned, Heads of Departments must consider the following:-

The possibility of training to meet the requirements of a vacant post;

Vacancies that will exist in the near future (not longer than 6 months), i.e. vacancies arising as a result of retirement, boarding, resignation, promotion and employer initiated discharges where the date of exit is known;
The views of employees as expressed at various levels through a formal process/meeting.
Natural attrition rate of the department.

A Departmental redeployment list must be developed by every department citing the particulars of the employees in excess.

Parallel to the process of developing provincial/national redeployment lists, provincial/national vacancy lists (database) must be developed.

All employees must be informed in writing once they are declared in excess. Employees must also be informed of the process to be followed in attempting to suitably accommodate them within the Public Service. These employees must be encouraged to participate in the redeployment process.

An Inter-Departmental Co-ordinating Committee (IDCC) will be responsible for co-ordinating and facilitating the redeployment process between departments with the trade union representatives acting as observers. Two options can be followed in the redeployment process: The IDCC (with union representatives as observers) matches employees with vacant posts based on their profiles and the requirements of the posts; or all vacancies are advertised in "closed vacancy lists", i.e. only employees declared in excess may apply and a normal shortlisting process and selection will be followed (with union representatives as observers).

In the process of filling vacancies from the redeployment lists, departments must consider the possibility of placement with training needs in mind, i.e. taking into account the potential of the employee.

The employer may introduce measures to promote restructuring process by:-

allowing employees to retire early;
implementing a mutually accepted Severance Package;
creating shared posts.

The above measures will run concurrently with the redeployment process for as long as they are valid and will be regulated separately from these measures.

Redeployment of employees in excess is compulsory. Subject to due processes, employees who unreasonably refuse to be redeployed are not entitled to severance pay and are deemed to have resigned with effect from a date to be determined by the relevant Head of Department.

An employee, declared in excess in terms of this process, who cannot be redeployed due to no fault of his/hers, shall be held in excess of his/her present staff establishment until s/he can be suitably redeployed or an alternate mechanism is established to manage the process. During the period of being held in excess:-

all avenues should be explored by the employer and the employee concerned to find suitable permanent placement; and
the employee shall be optimally utilised within the department.

In conclusion

The issues set out in this Chapter are premised on the belief that all those involved in the public sector, in spite of their differences, seek to ensure a quality life for all citizens, particularly those historically disadvantaged. Innovation poses a challenge to how the public, labour and government should engage with each other on matters of public service restructuring. This interaction should be guided by the fundamental need to provide quality services to the public whilst ensuring that there are sound and accountable processes and procedures used. The restructuring process requires that workers be aware of the immense skills challenges and work organisation challenges posed by these imperatives.

In some instances, these service delivery challenges may require that workers undergo re-skilling processes, or be transferred from areas of relative surplus to those of relative shortage, or be transferred from a government department to a Public Entity, or be given a new set of responsibilities with accompanying changes in the conditions of service, or where necessary, exit the employ of the public service. In addition, it would be important for roleplayers such as organised labour to partner with government to build a new work ethos of commitment as well as sound ethical conduct, so that the restructuring also finds expression in how people conduct themselves and handle their responsibilities on a day to day basis, and how they view their role in protecting the public interest and putting people first.

CHAPTER 5

STRATEGIES FOR KEY SECTORS IN THE PUBLIC SERVICE

General

As indicted in Chapter 1, the structure employment and expenditure trends differ from one sector to the other mainly because on their different needs regarding type of skills and degrees of labour intensity. This warrants the realisation of the different circumstances in which the different sectors in the Public Service operate.

The security, criminal justice and the social services clusters for example are all referred to as "service delivery departments and in the same Public Service but have different needs and subsequently require different strategies to facilitate the transformation of service delivery. This is based on a premise that uniform strategies have been found to be ineffective, hence a need for varied approaches to improved service delivery.

The social service cluster

This cluster comprises of the education, health and welfare departments. Because of the fact that departments in this cluster are labour intensive and at least 60% of their employees are professionals, they spend more than half of their budgets on personnel except for the welfare departments whose budget goes largely to social grants.

Since education and health are regarded as a basic need, it will be virtually impossible and uneconomical to deliver these services on a large scale and in an equitable manner outside the Public Service.

To ensure the sustainable high quality and standard of services rendered it is important for the departments in this cluster to employ professionals. In this regard, the main cost driver in personnel expenditure is the number and the frequency of upgrades that are effected in response to a need to retain skilled employees.

In the light of the above, this cluster seems to have a limited scope for containing personnel costs through reductions in numbers but improvements can be achieved through the correct redistribution of employees even to areas that have been isolated.

The health division in the sector on the other hand is faced with a challenge similar to that of education. It needs to move health personnel even to rural areas in provinces. There is an increasing need for strategies to attract and retain professionals even to rural areas.

The security and defence clusters

The security cluster like the social service cluster is also labour intensive except for the defence that currently operates in a low-threat environment. In this regard the two require different strategies if they are to reform their service delivery. The security cluster need to release all the trained police men and women who are currently utilised in other areas save for the police work in the street with a view to reinforce the teams that are combating crime in the street.

Furthermore, the two clusters need to encourage natural attrition at lower levels in order to revitalise and improve skills levels at entry level. Both these clusters are faced with a challenge to reduce personnel costs if there are to meet their operational requirements. One of the target areas is the cost of medical benefits that has been heavily subsidised and the pay progression system that has added a substantial burden on personnel costs.

The department of Justice, as one of the departments in the security cluster, is faced with a great challenge because of its nature of work. The bulk of its employees are professionals. In this regard, there is a need for strategies to attract and retain these professionals without having a negative impact on personnel costs and subsequently service delivery.

Strategies that are relevant for this cluster include the redeployment of excess personnel to other sectors, encouragement of natural attrition at lower levels and the introduction of appropriate incentives with a view to retain skilled personnel.

The infrastructure, agriculture and allied clusters

Both these clusters are labour intensive but the difference between them and the social services cluster is the skills levels required. Two thirds of the employees in these clusters are unskilled (salary levels 1 and 2) and these are located in the former homelands where they are engaged in direct production services.

Where the infrastructure cluster see outsourcing as a major solution to their personnel cost problem, the agriculture and allied cluster foresees a fundamental change in its function where there is a possibility of eliminating the employment of elementary workers altogether.

Although for the infrastructure outsourcing seems a major solution, the Department of Water Affairs and Forestry has found that the problem of varied salary increases for these grades is a major hurdle when the transfers to the private sector are effected.

Since most of the employees in the agriculture and allied cluster are located in the provinces, it is important to consider the impact of the strategy to be effected on the economy of that region. In this regard, strategies that are to be effected should ensure regional economic development.