THE UNITED REPUBLIC OF TANZANIA

PRESIDENT’S OFFICE
PUBLIC SERVICE MANAGEMENT

PUBLIC SERVICE PAY AND INCENTIVE POLICY

October 2010
 TABLE OF CONTENTS
Pg
LIST OF ABBREVIATIONS .................................................................................... III
GLOSSARY .................................................................................................................. V
FOREWORD ........................................................................................................... VIII
CHAPTER 1................................................................................................................. 1
1.0 INTRODUCTION................................................................................... 1
1.1 Background ....................................................................................... 1
1.2 Implementation of the Pay Reform ................................................. 2
1.3 The Medium Term Pay Policy ........................................................... 2
1.4 The Medium Term Pay Strategy....................................................... 5
CHAPTER 2................................................................................................................. 7
2.0 SITUATIONAL ANALYSIS ...................................................................... 7
2.1 Ensuring competitive pay in the public service ............................... 8
2.2 Ensuring equal pay for equal value of work across the public
service 9
2.3 Increasing trend of allowances in the public service ....................... 9
2.4 Towards total reward in the public service.................................... 10
2.5 Staffing problem in some LGAs ...................................................... 11
2.6 Decentralising and management of HR and accountability .......... 11
2.7 Improving productivity as a strategy to enhance pay ................... 12
CHAPTER 3............................................................................................................... 14
3.0 RATIONALE, OBJECTIVE AND SCOPE .................................................. 14
3.1 RATIONALE ..................................................................................... 14
3.2 OBJECTIVE ....................................................................................... 16
3.3 SCOPE ............................................................................................. 16
CHAPTER 4............................................................................................................... 17
4.0 ISSUES, OBJECTIVES AND STATETEMENTS.......................................... 17
4.1 Competitiveness of the public service pay .................................... 17
4.2 Pay across the public service.......................................................... 17
4.3 Service Delivery in LGAs ................................................................. 19
4.4 Towards total rewards regime ....................................................... 19
4.5 Allowances ...................................................................................... 20
4.6 HR management and accountability .............................................. 21
4.7 Remuneration and productivity ..................................................... 22
CHAPTER 5............................................................................................................... 24
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5.0 The LEGAL AND INSTITUTIONAL FRAMEWORK................................... 24
5.1 Legal Framework ....................................................................................... 24
5.2 Institutional Arrangement ......................................................................... 24
5.2.1 President’s Office, Public Service Management: ........................... 24
5.2.2 Prime Minister’s Office, Regional Administration and Local
Government ................................................................................................. 25
5.2.3 Ministry Of Finance and Economic Affairs: .................................... 26
5.2.4 Public Service Productivity and Remuneration Board: .................. 26
CHAPTER 6............................................................................................................... 28
6.0 CONCLUSION .................................................................................... 28

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 LIST OF ABBREVIATIONS

CG - Central Government
CPs - Cooperating Partners
D by D - Decentralisation by Devolution
EAL - Employment Allowances
EAs - Executive Agencies
GDP - Gross Domestic Product
GDR - Government Domestic Revenue
HR - Human Resources
HRM - Human Resources Management
JERG - Job Evaluation and Re-grading
LCC - Local Cost Compensation
LGAs - Local Government Authorities
LGRP - Local Government Reform Programme
M&E - Monitoring and Evaluation
MDAs - Ministry, Departments and Agencies
MDGs - Millennium Development Goals
MFIs - Multilateral Financial Institutions
MKUKUTA - Mkakati wa Kukuza Uchumi na Kupunguza
Umaskini Tanzania
MoEVT - Ministry of Education and Vocational Training
MoFEA - Ministry of Finance and Economic Affairs
MoHSW - Ministry of Health and Social Welfare
MTEF - Medium Term Expenditure Framework
MTPP - Medium Term Pay Policy
MTPRS - Medium Term Pay Reform Strategy
OC - Other Charges
PE - Personnel Emoluments
PIs - Public Institutions
PMO-RALG - Prime Minister’s Office – Regional Administration and
Local Government
PO-PSM - President’s Office - Public Service Management
PSA - Public Service Act
PSM - Public Service Management
PSRP - Public Service Reform Programme
RE - Recurrent Expenditure

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SASE - Selective Accelerated Salary Enhancement
ToR - Terms of Reference
URT - United Republic of Tanzania
WB - Wage Bill

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 GLOSSARY

Grade Differential Salary difference between one grade and

another.

Incentive Extra payment or other reward in addition to the basic salary

made by the employer. It is paid/given to motivate an employee to
deliver services effectively and efficiently.

Incentive regime A system of packages from which incentives are

administered.

Job Evaluation A Management technique that is used to

establish relative value of different jobs in an organisation for the
purpose of ensuring that every job is paid according to its weight and
relative value.

Motivation Anything given or done to raise an employee’s morale.

This can be financial, material, verbal or written congratulations.
Motivation is usually effected following an employee’s best performance.

Non-Incidental Allowances Allowances that are paid on regular

basis.

Pay An amount of money paid on a regular basis to people in

regular employment. Payment may be in the form of wages or a salary,
in cash or by cheque or by bank transfer.

Pay Targets Salaries that the Government aims to achieve over the
medium term period.

Pension Money paid periodically to an individual who retires from

employment because of age, disability, or completion of a specified
period of service.

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Project Implementation Units All special staffing arrangements
made in institutions to manage and implement donor-funded
programmes/projects.

Re-grading A system of grading job positions in a salary structure.

It is mainly done after the exercise of Job Evaluation for the purpose of
ensuring that different posts are positioned in the correct salary grades
according to their job weight.

Remuneration The entire package of an employee’s earnings.

Generally, it includes a basic salary, bonuses, allowances, incentives,
motivation, pension, health Insurance, etc.

Remuneration Boards and Authorities Statutory bodies established

to administer remuneration packages.

Salary A fixed regular payment, typically paid on a monthly basis

but often expressed as an annual sum.

Selective Accelerated Salary Enhancement Scheme A scheme that

targets accelerated salary enhancement to key professional, technical
and managerial personnel whose efforts are critical to improvement of
service delivery, management of reform efforts and production of
strategic government outputs.

Step Differential Difference of salaries within the same range of

salary grade. It is normally determined by annual salary increments

Total Reward A combination of current contractual and intangible

rewards (monetary and non-monetary), as well as future expectations.
Monetary reward is related to payment while non monetary reward is
related to job security, career prospects, improved management,
meaningful job content, appreciation of work done and improved working
conditions. Future expectations are items such as pension and re-
employment after retirement.

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Wage Fixed regular payment earned for work done or service
rendered typically paid on a daily or weekly basis.

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 FOREWORD

The Government is committed to implementing this pay and incentive

policy for the public service within an affordable wage bill. The policy
provides a harmonised and unified framework for determining pay while
eradicating pay disparities across the entire public service as stipulated
in the Public Service Management and Employment Policy (Second
Edition, 2008). This Government intervention is aimed at attracting and
retaining well qualified personnel, in the public service, as well as
motivating employees by addressing equitable remunerations across the
service.

Harmonisation and unification of pay will lead to salary enhancement for

the entire public service especially for technical, professional and
managerial cadres. Pay enhancement is a necessary incentive required
for utilizing existing potential more effectively and improving
performance. In this policy the Government also adopts principles that
will address equitable distribution of staff across the country by
developing multi-dimensional approaches towards staff motivation.
Nevertheless, this will be carried out in an affordable and sustainable
manner that is consistent with the Medium Term Expenditure Framework
(MTEF).

Since most of the problems in the current remuneration system for public
servants have persisted for quite a long time, full implementation of the
measures articulated in the Pay and Incentive Policy will require
significant effort from all of us. Implementation of the Pay and Incentive
Policy initiatives will, therefore, be phased in a manner that is consistent
with the rationalisation of the pay system and introduction of
performance oriented management culture in the public service. The
measures outlined in this policy document underscore Government
commitment to re-invigorating morale and integrity of its public servants
so as to improve the quality of service delivery to the people.

Hon. Hawa Abdulrahman Ghasia (MP)

MINISTER OF STATE, PRESIDENT’S OFFICE
PUBLIC SERVICE MANAGEMENT

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 CHAPTER 1

1.0 INTRODUCTION

1.1 Background
1.1.1 The purpose of pay and incentives is to compensate employees
for work they do, to motivate them to perform well, to retain them, and
thereby avoid the need for expensive recruitment and training for
replacement The public service, like any other organization needs to
compensate, motivate and retain its employees. It is in this context that
the Government of Tanzania continues with efforts to motivate its
workforce.

1.1.2 Recent Government efforts to reform its pay and incentive system
can be well explained in the context of macro-economic reforms that
were started in the 1980s through to the 1990s. In 1994, the
Government adopted Pay Reform as an integral component of Public
Service Reform Program (PSRP). This was because many of the
problems associated with poor performance of the public service were
related to lack of an appropriate compensation structure and
weaknesses in the incentive regime. It ought to be said at the outset that
Pay and Incentives problems in the public service go beyond salaries.
Goals of the pay reform were as follows:

(a) Ensuring evolvement of a rational and transparent

compensation structure;
(b) Ensuring development of appropriate and adequately
competitive remuneration levels to allow public service to
attract and retain the desired number and quality of Human
Resource (HR) with appropriate requisite skills and
experience;
(c) Ensuring evolvement of an incentives regime with
appropriate rewards (and sanctions) to adequately motivate
public servants towards acceptable standards of
performance; and
(d) Facilitating wage bill determination, planning, and control.

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1.2 Implementation of the Pay Reform
1.2.1 Implementation of pay reform took place in two phases.
(a) The first phase covered the period 1994 – 1999 and its priorities
were cost containment, rationalisation of the public service salary
and job-grade structure, and
(b) The second phase covered the period 1999 to date, and its major
priority was to enhance pay in order to ensure that the public
service has the capacity to attract, retain and adequately motivate
personnel with requisite skills to provide the desired public
services and government strategic outputs.

1.2.2 Much was accomplished during the first phase of pay reform in
terms of rationalizing the salary and job-grade structure, increasing
transparency of the compensation system and improving wage bill
management. However, the success did not automatically translate into
significant improved performance and service delivery. Experience
during the period showed that relying on wage-bill savings from
employment reductions, particularly in a period where the wage bill is
being reduced in relation to size, did not provide much in the way of
salary enhancement.

1.2.3 The second phase of pay reform was implemented in a more

comprehensive and systematic approach to pay enhancement.
Measures adopted included:

(a) Public Service Medium-Term Pay Policy (MTPP),

whose goal was to enhance pay levels for qualified technical,
professional and managerial cadres; and
(b) Medium -Term Pay Reform Strategy (MTPRS), whose
objective was to provide a systematic and comprehensive
approach to implementing the policy.

1.3 The Medium Term Pay Policy

1.3.1 The MTPP was adopted for the purpose of ensuring that, the
Government has a critical mass of appropriately skilled and experienced
personnel to ensure efficient and effective management of the economy,
and for designing and implementing programmes to improve the quality

2
of public services. As such, the short to medium term priority of the
policy was to enhance remuneration levels for qualified technical,
professional and managerial cadres of the public service.
1.3.2 The major priorities set out in the MTPP were:
(a) To develop a new job-grade and salary structure
A new job grade and salary structure was to be developed
on the basis of the outcome of the comprehensive job
evaluation and re-grading exercise (JERG). While being
simple and easy to administer, the new structure, was
expected to improve incentives by providing increased pay
differentials within grades as well as between them.
(b) To enhance salary and wages for qualified technical and
professional cadres.
A targeted public service salary structure that would attract,
motivate and retain qualified technical and professional
personnel was supposed to be adopted and implemented.
(c) To adopt a compensation structure where allowances do
not feature prominently.
The transparency of the compensation structure was to be
improved by consolidating and/or eliminating some
allowances found to be remunerative.
(d) To develop a special (core) professional and managerial
cadre.
In pursuit of the goal of professionalising the public service, a
framework was to be developed for a special professional
and managerial cadre, comprising highly qualified, highly
tasked and well compensated technical and professional
officers.
(e) To have a more equitable share of the wage bill between
services group.
The total Government wage bill was to be maintained at
levels determined in the medium term expenditure
framework and consistent with the macro-economic stability
benchmarks. A framework for ensuring equitable share of the
wage bill among the various public service institutions was to
be defined and implemented.
(i) To sustain staff rationalisation and efficiency measures.

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 This was to be accomplished through functional reviews
and strategic planning, contracting-out and private-sector
participation where appropriate, as well as adopting
rigorous application of staffing norms in ministries and
departments.
(f) To improve personnel control and information systems
and practices.
The public service was supposed to improve aspects of the
personnel control and information systems to strengthen the
management of the Public Service and enhance pay levels.
(g) To further evolve the performance management system,
where:
(i) An objective and open staff appraisal system
would continue to be used as the only basis for
progressions and promotions;
(ii) Distinctions would be made between good, fair
and poor performers; and
(iii) Increments and promotions to be based on merit.
(h) To rationalise donors’ compensation for public service
personnel. The main objective behind rationalizing donors’
incentives was to develop a framework to:
(i) Rationalise and harmonise arrangements among
donors on the levels of compensation paid for
personnel engaged in donor funded projects and
programmes; and
(ii) Achieve convergence to the donor incentives with the
public service pay reform targets.
(i) To review and reform the public service pension system
in order to:
(i) Make it more fiscally sustainable and affordable;
(ii) Make it more attractive to public servants by enhancing
their terminal benefits;
(iii) Rationalise the benefits rate in light of the increased
pensionable emoluments resulting from the
consolidation of allowances into base salaries; and
(iv) Improve its management and to ensure timely
provision of benefits.

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 (j) To develop a framework of guidelines which would allow
Executive Agencies and other (non-commercial) publicly
funded institutions:
To set boundaries to allow them autonomy in the determination
of their own compensation system.

1.3.3 In addition to the above, the MTPP also proposed introduction of a

performance-based compensation system to be implemented using the
following measures:
(a) Putting an end to automatic promotions and pay
increases based on schemes of services for all
categories of employees;
(b) Issuing annual performance contracts to serve as basis
for annual staff appraisals to all Government officers
excluding operational service; and
(c) Planning and implementing a pilot performance-related
pay schemes for MDAs and public institutions.

1.4 Medium Term Pay Strategy

For the purpose of operationalising the Medium Term Pay Policy
(MTPP), the Medium Term Pay Reform Strategy (MTPRS) was
developed with the following major aspects:
(a) Job evaluation and re-grading (JERG): Getting the job-
grade structure right for the purpose of improving the links
between pay and performance. Implementation of
recommendations of the comprehensive JERG exercise was
expected to result in improved pay for qualified professional
and technical positions relative to others in the public
service, as many of these positions were under-graded
relative to other positions, as well as resulting in improved
(perceived) fairness in the compensation as horizontal and
vertical equity are enhanced.

(b) Medium-term pay targets: The adoption of a medium-

term target salary structure that would systematically enhance
pay for all public servants, particularly those who were

5
disadvantaged following the consolidation/elimination of most
of the allowances. Annual salary adjustment plans were
proposed for achieving the medium-term pay targets.
(c) Selective Accelerated Salary Enhancement (SASE):
The SASE scheme was adopted. This scheme targeted salary
enhancement to key professional, technical and managerial
personnel whose efforts are critical to the improvement of
service delivery, management of the reform efforts, and the
production of strategic Government outputs.

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 CHAPTER 2

2.0 SITUATIONAL ANALYSIS

2.1 Salary enhancement

2.1.1 In the past ten years of pay reform efforts and MTPP (1999)
implementation much has been achieved in terms of salary
increases, rationalisation of salary and job grade structure,
increasing transparency of compensation system, improving wage
bill management, and implementation of the public service pension
reform. In line with this, a target public service salary structure
was adopted and implemented with the purpose of enhancing
salaries of qualified professional, technical and professional
cadres. Over the period of 2000/01 – 2007/08, for the majority of
public servants pay targets were reached and to some extent
exceeded. Generally, the average salary increased by 215.73
percent from shillings 74,183 in 2000/01 to shillings 234,224 in
2007/08.

2.1.2 In addition, effective implementation of the Job Evaluation

and Re-grading exercise (2003) has facilitated rationalisation of
salary and job grade structure by improving the link between pay
and performance. Furthermore, the move towards a more
integrated and unified job grade structure has increased
transparency of the compensation system and wage bill
management.

2.1.3 As part of efforts to improve remuneration in the public

service, the Presidential Pay Commission was formed in 2006.
The Commission was tasked with advising the Government on
how to improve public service pay and other incentives. The
Commission recommended among other things: revision of the
MTPP; harmonisation of salaries across the public service; making
salaries both internally and externally competitive; tying pay above
the statutory minimum to the individual’s efficiency and productivity
instead of length of service; reviewing public sector salaries and
other remunerations regularly informed by continuous research;

7
 reducing the current number of remuneration management
authorities to one; alleviation of staffing problems in some LGAs;
and establishment of the Productivity and Remuneration Board.

2.2 Challenges for the Public Service Remuneration

2.2.1 Despite these efforts, pay levels in the public service
especially of technical, professional and managerial groups are still
low; the manifestation of which include ad hoc and piece-meal
salary adjustments, intermittent industrial actions by some cadres,
informal job grading for some cadres, re-emergence of allowances
as a compensation factor, proliferation of workshops, payments of
attendance fees and honoraria, and re-emergence of Project
Implementation Units (PIUs). These manifestations have negative
consequences for the management of the wage-bill and
Government budget in general. Given this situation the
government needs to address the following challenges:

(a) Ensuring competitive pay in the public service

Assessment of the implementation of MTPP and MTPRS
conducted in 2008 indicated that pay increases for the past
ten years have yet to arrive at a convergence between public
service pay levels and those of its labour market
comparators. This is because there remain a sizeable gap
between public service pay levels and those of its
comparators. A Comparative Salary Survey conducted in
2006 indicated that none of the salary groups in the public
service received more than 49% of the average pay in the
labour market for their comparators. The reason for this
failure lay primarily in the growth of public service
employment. Over the medium-term period, public service
employment grew by 26.9 percent from about 262,800 in
FY2000/01 to roughly 332,800 in FY07/08. The growth was
primarily driven by the requirement of expanding access to
social services so as to implement MKUKUTA and the
MDGs. The employment situation needs re-examination as
to what constitutes right size of the public service in the

8
 Tanzanian context given the objects of the MKUKUTA and
MDGs.

(b) Ensuring equal pay for equal value of work across the
public service
The report on the success, limitations and challenges of Pay
Reform efforts that was commissioned in 2006 indicated that,
implementation of JERG exercise has a number of
challenges. While efforts were made to ensure that jobs
were correctly graded in the new salary structure in line with
established job evaluation criteria, various job positions have
been upgraded relative to other public service personnel
outside the framework of an objective JERG exercise. Such
approaches to salary enhancement run the risk of derailing
the effort of systematic and comprehensive pay reform,
giving rise to job grade and compensation distortions.

Nevertheless, the JERG exercise was conducted only in the

Central and Local Government Authorities, and in some
Executive Agencies leaving other public institutions to grade
their job positions using traditional and irrational approaches.
The absence of comprehensive JERG across the public
service has led to compensation distortions in the public
service. The Presidential Pay Commission (2006)
recommended, among other things, ensuring equal pay for
equal value of work across the public service. Currently,
there is no framework or guidelines to assist Executive
Agencies and other (non-commercial) public funded
institutions to determine their own compensation structures.

(c) Increasing trend for allowances in the public service

When Government embarked on the pay reform process, a
decision to consolidate non-incidental allowances into basic
salaries was made. On the basis of that decision, a new
compensation structure was formulated where allowances
did not feature prominently. However, in recent years, non-
incidental allowances that were once paid through payroll

9
 and were consolidated into basic salaries, have began to re-
emerge and to be paid under Other Charges. The outcome
of the study on possible scenarios for allowances in the
public service (2008) indicated that, there was growth of
allowances in the public service compensation system. The
study showed that, over the medium term period,
employment allowance (EAL) had increased rapidly in
absolute terms and relative to other aspects of recurrent
expenditures, including the wage bill. The study revealed that
while EAL grew by nearly 373%, Other Charges grew by
261%, and the wage bill grew by 192%. The wage bill and
EAL trends were contrary to the expectations projected
under the MTPP and MTPRS.

(d) Towards total reward in the public service

Despite the fact that the MTPP and MTPRS recognised the
importance of non-pay factors in improved work
performance, no systematic approach was evolved to
incorporate non-pay incentives into the operationalisation of
the MTPP. Although there are several incentives that are
provided for in the public service, they are in most cases
monetary in nature and limited to a small number of
beneficiaries.

According to the public service employee perception survey

(2008), respondents ranked motivating factors involving both
pay and non-pay. Three of the four top ranked factors were
non-monetary in nature, showing the importance of non-
monetary incentives in motivating employees. The factors
ranked most frequently by the survey respondents were:
Increased salaries (44 percent), increased working tools and
budgets (20 percent), improved management (16 percent),
more training (12 percent), increased allowances (5 percent),
and improved pensions (3 percent). This calls for a widening
the scope of coverage as well as developing other incentive
packages.

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(e) Mainstreaming Project Implementation Units (PIUs) into
Government Structure
A study done in 2009 on mainstreaming PIUs into the
Government structure indicated that, some PIUs have high
direct and indirect costs. They tend to develop into parallel
organizations in the institutions they are located and
sometimes may dilute Government policy through their
adherence to donor agendas. It was revealed that PIUs
could create disharmony between their staff and Ministerial
regular staff specifically those of the same professional and
equivalent grades because of higher salaries provided to
PIUs’ staff. Consequently, the situation could lower staff
morale in the public service. The study further revealed that
the use of PIUs could result in eroding, rather than
strengthening skills development and overall capacity in
Government Ministries where such PIUs are located.

(f) Staffing problem in some LGAs

The study on staffing problems at LGAs conducted in 2005
revealed that, all LGAs to a varying degree, face recruitment
and retention problems of technical, professional and senior
staff. At least 23 LGAs were identified as having persistent
and significant staffing problems. The results of the survey
of staffing problems in underserved areas in Tanzania (2008)
indicated that the major factors influencing staff attraction
and retention in those areas are related to finance, amenities
and governance. These include: lack of special incentives;
lack of supplementary income opportunities; lack of suitable
quality housing; lack of adequate access to health and
education facilities; lack of adequate access to telephone
and internet services; lack of adequate access to water and
electricity; political interference; management and
organization practices.

(g) Decentralisation, Human Resources Management (HRM)

and accountability

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 The Government policy of Decentralisation by Devolution
intends to achieve among other things decentralization of
HRM. To date, much progress has been made in terms of
HRM and accountability framework especially after the
enactment of the Public Service Act, 2007, followed by the
revision of the Public Service Management and Employment
Policy in 2008. However, accountability remains as one of
the challenges to be addressed before adopting
comprehensive HRM decentralisation particularly payroll
management. The recent HR and payroll audits show that
the integrity of the payroll in MDAs and LGAs is still a
challenge.

(h) Ensuring effective collective bargaining in the public

service
Negotiations between Government and Public Servants on
issues related to pay and staff welfare is currently governed
by the Public Service Negotiation Machinery Act, 2003.
Negotiations on welfare are carried out through special
committees namely Joint Staff Council and the Master
Workers’ Council. Despite that in most cases the
Government has not been able to meet all demands put
forward by workers through their representatives in the
councils, such mechanisms continue to be the basis upon
which existing industrial harmony is built. The challenge is
how to make such mechanisms more effective, especially
aligning workers demands to their levels of productivity
on one hand, and to the entire economy on the other.

(i) Improving productivity as a strategy to enhance pay

The necessary condition for enhancing pay is improved
productivity. Improving productivity entails maximizing
efficiency, effectiveness and maximum utilisation of human
resource capacities. Currently, there has been a tendency
among different working groups to demand higher salaries
without considering improved performance and productivity.
Government needs to ensure a sustainable win-win situation

12
 in which a rise in wages and salaries motivates workers to
increase performance and productivity to levels that more
than offset the increased cost.

In summary government needs to:

(i) Improve competitiveness of public service pay,
(ii) Ensure equal pay for equal value of work across the public service,
(iii) Increase trend for allowances in the public service,
(iv) Move towards total reward in the public service,
(v) Mainstream PIUs into the Government structure,
(vi) Resolve staffing problems in some LGAs,
(vii) Decentralize management of payroll and accountability,
(viii) Ensure effective collective bargaining system in the public service,
and
(ix) Use improved productivity as basis for pay enhancement.

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 CHAPTER 3

3.0 RATIONALE, OBJECTIVE, AND SCOPE

3.1 RATIONALE
3.1.1 The capacity of Government to attract, recruit and retain staff
is very pertinent to enhancement of performance and
accountability in the public service. The MTPP (1999) and MTPRS
(1999) adopted by the Government articulated clearly the need to
systematically raise compensation for the core professional,
technical and management personnel in the public service, which
is recognised as a prerequisite for improving public service
performance and delivery. However, pay enhancement falls short
of expectation by public servants as there still remain a sizeable
salary gap between private and public institutions.

3.1.2 In the absence of a systematic and comprehensive approach

to adjusting pay in the public service, the Government has come
under pressure from various cadres to adjust pay of selected
cadres in isolation of other cadres. While such request may not be
exorbitant, particularly given domestic and regional market
considerations, care should be taken in adopting ad hoc and
piecemeal approaches to pay adjustments. Such approaches to
salary enhancement run the risk of derailing efforts for systematic
and comprehensive pay reform, giving rise to job grade and
compensation distortions.

3.1.3 Pay and incentive challenges facing the public service are
quite critical, and call for urgent strategies which emphasise a
harmonised and unified framework for determining pay and
incentives while eradicating pay disparities across the entire public
service.

3.1.4 Notwithstanding remarkable achievements of the MTPP and

MTPRS, there are various outstanding and emerging challenges
such as the competitiveness of the public service pay, disparities
of pay, ad hoc approaches to adjusting public servants pay,

14
 staffing problems in some LGAs, systematic approach to
incorporate non-pay incentives into public service compensation
structure, increasing trend of employment allowance,
decentralisation, management of HR and accountability.

3.1.5 The MTPP and MTPRS that provided for guiding principles
for remuneration in the public service between 1999 to date were
not comprehensive enough to effectively address the current and
emerging pay and incentive challenges. After all, they only
covered Central and Local Government, leaving out other
Government institutions, which draw their compensation from the
Treasury.

3.1.6 This new pay and incentive policy is therefore intended to fill
the gaps that the previous policy did not cover, and to address
emerging pay and incentive challenges that have had significant
adverse impact on creation of an effective and efficient public
service.

3.1.7 Formulation of this policy takes into consideration the

following:
(i) The Public Service Management and Employment Policy as
revised in 2008,
(ii) The Public Service Negotiation Machinery Act, 2003,
(iii) The Local Government Reform Policy (1998),
(iv) The Public Service Act, 2002,
(v) The Tanzania Development Vision 2025,
(vi) National Strategy for Growth and Reduction of Poverty
(NSGRP) of 2004,
(vii) Millennium Development Goals (MDGs),
(viii) Rural Development Strategy of 2001,
(ix) The Public Service Reform Program Phase II, and
(x) The Presidential Pay Commission Report (2006).

15
3.2 OBJECTIVES
The general objective of this Policy is to have a harmonised and unified
framework for determining pay and incentives while eradicating pay
disparities across the entire public service.

The Specific Objectives of the policy are:

(i) To enhance the capacity of the public service to attract, retain and
adequately motivate personnel with requisite skills.
(ii) To rationalise and harmonise pay across public service institutions
that draw compensation from the Treasury.
(iii) To alleviate staffing problems in LGAs by ensuring equitable
distribution of staff.
(iv) To have a total reward regime in the public service.
(v) To adopt a compensation structure where allowances do not
feature prominently.
(vi) To have effective accountability in HR management.
(vii) To promote performance and productivity in public service.

3.3 SCOPE
3.3.1 In terms of administration, the public service is divided into several
groups and each group has its own administrative legislation. These
legislations include the Public Service Act, 2002, the Parliamentary
Service Act, 1997, the Judicial Service Act, 2005, the Police Force and
Prison Service Commission Act, 1990, the Judges (Remuneration and
Terminal Benefits) Act, 2007, the Tanzania Intelligence and Security
Service Act, Cap 406, the National Defence Act, and the Public
Corporations Act, 1992. Nevertheless, the Public Service Management
and Employment Policy (2008) recognises these groups as public
servants. Furthermore, the practice is that remuneration of these groups
is approved by the President based on the approved wage-bill ceiling.

3.3.2 Therefore, the scope of the policy is to provide a framework for pay
and incentives to public servants in the Central Government, Local
Government Authorities, Executive Agencies and all Public Institutions
that draw personnel compensation from the Treasury.

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 CHAPTER 4

4.0 ISSUES, OBJECTIVES AND STATETEMENTS

4.1 Issue: Competitiveness of the public service pay

Although the Government has made an achievement in enhancing
salaries in the public service according to adopted pay targets, the
increase did not result in convergence between public service pay levels
and those of its labour market comparators. A sizeable gap still
remains. The results of a comparative compensation survey (2006/07)
show that none of the salary groups in the public service receives more
than 49% of the average pay in the labour market for their comparators.

Objective: To create a conducive environment which will enable the

public service to attract, retain and adequately motivate personnel with
the requisite skills.

Policy Statements:
1. The Government shall strive to make public service pay better
relative to the Labour market comparators, and to improve working
conditions.
2. The Government shall ensure that all pay adjustments are
consistent with the Medium Term Expenditure Framework (MTEF).

4.2 Issue: Equal pay for equal value of work across the public
service.
Different public institutions may be functioning under different
circumstances that require different conditions of service, as well as
degrees of flexibility in setting their compensation structures.
Nevertheless, efforts should be made to rationalise and harmonise pay
in line with the principle of equal pay for equal value of work.

This is not the case currently, as there are a multitude of stand-alone

remuneration bodies in the public service. For example, while PO-PSM
caters for setting remuneration for Civil Service, Local Government
Authorities and Executive Agencies, different regulatory authorities and
17
public enterprises’ Boards of Directors, as well as many Projects
Implementation Units (PIUs) determine their respective pay levels and
structures. This has resulted in a lack of coordination that has created
distortions in the public service pay structure, something that must be
corrected. Apart from these institutions, remunerations for Parliament
and the Judiciary are administered under the Parliamentary Commission
and Judicial Service Commission respectively.

This has been happening despite the introduction of objective job

evaluation and re-grading, which was carried out to rationalise job-grade
structures, schemes of service to better relate pay and performance, and
to improve equity within the core public service. Yet, major disparities
and inequities in pay and incentives exist within many public institutions
and between institutions that draw their remuneration from the Treasury.

Objective: To rationalise and harmonise pay across the public service

institutions that draw compensation from the Treasury.

Policy statement:
The Government shall provide a framework of guidelines on a
compensation system to Executive Agencies and other public
institutions that draw employment compensation from the Treasury.

4.3 Issue: Management of Programs and Projects in the

Government
Project Implementation Units (PIUs) compensate for weak institutional
capacity and are regarded as the most practical mechanism for getting
work done in donor programs/projects. They allow greater flexibility in
hiring and providing staff incentives and ensure direct monitoring and
accountability of funding agencies. Although, they enhance service
delivery, PIUs are parallel organisations with vested interests and
competing incentives. They, therefore, represent a contradiction
between two development principles in that, while short-term efficiency
gains can be realised, longer-term capacity of the Government to
manage projects is impaired.

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Objective: To integrate project management into Government
Operations as the way to develop capacity building.

Policy statement:
The Government shall strengthen capacity of the public servants to
manage programs and projects.

4.4 Issue: Service Delivery in LGAs

A major factor constraining the capability of LGAs to improve service
delivery, quality and accessibility in line with the objectives of the
MKUKUTA and MDGs is their limited capacity to attract, retain and
adequately motivate qualified personnel. Furthermore, lack of such
personnel and inappropriate skill mix may also impede the
decentralisation process. Reasons for staffing problems in some LGAs
are partly related to long-term rural development needs that they cannot
address, and partly related to factors that cannot be alleviated in the
short to medium term. While financial incentives will assist in alleviating
capacity weaknesses to attract and retain staff, required interventions
have to go far beyond this level.

Objective: To attract more staff to work in LGAs with staff

problems to ensure equitable distribution.

Policy Statements:
1. The Government shall design and develop an appropriate
incentive scheme to attract and retain staff allocated in
underserved areas.
2. The Government shall improve the organisational environment and
strengthen HRM in LGAs.

4.5 Issue: Systematic approach to incorporate non-pay incentives

into public service compensation structure.

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While pay is considered to be a major factor in motivating public service
personnel towards improved work performance, the employment
perception survey ranked three of the top four motivating factors to be
non-financial incentives. The three factors are: improved working tools
and budgets, improved management and more training. Therefore, even
if enhanced pay is provided, it may not in itself be enough to encourage
increasing performance among sections of the workforce.

The public service not only lack positive incentives for improved
performance, but also adequate sanctions for correcting continuing poor
performance, mismanagement and neglect of duties. Both adequate
incentives and adequate sanctions, which are seen as fairly dispensed,
are part and parcel of a well functioning reward system. Currently, there
is no comprehensive and systematic framework of financial and non-
financial incentive to effectively address the motivational problem in the
public service.

Objective: To have a total reward regime in the public service to

motivate public servants to improve performance.

Policy Statement:
The Government shall develop a total reward system in the public
service.

4.6 Issue: Increasing trend of allowances

It has been observed that, while remunerative allowances paid through
payroll were consolidated into basic salary, employment allowances paid
through MDAs votes within OC budget have become major conduit for
allowances drift.

Objective: To adopt a compensation structure where allowances do not

feature prominently.
Policy Statements:
1. The Government shall minimise the use of non-duty facilitating
employment allowance in the compensation of public servants in

20
 order to sustain transparency and ensure the equity of the pay
structure.
2. The Government shall budget expenditure by reducing
remunerative allowances from OC budget.

4.7 Issue: Decentralising HR management and accountability

Decentralization of HR management including payroll is hampered by
lack of accountability and effective checks and balance between
institutions involved. This is further compounded by lack of accurate
information as the basis for HR management and decision making.

In addition there have been inaccuracies, poor communication/flow of

HR information, including payroll issues between Government
institutions responsible for payroll management. This has resulted in a
situation where, for example, serving public servants are excluded from
the payroll while retirees are included. There have also been incidences
where deductions from individual salaries were not reflected in salary
slips, or there were mismatches between approved PE budgets
submitted by LGAs and TT (Telegraphic Transfers).

Objective: To promote effective accountability in HR management for

efficient use of wage bill resources.

Policy Statement:
The Government shall strengthen institutional HR capacity for
management of HR both at the centre and at operational levels
consistent with the policy decentralisation by devolution.

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4.8 Issue: Promoting an effective Collective Bargaining System

Effective collective bargaining between Government and Public Servants

is the basis of industrial harmony. However, experience suggests that
public servants demand higher pay increases without due regard to
increasing productivity not only of the public service, but also of the
whole economy. The challenge is, therefore, how to align workers
demands with their level of productivity bearing the two considerations in
mind.

Objective: To promote productivity as the basis of collective bargaining

in the public service.

Policy Statement:
The Government shall develop a framework for effective collective
bargaining.

4.9 Issue: Promoting improved performance and productivity

at the work place

Wages affect productivity by affecting workers “choice of work effort”. If

workers perceive themselves as being underpaid, their commitment to
being fully productive at the workplace will be diminished. However,
salary enhancement is not the panacea for addressing issues related to
inefficiency, indiscipline, low productivity, and lack of motivation. If
increased pay is not accompanied by increased efforts to raise
productivity and improve institutional mechanisms, pay increases may
simply lead to increased labor costs. The result may be that higher pay
leads to more government operations, with no improvements in service
delivery, and a less affordable size of the government.

Unlike many developed and developing countries, Tanzania does not

have a national productivity organization since the National Productivity
Council Act was repealed in 2003. The National Productivity, Incomes
and Price Policy promulgated in Government Paper No. 1 of 1981 has
22
not been reviewed to date. Productivity as a strategy for improvement of
business competitiveness and economic growth is conspicuously absent
from the official development management agenda.

Objective: To promote improved performance and productivity in public

service.

Policy Statements:
1. The Government shall establish a Public Service Productivity
and Remuneration Board.
2. The Government shall review the National Productivity,
Incomes and Price Policy of 1981.
3. The Government shall strengthen the use of OPRAS to ensure
linkage between pay and performance.

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 CHAPTER 5

5.0 THE LEGAL AND INSTITUTIONAL FRAMEWORK

5.1 Legal Framework

Implementation of this policy will entail harmonisation of different legal
and regulatory frameworks and standards for compensation in the public
service, which include, the Judges Remunerations Act, 2007, the Public
Service Act, 2002, the Police Force and Prison Service Commission Act,
1990, Public Corporation Act, 1992 and all Acts governing different
public institutions that draw their compensation from the Treasury in the
form of subsidies.

Effective realization of this policy will depend on two main preconditions.

Formulation of the implementation strategy and revision of various Acts,
Laws and Regulations that give mandate to different authorities to
develop different compensation structures for different public servants.

5.2 Institutional Arrangement

The objective of the Public Service Pay and incentive Policy will be
achieved through active participation of different stakeholders, including:
the President’s Office, Public Service Management, Planning
Commission, Ministry of Finance and Economic Affairs, Prime Minister’s
Office, Regional Administration and Local Governments, other MDAs
and LGAs, and non-state actors. Together with these a Public Service
Productivity and Remuneration Board (PSPRB) will be established. The
role of these stakeholders will be:

5.2.1 President’s Office, Public Service Management:

(a) Develop Medium term pay targets in line with Labour market
comparators.
(b) Carry out comparative compensation surveys at regular intervals.
(c) Review public service compensation relative to its labour market
comparators.
(d) Provide a framework of guidelines on compensation systems to
Executive Agencies and other public institutions that draw
employment compensation from the Treasury.
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 (e) Ensure that the principle of equal pay for equal value of work is
adhered to.
(f) Establish objective criteria for weighing job content across the
diverse organisations that comprise the broader public service
based on the comprehensive JERG process.
(g) Conduct JERG exercise across the public service.
(h) Ensure consistence and systematic approach to adjusting salaries
for public servants.
(i) Design and develop an appropriate incentive scheme to assist
LGAs in their efforts to overcome HR constraints to service
provision, as well as managing the decentralisation process.
(j) Strengthen HR and organisational management to assist
supervisory and managerial personnel to effectively use financial
and non-financial incentives to motivate staff towards higher levels
of individual and organisational performance.
(k) Rationalise the compensation structure and improve its
transparency.
(l) Rationalise the compensation structure through consolidation of
remunerative allowances into the payroll.
(m) Strengthen rremuneration policy research, planning and
evaluation.
(n) Coordinate and monitor implementation of the Pay and Incentive
Policy.

5.2.2 President’s Office, Planning Commission

(a) Develop key strategies to improve national productivity and
competitiveness.
(b) Ensure National Human Resource Development Strategy targets
having are reached.

5.2.3 Prime Minister’s Office, Regional Administration and Local

Government
(a) Improve organisational environment and strengthen HRM in LGAs.

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5.2.4 Ministry of Finance and Economic Affairs:
(a) Ensure that public service pay is systematically enhanced in an
affordable and sustainable manner, while maintaining an
appropriate balance between the public service wage bill and
expenditures on operation and maintenance.
(b) Ensure that all pay adjustments are consistent with the Medium
Term Expenditure Framework (MTEF).
(c) Develop measures to ensure that all public institutions drawing their
personnel compensation from the Treasury undertake
compensation adjustment within the budget cycle and are
appropriately budgeted.
(d) Ensure provision of funding for required incentives in LGAs.
(e) Rationalise budget expenditure by reducing remunerative
allowances from OC Budget.
(f) Review the 1981 National Productivity, Incomes and Price Policy.

5.2.5 Public Service Productivity and Remuneration Board:

A Public Service Productivity and Remuneration Board (PSPRB) shall
be established to monitor and harmonise compensation in public
institutions that comprise the public service.

The PSPRB shall be based in President’s Office. The Board shall be

responsible for:
(a) Rationalising and harmonising remuneration across all
public service bodies that draw their personnel
compensation from the Treasury; and
(b) Reviewing proposals for improving
productivity/performance across the broader public
service to better link pay to performance.

In carrying out its responsibility the PSPRB should be guided by the

following fundamental principles:
(a) Promoting the capacity of the public service to attract,
retain and adequately motivate personnel with the
requisite skills for improved service delivery, quality
and accessibility;

26
 (b) Promoting provision of equitable remuneration in the
Public Service or any part thereof, taking into account:
(i) The nature and demands of respective
responsibilities, functions and duties of public
servants;
(ii) The nature and length of training which public
servants require in order to perform their
respective functions and duties;
(iii) Narrowing the gap in remuneration between
persons in the private sector of equivalent grade
or status and public servants; and
(iv) Promoting transparency, integrity and
accountability in public life and in the public
service.
(c) Promoting improved performance and productivity at
the work place as the basis for payment of
remuneration in the Public Service.
(d) Promoting understanding that any revision of
remuneration, allowances and benefits in the Public
Service is subject to:
(i) Performance of the national economy, in general,
and to the cost of living and economic growth
rate, in particular;
(ii) The need to enhance and maintain macro-
economic stability in the country; and
(iii) Affordability and sustainability.

5.2.6 Other MDAs and LGAs

The role of other MDAs and LGAs shall be to adhere to the principles
laid down in this policy.

5.2.7 Other Stakeholders

Trade Unions shall negotiate and advise Government on Public Service
pay and incentives, in line with existing legislation.

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 CHAPTER 6
6.0 CONCLUSION
The principles that have been outlined in this policy provide a
comprehensive framework for public service remuneration. In particular
the policy seeks to:
(a) Harmonise compensation structures across MDAs and
PIs that draw their personnel compensation from the
Treasury;
(b) Narrow the gap in compensation packages between
the public service and labour market comparators;
(c) Provide adequate pay differentials to compensate for
skills and ability, experience, performance and
responsibility;
(d) Attract, retain and motivate professional and qualified
technical personnel in the Public Service;
(e) Reduce the significance of employment allowances
with remunerative elements in the recurrent
expenditure budget to achieve rationality and
transparency in the compensation system;
(f) Alleviate staffing problems in underserved areas to
improve service delivery, quality and accessibility for
the most vulnerable segments of the population, with
little or no alternative to publicly provided services; and
(g) Decentralise payroll management and accountability,
to align administrative and funding procedures and to
recruit and retain social sector personnel in line with
goals of equity.

Implementation of this policy will assist the Government in articulating

and better achieving public service pay-reform objectives for the purpose
of improving service delivery, quality and accessibility. The adoption of
the Pay Policy will signal a major change in the pay and incentives
regime consistent with a more holistic approach to enhancing the
capacity to improve service delivery, quality and accessibility in line with
the objectives of MKUKUTA and the MDGs.

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