July 08, 2019
Isaac Quesada / email@example.com
Attorney at law BDS Asesores
The Law for the Strengthening of Public Finances, which entered into force last December 4, 2018, established efforts to contain government spending and heal public finances, which is why lawmakers ordered drastic changes in terms of salary entitlements. Even though said law reformed and reduced to 4 more than 100 benefits that are currently enjoyed in the public sector, we can state without a doubt that the greatest change numerically speaking corresponds to the annual bonus entitlement. Opinion DFOE-SAF-OS-00001-2018 issued by the Office of the General Comptroller of the Republic states that around 88 thousand officers of the Central Government (Ministries) enjoy over 5 annual entitlements. Approximately 60 thousand officers enjoy over 10 annual entitlements, while around 32 thousand public servants enjoy over 20 annual entitlements.
In terms of remuneration, this means that for the first group of workers annual entitlements represent an additional 10% of their base salary, for the second group around 20%, while for the last group these represent an additional and significant percentage of around 40% on their base salary. Although this piece is not focused on the economic aspect, the aforementioned data show the considerable impact that these annual entitlements have on the final remuneration enjoyed by most public employees. On the other hand, the Public Administration Salaries Act (in force since 1957) established annual entitlements as a performance incentive, thereby requiring the officer to obtain at least a “good” grading score in his/her annual performance evaluation, which led to the above referred situation where a considerable majority of public servants gets to enjoy this annual entitlement.
The nature of the annual entitlements is that of an incentive for the permanence, stability, suitability and performance of the specific worker. This means that annual entitlements were created to benefit those workers who not only met service time criteria, but also good performance scores, which in turn would favor efficacy and efficiency in public functions. Before the entry into force of Act 9635, however, many institutions acknowledged annual entitlements indiscriminately without conducting a performance evaluation, and based on percentages way higher than 1.94% and 2.54% as established by the current legislation.
Act 9635 intends to organize and standardize the acknowledgement of annual entitlements. Thus, as from December 4, 2018, annual entitlements may not exceed any percentages set forth by law (1.94% for professional workers and 2.54% for non-professional workers). These percentages will exclusively apply once for purposes of converting the 2018 annual entitlement into a fixed nominal amount, and all annual entitlements from previous years should also be converted into a nominal amount. In other words, this law aims to prevent annual entitlements from increasing every time the officer is promoted, neither when base salary increases, thereby avoiding the exponential growth of these remunerations. Thus, we should be clear that all government institutions covered by Act 9635 should abide by these legal provisions in terms of annual entitlements, always taking into consideration the respect for vested rights of public officers, which is why this significant change must be carefully implemented.
Moreover, the change in terms of performance evaluations is worthy of mention, given that as from June 4, 2019, every institution covered by the scope of application of Act 9635 should have implemented a performance evaluation system based on quantifiable objectives and goals, and must have an IT system in place to record all day-to-day tasks in order to verify fulfillment of goals and objectives, thereby fostering efficient spending and public service. This evaluation system should be objective enough to certify that the assigned grading score corresponds to the one obtained by the concerned officer on his/her daily work, as now it is strictly mandatory that workers obtain a “very good” or “outstanding” grading score in order to qualify for the annual entitlement. To implement this, the Ministry of Planning (MIDEPLAN) must issue a number of guidelines that will serve as input for all institutions; however, these still pose serious concerns about how these guidelines will apply to the wide array of positions throughout the public sector, covering operational, managerial, and director positions.
These changes entail two very different scenarios. First, the law is categorical in terms of the amounts considered for the acknowledgement of annual entitlements, as Act 9635 is oriented to restrictive spending without disregarding the fact that this change should be carefully implemented. On the other hand, when it comes to performance evaluation, there is still some uncertainty on how MIDEPLAN’s guidelines will be implemented. The truth is that these changes are already effective, and each institution is responsible for ensuring their adoption. In this connection, it should be noted once again that in no way will MIDEPLAN’s guidelines annul or undermine the different degrees of autonomy that each and every institution has, which is why the evaluation method to be implemented by the relevant supervisor should take into consideration each of these variables.