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ACC 602 – Public Sector Accounting

Chapter No. 03: Pay Fixation.
1) Definition: Pay fixation refers to the process of determining the initial salary of a newly
appointed employee or adjusting the salary of an existing employee in accordance with
government regulations and pay scales.

Context in Pakistan: In Pakistan, the fixation of pay is governed by federal and provincial
regulations, which outline the basic pay scales, increments, and allowances. The process ensures
uniformity and fairness in public sector compensation.

Key Points:

 Basic Pay Scales (BPS): These scales range from BPS-1 to BPS-22, with BPS-1 being the
lowest and BPS-22 the highest.
 Initial Appointment: The initial pay is fixed based on the relevant BPS, qualifications,
and experience.
 Promotion and Increment: Pay is adjusted during promotions and annual increments as
per the rules.

2) Pre-requisites for Drawl of Salary, Procedure, Accountal:

Pre-requisites for Drawl of Salary:

 Appointment Order: Official order confirming the appointment.
 Assumption of Charge: Formal assumption of duty by the employee.
 Personal File: Complete documentation including educational certificates, NIC, etc.
 Bank Account: Valid bank account for salary disbursement.

Procedure:
1. Preparation of Pay Bill: The concerned department prepares a monthly pay bill.
2. Verification: The bill is verified by the Accounts Office.
3. Submission: Verified pay bills are submitted to the Treasury/Accounts Office.
4. Disbursement: Salary is disbursed through banks or direct credit into employee
accounts.

Accountal:
 Proper record-keeping in the service book and salary registers.
 Compliance with audit requirements and financial regulations.
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3) Basic Pay Scales, Eligibility for Increment, Authority for Pay Fixation and
Disbursement Process:

Basic Pay Scales (BPS):

 Minimum to Maximum Stages: Each scale has defined minimum and maximum pay
points.
 Running Pay Scale: Continuous scale allowing for increments within the scale.

Eligibility for Increment:

 Granted annually on 1st December.
 Employee must have completed six months of service.

Authority for Pay Fixation:

 Initial Fixation: By the appointing authority as per rules.
 Increments and Adjustments: Governed by the relevant department and Accounts
Office.

Disbursement Process:
 Handled by the Accountant General's Office.
 Practical training includes reviewing actual salary slips and understanding deductions.

Practical Example: Accountant General Balochistan: Provides salary slips for practical
training, demonstrating gross salary, deductions, and net salary.

4) Different Kinds of Allowances admissible to Government Servants in

Pakistan:

Government servants in Pakistan are entitled to a variety of allowances in addition to their basic
salary. These allowances are intended to cover different aspects of their service and personal
expenses. Here are some of the main types of allowances and their corresponding rates, as
applicable to government servants in Pakistan:

1. House Rent Allowance (HRA).

 Rates: Varies based on the city of posting and the basic pay scale. Typically, it is a
percentage of the basic pay.
 Big Cities (e.g., Islamabad, Karachi, Lahore, Quetta, and Peshawar): 45% of the basic
pay scale 2008 increased later by 50%.
 Other Cities: 30% of the basic pay scale 2008 increased later by 50%.

2. Rental Ceiling for Hiring / House Requisition.

Where employee is entitled for government accommodation. The residential accommodation of
hiring is currently available in the following cities only:

Islamabad
Rawalpindi
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Lahore
Peshawar
Quetta
Karachi

The employees residing in the above cities can claim the hiring of residential accommodation. If
they don’t claim the said facility then they will get House Rent Allowance (HRA).

3. Medical Allowance.
 Rates: A fixed amount based on the basic pay scale.
 BPS 1-16: Rs. 1,500 per month.

The current rate of Medical Allowance for government employees in Balochistan has been set at
a minimum of Rs. 1,500 per month. Additionally, this allowance is increased by 25% of the
existing rate. For new entrants in Basic Pay Scales (BPS) 17-22, the medical allowance is
calculated as 15% of the minimum of the relevant basic pay scale of 2008, plus an additional
25% of the current medical allowance amount.

4. Conveyance Allowance.
 Rates: Based on the basic pay scale.

BPS 1-4: Rs. 1,780 per month.

BPS 5-10: Rs. 1,930 per month.
BPS 11-15: Rs. 2,285 per month.
BPS 16 and above: Rs. 5,000 per month.

5. Adhoc Relief Allowance (ARA).

 Rates: This is granted periodically and varies. For instance, an Adhoc Relief Allowance
was granted in 2022, which was 15% of the basic pay of 2017.
 Rates are updated periodically by the government.

6. Disparity Reduction Allowance (DRA).

The Disparity Reduction Allowance for government employees in Balochistan is set at 15% of
the basic pay. This allowance applies to employees from BPS-1 to BPS-19 who do not receive
additional allowances that are equal to or greater than 100% of their basic pay.

7. Special Relief Allowance.

 Rates: Sometimes granted in addition to Adhoc Relief Allowance, usually a fixed
percentage of the basic pay.

8. Utility Allowance.
 Rates: Applicable to certain categories of employees (e.g., Judiciary, Secretariat
employees).
 Rates can vary significantly based on the employee's grade and department.
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9. Travelling Allowance / Daily Allowance.

 Rates: This is typically a percentage of the basic pay, aimed at counteracting inflation.
 Rates are periodically revised.

10. Entertainment Allowance.

 Rates: Typically granted to high-ranking officers.
 BPS 20 and above: Varies, often a fixed amount.

11. Orderly Allowance.

 Rates: Typically granted to high-ranking officers for Personal Attendant or Orderly who
can take care of various tasks such as managing uniforms/dress, personal equipment and
other day-to-day affairs allowing the officer to focus more on professional
responsibilities.
 BPS 20 and above: Rs. 25,000 P.M.

12. Uniform Allowance.

 Rates: Applicable to employees required to wear uniforms (e.g., police, armed forces,
certain civil services).
 Rates vary based on the service and grade.

13. Teaching Allowance.

 Rates: Granted to teachers and educational administrators.
 Fixed amount based on designation and grade.

14. Higher Qualification Allowance.

 Rates: Granted to employees who acquire higher qualifications than the minimum
required for their post.
 Fixed amount, varies based on qualification and department.

15. Computer Allowance.

 Rates: For employees who work extensively with computers.
 Typically a fixed amount.

16. Special Pay Allowance.

 Rates: For specific roles or responsibilities.
 Varies widely based on the nature of the role.

17. Hard Area Allowance.

 Rates: Granted to employees posted in difficult or hard-to-live areas.
 Varies based on the region and grade.

These rates and allowances are subject to periodic review and revision by the government, often
announced in the annual budget. For the most current and detailed information, it's best to refer
to the latest official notifications and circulars from the Government of Pakistan.
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5) Deductions from Salary and Benefits:

Deductions:

1. House Rent Allowance (HRA): Deducted if government accommodation is provided.

2. General Provident Fund (G.P Fund): Compulsory savings scheme.
3. Group Insurance: Provides life insurance coverage.
4. Benevolent Fund: For financial assistance in emergencies and retirement benefits. The
rate of contribution of Federal Employees Benevolent Fund is 2.4% of pay with
maximum rate of Rs.960 p.m. Government of Balochistan 10% of Initial BPS per
month.
5. Income Tax: Deducted as per the Income Tax Ordinance.

Benefits in Lieu of Deductions:

1. During Service:
 Loans and advances from G.P Fund.
 Insurance cover and medical benefits.

2. At Retirement:
 G.P Fund balance.
 Gratuity and pension.
 Encashment of leave.

3. In Case of Death:
 Family pension.
 Group insurance payout.
 Benevolent fund assistance.

Practical Session:

 Review of Pay Slip: Analyze a pay slip from Accountant General Balochistan.
 Hands-on Training: Students calculate salary, understand deductions, and simulate pay
fixation scenarios.

Conclusion:

Understanding pay fixation, salary drawl procedures, and various deductions are crucial for
effective financial management in the public sector. Practical training using real-life examples
enhances comprehension and application of these concepts.

References:

1. Government of Pakistan, Finance Division Circulars.

2. Accountant General Balochistan Resources.
3. Public Service Commission Guidelines.