Sri Lanka’s severe economic crisis in 2022 led to price hikes and an increased cost of living. The public sector employees, especially those with fixed incomes, struggled with managing their daily household expenses.
President Ranil Wickremesinghe provided a Rs. 10,000 allowance to all public sector employees in response to these conditions despite the financial difficulties. After a few months, widespread protests, especially from doctors, caused significant public distress. An investigation into the situation led to adjustments in allowances for doctors in order to maintain the national health system.
Once that issue was resolved, protests erupted in the university sector. Allowances for university employees were also adjusted to avoid disrupting education.
By the time that issue was resolved, further demands were made by Government executive officers, particularly district and divisional secretaries. The Government subsequently directed careful attention to these matters.
With special consideration, President Wickremesinghe presented a Cabinet paper for a systematic increase in public sector salaries and eliminating salary discrepancies. Consequently, a comprehensive salary revision for the entire public sector was decided.
During the Cabinet meeting on May 27, it was approved to form a special committee to prepare a report with recommendations for implementation in the 2025 budget. This committee, consisting of ten members, was chaired by former Presidential Secretary Udaya R. Seneviratne, with Additional Secretary to the President G.L. Vernon Perera.
The other members included:
Jude Nilukshan (Director General, National Budget Department),
Hiransa Kaluthantri (Director General, Department of Management Services),
S. Aloka Bandara (Director General of Integrated Services),
H.A. Chandana Kumarasinghe (Director General of Institutions),
Dr Terrence Gamini de Silva (Retired Deputy Director General, Ministry of Health),
Duminda Hulangamuwa (Chairman, Ceylon Chamber of Commerce),
Chandi H. Dharmaratne (Chief People Officer, BCS International Technology Pvt Ltd),
Isuru Thilakawardhana (Deputy General Manager, Human Resources, Commercial Bank).
The committee consulted representatives from 30 trade unions and gathered evidence from 200 individuals to compile a comprehensive report.
As the preparation of the 2025 budget is underway, an interim report has been submitted for inclusion.
The interim report was presented to the Cabinet by the President on August 12 and received approval. As a result, the salary increases mentioned in the interim report are recommended to be included in the forthcoming budget.
Currently, the number of salary scales in the public sector, which stands at 30, will be reduced to four categories.
After implementing these recommendations, the salary discrepancies within the public sector will be addressed by restructuring the grades into four salary categories.
Accordingly, starting in 2027, every public sector employee will receive a continuous monthly cost of living allowance of Rs. 25,000. Additionally, all public sector employees will see their basic salaries increased from 24 percent to 35 percent.
The minimum salary for a public sector employee will be raised to Rs. 55,000.
This is the largest salary increase ever granted to public sector employees in Sri Lankan history. It is being executed systematically.
The move is in accordance with the interim report of the special committee appointed to address salary discrepancies in the public sector.
Notably, over 1.3 million public sector employees provide significant services to 22 million people through ministries, departments, institutions, and statutory bodies. The Government spends over Rs. 1,200 billion annually on salaries and allowances for public sector employees, with an additional Rs 400 billion spent on pensions.
Public sector employees have long been concerned about the lack of a basic salary increases over an extended period. Public sector unions made various demands, and these have been considered in a manner that minimises the financial burden on the country while ensuring that the entire public sector is covered. Proposals for a qualitative and efficient public service have been introduced in the 2025 budget.
The committee’s proposals include a comprehensive review of current salaries and allowances across the entire public sector, aiming to introduce attractive salaries and allowances in line with prevailing economic indicators, thereby enhancing the efficiency of the public service.
Measures have also been proposed to minimise the financial burden on the Government by gradually increasing salaries and allowances over time, identifying innovative revenue-generating projects, and undertaking necessary tasks to reduce the additional financial burden on the Treasury.
All positions in the public sector will be classified under four primary service levels. Each category will be aligned with the Sri Lanka Qualification Framework (SLQF) and National Vocational Qualifications (NVQ). Recruitment qualifications will be categorised accordingly, taking into account job responsibilities, the need to attract skilled workers for specific roles and the retention of employees.
In particular, for primary service categories, it has been proposed to adopt selection criteria based on the SLQF and NVQ as basic qualifications for recruitment, ensuring that the needs of the service are met through appropriate selection processes.
The rest of the service categories are proposed to be recruited strictly through formal competitive examinations and interview processes. Consequently, the currently approved recruitment procedures will be promptly revised as necessary.
The committee has suggested measures to limit public sector employees to one million or fewer by 2030. Adopting new technologies in line with global trends will make this reduction possible. Starting in 2025, the entire public sector will undergo a digitalisation and automation process within three years, with the introduction of electronic systems for public administration (E-Governance). Priority will be given to State investments in this area.
A new medical insurance scheme offering attractive benefits will also be implemented starting January 2025. This scheme will involve a minimum monthly contribution of Rs. 1,000 from all public sector employees and retirees. Services will also be outsourced to minimise Government expenditure and maximise efficiency.
As a key initiative, a restructuring program has been proposed to transform identified Government departments, institutions, and statutory bodies into public liability companies (PLCs) listed on the stock exchange. This restructuring will include public and private investment and shares for the public and employees.
In 2025, a comprehensive work study will be conducted across the public sector to facilitate a scientific analysis of staffing and service requirements.
Key performance indicators (KPIs) will be developed for all public sector employees, with salary increments based on progress against these KPIs.
These salary and allowance increases will not apply to state-owned enterprises and banks categorised as commercial entities. The new salary and allowance structure will be implemented across all other government institutions.
As a vital aspect for all Sri Lankans, the committee aims to maintain and enhance the reliability and recognition of free healthcare and higher education by ensuring these sectors are economically valuable and based on credible physical and human resources.
Public sector retirees who retired before 2020 will also have their pensions adjusted to resolve discrepancies by providing the entitled salary increments. Starting in January 2025, retirees will receive a cost-of-living allowance equal to 50 percent of the amount given to active public officers.
This new salary scheme will be implemented in stages starting January 1, 2025, in consideration of the state’s financial capacity, and managed within the existing tax policy framework.
The Cabinet has granted policy approval for the recommendations in the committee’s report and has agreed to include the proposals in the 2025 budget, following the submission by President Wickremesinghe, who also serves as Minister of Finance, Economic Stabilisation, and National Policies.
As the implementation of the agreements with the International Monetary Fund is in progress, any further salary increases for public sector employees will be addressed starting in 2027. The committee’s report recommendations clearly outlined the interim measures leading up to that point.
The aim is to ensure that the entire public sector continues to serve the public efficiently while not becoming a financial burden on the Treasury by following these guidelines.
Translated by Sachitra Mahendra
