Pay cut for state execs illegal?

Malacañang admitted yesterday there may be legal constraints in the implementation of President Arroyo’s recent directive to reduce salaries and benefits of senior executives working in government-owned and controlled corporations (GOCCs) and government financial institutions (GFIs).

Budget Secretary Emilia Boncodin said affected managers, board directors, members and trustees in state firms can easily invoke existing employment laws in questioning Memorandum Order 20.

"We have been told that under existing laws, there can be no diminution in the salary of government workers," Boncodin said.

Executive Secretary Alberto Romulo said the best they can do right now is appeal to "the sense of patriotism and public service" of state executives in making voluntary salary cuts.

"The President and Cabinet members receive much less than most of them. I believe they know that this just isn’t right," Romulo said.

Memorandum Order 20, which was signed June 25, suspends allowance and pay increases of top-level executives in state firms. A review in the salaries of GOCCs, GFIs and their subsidiaries by the Commission on Audit revealed that senior state executives were even receiving more than their counterparts in the private sector.

Under the Salary Standardization Law (SSL), the pay package of state executives should not exceed two times the standard rate for comparable national government positions.

Some GOCCs and GFIs, however, have been exempted from the law and have prescribed their own compensation packages.

Boncodin pointed out that this was precisely the reason why Mrs. Arroyo had instructed all heads of state firms and subsidiaries to implement a pay rationalization plan for all senior officer positions.

"The administration has an austerity program and we want these corporations to help. They will have to draw up their own plans so the pay cuts are less painful to those concerned. It’s really up to them how to go about the pay rationalization," the budget chief said.