Pay rise amid rising prices

The government has approved a new national pay scale that will substantially raise the basic salaries of public servants, but employees will have to wait for up to a year to receive the full increase as high prices continue to squeeze household budgets.

Under the National Pay Scale 2026, the basic salaries of government employees will be implemented in three phases between 1 July 2026 and 1 July 2027, while various allowances will take effect from 1 January 2028.

The weekly Cabinet meeting, chaired by Prime Minister Tarique Rahman, approved the new structure at the Secretariat on Monday, according to a press release from the Prime Minister’s Office.

The new scale retains the existing 20 grades. The minimum basic salary for Grade 20 has been raised to Tk20,000 from the current level, representing a 142 per cent increase, while the maximum prescribed salary for Grade 1 will rise by 100 per cent to Tk1,56,000.

The government said it considered its financial capacity, the overall economic situation, inflation, the cost of living and the need for a balanced and rational pay structure in approving the new scale.

But the timing of the increase comes against a backdrop of persistent price pressure, with higher food, housing, transport, healthcare and other essential costs eating into the purchasing power of employees and pensioners.

The government itself acknowledged the inflationary risk of a full-scale implementation, opting for a phased rollout to reduce the impact on public finances and prices.

Around 24 lakh military and civilian employees and more than 9 lakh retired employees and other eligible beneficiaries are expected to benefit from the new pay structure.

The additional annual expenditure is estimated at around Tk1,05,580 crore, with the required funds earmarked under the Medium-Term Budget Framework for the relevant fiscal years.

Employees in Grades 10 to 20 will get priority under the phased implementation, reflecting their relatively lower incomes and greater vulnerability to rising living costs.

The basic pay will be introduced in three phases over the 2026-27 and 2027-28 fiscal years, although the pay scale itself will be effective from 1 July 2026.

All allowances will be introduced together from 1 January 2028.
The same phased approach will apply to increases in net pensions.

The ratio between the salaries of the lowest and highest grades will also narrow from the existing 1:1.945 to 1:1.78, indicating a relatively larger increase for lower-paid employees.

Lower-paid pensioners will receive the biggest percentage increases under an interim arrangement, as the government has deferred full implementation of the “One Rank One Pension” (OROP) system until 2030.

Net pensions of Tk9,000 or less will increase by 100 per cent, while those between Tk9,001 and Tk20,000 will rise by 75 per cent.

Pensions of Tk20,001-30,000 will increase by 65 per cent, those between Tk30,001 and Tk40,000 by 60 per cent, and pensions of Tk40,001 or more by 55 per cent.

The Finance Ministry said full implementation of OROP at this stage would impose a substantial financial burden, while the government also lacks data on civilian employees who retired before 2019.

The slab-based increases are expected to provide greater relief to pensioners who retired many years ago and now survive on relatively low pensions.

For these households, however, the real value of the increase will depend on how prices move. Years of elevated living costs have already eroded the purchasing power of fixed pensions.

The government has expanded mobile allowance coverage to all 20 grades, compared with the previous limit of Grade 5.

The decision reflects the growing use of mobile internet and digital communication in government offices.

In a new measure, government employees with children with special needs will receive Tk3,000 a month for each child.

Meanwhile, a separate committee has been formed for the judicial service.

Its recommendations will form the basis for a separate Bangladesh Judicial Service pay scale, to be implemented in phases from 1 July 2026 in line with the National Pay Scale 2026.

The Finance Division will issue the necessary gazettes, orders and instructions covering salary fixation, allowances, pensions and other post-retirement benefits.

The government said the phased rollout would ease inflationary pressure while improving the financial security and motivation of public servants and helping create a more efficient and people-oriented administration.

For government employees and pensioners, the bigger question is whether the higher nominal salaries will translate into greater purchasing power.

With the cost of everyday necessities still weighing heavily on household budgets, the full benefit of the long-awaited pay revision may take time to be felt.