largely composed of long-standing employees with decades of experience in the civil service. For any given type of position the grades and steps of jobholders vary widely due to the credential-based grading system. This in turn results in some variation in the base salary for a given position—violating the important HRM principle of ‘equal pay for equal work.’ Second, monetary and in-kind allowances that are differentiated by rank—namely, the job title allowance and gasoline and mobile phone coupons—are a significant addition to the total monthly net compensation received by the managerial cadres. This phenomenon is illustrated in Figure 6.

**Figure 6: Composition of average total monthly compensation, '000 kip**

<!-- Start of picture text --> Base salary Allowances<br>1,800<br>1,500<br>1,200<br>900<br>600<br>300<br>0<br>Technical Deputy Head of Deputy Director<br>staff head of division director general<br>division general<br><!-- End of picture text --> For technical staff, base salary comprises 90 percent of total remuneration. For division heads, base salary makes up about 75 percent of take-home pay, with allowances accounting for 25 percent. At the top of the civil service salary structure, directors general receive only about 60 percent of their total compensation in the form of base pay, with allowances making up the additional 40 percent. It is clear from this analysis that simply examining base salaries would lead to inaccurate and skewed conclusions about compensation.

_Source: GOL; World Bank analysis_ The compression ratio, which compares earnings at the top of the civil service to an entry-level post, is a simple indicator of an individual’s formal financial incentives to take on more demanding positions. Using the base salary grid to calculate a compression ratio, individuals at the top (grade 5 step 15) earn 3.1 times the base salary of those at the bottom (grade 1 step 1). Yet, as cautioned in Part I, this calculation of the compression ratio is misleading—it neither factors in the effect of allowances, nor does it consider the fact that, due to the career system, senior managers may not hold the highest possible educational credentials and thus not be in the highest grade. Using actual data for the sample ministries, the compression ratio for base salary only ranged from 2.2 to 2.6 for DDGs and 2.3 to 2.6 for DGs. But once monetary, and especially in-kind, allowances are included, the compression ratio increases markedly to 3.3 to 3.7 for DDGs and 3.8 to 4.0 for DGs.

A snapshot of the range of total monthly compensation across ranks is revealing (Figure 7). The range of average total compensation across the sample for technical staff and for directors general is relatively small; while total compensation in the lower managerial ranks—deputy head and head of division, and deputy director general—exhibits more variation. Such a distribution of compensation is not uncommon in bureaucratic organizations, since their very structure often means that staff at middle ranks will vary more in terms of their educational qualifications and years of experience than will those at the top and bottom of the professional ranks.

What is, however, somewhat unusual about the compensation distribution pictured in Figure 7 is that while there is some overlap in the compensation bands at the lower end of the scale, there is no such overlap at the top end. A comparison to the base salary structure, shown in Figure 8, is instructive in this 22