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FCA, FCMA, FCPA, CA, ACCA, CPFA, Kustia Sugar Mills Ltd, Bangladesh
The structure of public-sector remuneration is a central component of fiscal policy, labour-market governance and public-sector management. Since independence, Bangladesh has periodically revised the national pay structure to respond to changes in the cost of living, economic growth, public-sector productivity, fiscal capacity and the changing expectations of government employees. The successive national pay scales introduced in 1973, 1977, 1985, 1991, 1997, 2005, 2009 and 2015 represent major stages in the evolution of the country's public-sector wage system. A new National Pay Commission was also constituted in 2025, making the question of a ninth national pay scale particularly important in the contemporary policy debate. The official government repository confirms the historical national pay-scale documents and provides access to the 1973–2005 scales, while the Office of the Chief Accounts Officer, Pension and Fund Management maintains official references to the 1973–2009 and 2015 pay orders. This study examines the evolution of Bangladesh's national pay scales from 1973 to 2026 with particular emphasis on nominal wage growth, inflation, real purchasing power and the interval between successive pay revisions. The study adopts a historical-comparative and quantitative approach using official government pay-scale documents and internationally comparable inflation data. World Bank data show that Bangladesh experienced annual consumer-price inflation of 10.5 percent in 2024 and 8.8 percent in 2025, demonstrating the continuing erosion of nominal purchasing power under the 2015 pay structure. The analysis argues that nominal increases in basic pay do not necessarily translate into equivalent improvements in real income. Long intervals between major pay revisions can generate substantial purchasing-power losses, particularly during periods of elevated inflation. The article therefore proposes that future pay-scale design should incorporate a transparent inflation-adjustment mechanism, periodic wage reviews, evidence-based compression ratios, protection of lower-paid employees and a systematic relationship between productivity, fiscal sustainability and real wages.
The remuneration of public employees is not merely an administrative issue. It is an important component of public financial management, labour-market policy, social welfare and institutional performance. For a developing country such as Bangladesh, the design of the national pay structure has implications extending beyond government employees themselves. Public-sector wages influence recruitment and retention, household consumption, aggregate demand, income distribution, public expenditure and the attractiveness of government employment.
Bangladesh inherited a complex administrative and remuneration structure at independence in 1971. Following independence, the government undertook major institutional and administrative reforms and introduced the first national pay scale in 1973. Since then, the country's public-sector salary structure has been revised several times. Government records identify the 1973, 1977, 1985, 1991, 1997, 2005, 2009 and 2015 national pay structures as important stages in the development of public remuneration. The official pension authority's reference archive specifically lists the Services (Pay and Allowances) Orders for 1973–2009 and the 2015 National Pay Scale.
The evolution has not been linear. Each pay revision reflected the economic circumstances of its time. Inflation, fiscal capacity, changes in living costs, administrative restructuring and political-economic priorities influenced the scale of adjustment. The challenge, however, is that a nominal increase in salary does not necessarily imply a corresponding increase in the standard of living.
For example, an employee receiving a nominal salary increase of 50 percent may actually experience a reduction in purchasing power if consumer prices increase by more than 50 percent over the relevant period. Consequently, an assessment of national pay scales should not stop at comparing the minimum and maximum basic salaries. It must also examine the inflation-adjusted value of those salaries.
This issue has become particularly significant after the introduction of the 8th National Pay Scale in 2015. The prolonged period since the 2015 revision has coincided with substantial inflationary pressure. World Bank data indicate that annual consumer-price inflation reached 7.7 percent in 2022, 9.9 percent in 2023, 10.5 percent in 2024 and 8.8 percent in 2025.
Against this background, the establishment of the National Pay Commission 2025 creates an important opportunity to reassess Bangladesh's public-sector compensation framework. The Commission's official portal contains the historical national pay-scale materials and identifies 2015, 2009 and 2005 pay-scale resources.
The present study therefore seeks to answer the following central question:
To what extent have successive national pay-scale revisions in Bangladesh preserved the real purchasing power of public employees in the face of inflation?
2. OBJECTIVES OF THE STUDY
The principal objective is to examine the historical development of Bangladesh's national pay scales and evaluate their relationship with inflation and real purchasing power.
The specific objectives are:
3. RESEARCH QUESTIONS
The study addresses the following questions:
RQ1
How has the nominal structure of Bangladesh's national pay scales changed since independence?
RQ2
What has been the relationship between salary revisions and inflation?
RQ3
Have successive pay-scale revisions adequately protected the real purchasing power of public employees?
RQ4
Does Bangladesh require a systematic inflation-adjustment mechanism in addition to periodic pay commissions?
RQ5
What principles should guide the formulation of the ninth national pay scale?
4. LITERATURE AND CONCEPTUAL FRAMEWORK
4.1 Nominal Wage and Real Wage
Nominal wage refers to the amount of money an employee receives. Real wage, by contrast, measures the quantity of goods and services that the nominal wage can purchase.
The basic relationship can be expressed as:
Real Wage=Price IndexNominal Wage×100
Thus, a salary increase should be assessed against changes in the general price level.
If nominal salary increases by 40 percent while the price level increases by 50 percent, the employee experiences a real decline in purchasing power.
4.2 Inflation and Purchasing Power
Inflation represents a sustained increase in the general price level. Its effect on wage earners depends on whether wages increase at the same pace.
The cumulative inflation factor over several years can be calculated as:
Cumulative Inflation=t=1∏n(1+πt)−1
where:
The salary required to preserve purchasing power can then be estimated as:
Required Salary=Base Salary×(1+Cumulative Inflation)
This methodology is particularly important when analysing the 2015–2026 period.
5. METHODOLOGY
5.1 Research Design
This study adopts a historical-comparative quantitative research design.
The analysis combines:
5.2 Data Sources
The principal sources are:
Government Sources
The National Pay Commission 2025 official portal contains historical national pay-scale materials, including the national scales from 1973 to 2005 and references to later scales.
The Office of the Chief Accounts Officer, Pension and Fund Management provides official references to:
The historical government document identifies, among others, the 1973 National Scale of Pay, the 1977 Services (Grades, Pay and Allowances) Order and the 1985 Modified New Scales of Pay.
International Data
Inflation data are cross-checked against the World Bank's World Development Indicators. The World Bank identifies the underlying inflation series as originating from the IMF International Financial Statistics database.
The World Bank's global inflation database covers countries for the period 1970–2025 and provides annual CPI inflation data.
6. HISTORICAL EVOLUTION OF NATIONAL PAY SCALES
The following table presents the principal stages of Bangladesh's national pay-scale development.
|
National Pay Scale |
Year |
Approximate Period |
Major Significance |
|
1st |
1973 |
1973–1977 |
First national salary structure after independence |
|
2nd |
1977 |
1977–1985 |
Major post-independence restructuring |
|
3rd |
1985 |
1985–1991 |
Modified new scales |
|
4th |
1991 |
1991–1997 |
Revised grade and pay structure |
|
5th |
1997 |
1997–2005 |
Major salary restructuring |
|
6th |
2005 |
2005–2009 |
Shorter revision interval |
|
7th |
2009 |
2009–2015 |
Significant increase in basic pay |
|
8th |
2015 |
2015 onward |
Major restructuring and grade rationalisation |
|
9th |
2025/26 |
Under review/formulation |
Intended response to contemporary economic conditions |
Table 1. Major National Pay-Scale Revisions in Bangladesh
The official government archive confirms the historical sequence of the early pay scales, including 1973, 1977 and 1985.
7. COMPARATIVE SALARY STRUCTURE
A particularly useful way of examining the evolution is to compare the basic salary at the lower and upper ends of the government pay structure.
Historical comparative data reproduced in a government-related research publication provide the following illustrative comparison for selected years:
|
Grade |
1985 |
1991 |
1997 |
2005 |
2009 |
|
Grade 1 |
Tk. 3,000 |
Tk. 6,000 |
Tk. 15,000 |
Tk. 23,000 |
Tk. 40,000 |
|
Grade 2 |
Tk. 2,850 |
Tk. 5,700 |
Tk. 12,900 |
Tk. 19,300 |
Tk. 33,500 |
|
Grade 3 |
Tk. 2,350 |
Tk. 4,750 |
Tk. 11,700 |
Tk. 16,800 |
Tk. 29,000 |
|
Grade 4 |
Tk. 2,100 |
Tk. 4,200 |
Tk. 10,700 |
Tk. 15,000 |
Tk. 25,750 |
|
Grade 5 |
Tk. 1,850 |
Tk. 3,700 |
Tk. 9,500 |
Tk. 13,750 |
Tk. 22,250 |
|
Grade 6 |
Tk. 1,400 |
Tk. 2,800 |
Tk. 7,200 |
Tk. 11,000 |
Tk. 18,500 |
|
Grade 7 |
Tk. 1,150 |
Tk. 2,400 |
Tk. 6,150 |
Tk. 9,000 |
Tk. 15,000 |
|
Grade 8 |
Tk. 900 |
Tk. 1,850 |
Tk. 4,800 |
Tk. 7,400 |
Tk. 12,000 |
|
Grade 9 |
Tk. 750 |
Tk. 1,650 |
Tk. 4,300 |
Tk. 6,800 |
Tk. 11,000 |
Source: Historical government pay-scale data reproduced in a development-policy publication.
Table 2. Selected Historical Basic Pay Comparisons
This table demonstrates the substantial nominal expansion of government salaries over the period. However, nominal growth alone does not establish whether employees became better off in real terms.
8. GROWTH IN NOMINAL BASIC PAY
The growth of the top basic salary is particularly striking.
Between 1985 and 2009, the maximum basic salary shown in the comparative series increased from approximately Tk. 3,000 to Tk. 40,000.
That represents:
3,00040,000−3,000×100=1,233.3%
Thus, nominal basic pay increased more than thirteen-fold.
However, such a calculation must not be interpreted as a thirteen-fold increase in real income.
The reason is simple: the general price level also increased substantially over the same period.
9. THE INFLATION DIMENSION
Inflation is essential for understanding the actual impact of pay revisions.
The World Bank's historical data show considerable variation in Bangladesh's annual inflation rate. Selected recent observations include:
|
Year |
Inflation (%) |
|
2016 |
5.5 |
|
2017 |
5.7 |
|
2018 |
5.5 |
|
2019 |
5.6 |
|
2020 |
5.7 |
|
2021 |
5.5 |
|
2022 |
7.7 |
|
2023 |
9.9 |
|
2024 |
10.5 |
|
2025 |
8.8 |
The most important observation is that inflation accelerated sharply after 2021.
The 2022–2025 period therefore represents a particularly important test of the adequacy of the 2015 pay structure.
10. The 2015 Pay Scale and Purchasing-Power Erosion
The 8th National Pay Scale was introduced in 2015.
The problem is not simply that the 2015 pay scale has remained in place for a long time. The more important question is how much the cost of living has increased during that period.
Consider a simplified illustration.
Suppose the price level in 2015 is indexed at: 100
If the cumulative price increase subsequently raises the index to approximately: 170
then a person receiving Tk. 20,000 in 2015 would require approximately: 20,000×1.70=Tk.34,000
in the later period merely to purchase an equivalent basket of goods.
Thus, an employee whose nominal basic salary remains Tk. 20,000 would effectively experience a substantial reduction in purchasing power.
This is the central economic argument for periodic pay adjustment.
11. Inflation Shock of 2022–2025
The recent inflation experience deserves particular attention.
According to World Bank data, Bangladesh's annual CPI inflation was:
These rates compound rather than simply add together.
The cumulative inflation factor for the four-year period is approximately:
(1.077)(1.099)(1.105)(1.088)
which is approximately: 1.42
Therefore, the price level increased by roughly 42 percent over these four years under this simplified calculation.
This means that an employee would require approximately: Tk.100→Tk.142
merely to maintain the same purchasing power.
This finding is highly relevant to the design of the ninth pay scale.
12. Real Wage Gap
The difference between nominal wage growth and inflation can be expressed as the Real Wage Gap.
Real Wage Gap=Nominal Wage Growth−Cumulative Inflation
A more rigorous measure uses the ratio:
Real Wage Index=CPI IndexNominal Wage Index×100
For example, suppose:
Then:
Real Wage Index=170150×100=88.24
The employee would therefore have approximately 11.76 percent less purchasing power than at the base period.
This demonstrates why nominal pay increases can be misleading if they are not analysed alongside inflation.
13. Pay Revision Intervals
Another important finding is the irregular interval between pay-scale revisions.
|
Revision |
Previous Scale |
Approximate Gap |
|
1973 |
— |
— |
|
1977 |
1973 |
4 years |
|
1985 |
1977 |
8 years |
|
1991 |
1985 |
6 years |
|
1997 |
1991 |
6 years |
|
2005 |
1997 |
8 years |
|
2009 |
2005 |
4 years |
|
2015 |
2009 |
6 years |
|
2025/26 |
2015 |
~10–11 years |
Table 3. Approximate Intervals
The most important observation is the relatively long period following the 2015 pay scale.
A decade-long gap is particularly problematic when inflation remains persistently positive.
14. The Case for an Inflation-Responsive Pay Mechanism
The historical evidence suggests that Bangladesh's pay system has relied heavily on periodic pay commissions rather than a predictable automatic adjustment mechanism.
This creates several risks.
First, purchasing-power erosion
Employees may experience declining real wages between pay commissions.
Second, wage compression
Lower-paid employees can become disproportionately affected because food, housing, transportation and education costs constitute a larger proportion of their expenditure.
Third, administrative uncertainty
Long intervals between revisions create uncertainty for employees and policymakers.
Fourth, recruitment and retention problems
If real wages deteriorate significantly, government employment may become less competitive relative to alternative employment opportunities.
Fifth, industrial relations pressure
Large accumulated gaps can produce stronger demands for substantial adjustments when a new pay commission is eventually constituted.
15. Proposed Framework for the Ninth National Pay Scale
The ninth pay scale should not simply apply a uniform percentage increase.
Instead, a multi-factor compensation model should be considered.
Proposed Model
Pay Adjustment=Inflation Compensation+Productivity Adjustment+Grade Rationalisation+Living Cost Adjustment
The following components should be considered.
15.1 Inflation Compensation
A minimum adjustment should compensate for cumulative inflation since the previous pay revision.
If cumulative inflation is 40 percent, an employee's nominal salary should ideally increase by at least an amount sufficient to prevent a major loss in purchasing power.
15.2 Lower-Paid Employee Protection
A uniform percentage increase is not necessarily equitable.
For example:
The higher-paid employee receives five times the nominal increase.
Therefore, the ninth pay scale should combine:
percentage-based increases + minimum guaranteed monetary adjustment
15.3 Grade Rationalisation
A modern pay system should minimise excessive compression between grades while maintaining appropriate differentiation according to:
16. Compression Ratio
One of the most important indicators of pay-system design is the ratio between the highest and lowest basic salary.
If:
Compression Ratio=Lowest Basic PayHighest Basic Pay
then changes in this ratio demonstrate whether the wage structure is becoming more or less compressed.
A very narrow ratio may discourage responsibility and career progression.
An excessively wide ratio may contribute to inequality and weaken perceptions of fairness.
Therefore, the ninth pay scale should establish an evidence-based compression ratio.
17. Pay and Fiscal Sustainability
An increase in public-sector salaries has direct fiscal consequences.
Government expenditure on salaries and allowances is recurrent expenditure. Therefore, a sustainable pay scale must consider:
The World Bank currently describes Bangladesh's economic environment as involving weak growth, high inflation and financial-sector stress, highlighting the importance of balancing wage adjustment with fiscal sustainability.
Consequently, the ninth pay scale should not be evaluated exclusively from either the employee's perspective or the government's fiscal perspective. It requires a balanced framework.
18. Pay Scale and Employee Motivation
Compensation affects organisational behaviour.
If employees perceive that their real income is continuously declining, several consequences may emerge:
Conversely, a transparent and predictable pay structure can strengthen:
Thus, pay reform should be regarded as an institutional investment rather than simply a budgetary cost.
19. Pay Scale and Inflation: A Policy Feedback Loop
The relationship between wages and inflation is not one-directional.
The traditional concern is:
Inflation → higher salary demand.
However, public-sector wage increases can also influence aggregate demand.
Therefore:
Inflation→Wage Adjustment→Consumption→Aggregate Demand
may create additional inflationary pressure if wage increases substantially exceed productivity growth.
The appropriate policy objective is therefore not simply maximum wage growth, but:
real-wage protection without generating unsustainable macroeconomic pressure.
This requires coordination between:
20. Internationally Relevant Pay-Policy Principle
The World Bank's inflation database demonstrates the importance of using consistent CPI methodology when evaluating long-term real wages. Its global database contains annual inflation series for countries covering 1970–2025.
For Bangladesh, this suggests that future pay commissions should explicitly publish:
Such transparency would substantially improve the quality of public debate surrounding national pay reform.
21. Major Findings
The study produces several major findings.
Finding 1: Nominal pay has increased substantially
Bangladesh's national pay structure has experienced substantial nominal expansion since independence.
Finding 2: Nominal growth does not equal real growth
The substantial increase in basic salary over the decades must be adjusted for inflation before determining whether employees actually became better off.
Finding 3: Revision intervals matter
Long intervals between pay revisions expose employees to cumulative purchasing-power erosion.
Finding 4: The 2015–2026 period is particularly important
The period following the 2015 pay scale has included substantial inflationary pressure, especially after 2021.
Finding 5: Recent inflation has intensified the problem
Inflation reached 7.7%, 9.9%, 10.5% and 8.8% in 2022, 2023, 2024 and 2025 respectively.
Finding 6: Lower-income employees are more vulnerable
Food and essential expenditure constitute a larger proportion of household budgets for lower-paid workers.
Finding 7: A periodic pay commission alone may be insufficient
A permanent inflation-monitoring mechanism could reduce the need for extremely large adjustments after long intervals.
22. Policy Recommendations
Recommendation 1: Introduce a Five-Year Maximum Review Cycle
The government should institutionalise a maximum five-year comprehensive pay review.
Recommendation 2: Establish an Annual Pay Review Index
An annual index should monitor:
Recommendation 3: Protect Lower-Paid Employees
The ninth pay scale should include a minimum monetary increase in addition to percentage increases.
Recommendation 4: Introduce a Real-Wage Protection Mechanism
A transparent formula could trigger partial adjustment when cumulative inflation exceeds a predefined threshold.
Recommendation 5: Separate Pay Reform from Allowance Complexity
The basic salary structure should be sufficiently realistic so that employees do not become excessively dependent on numerous allowances.
Recommendation 6: Publish a Pay Commission Statistical Annex
Every future pay commission should publish:
23. Proposed Formula for Future Pay Revision
A practical framework could be:
NPSt+1=NPSt×(1+π)×(1+p)
where:
However, a pure formula should not automatically determine the entire pay scale.
A policy ceiling and fiscal sustainability test should also be applied.
An alternative formulation is:
Adjustment=αCPI+βProductivity+γLivingCost
where:
α+β+γ=1
The values of α, β, and γ can be determined by the government based on economic circumstances.
24. LIMITATIONS OF THE STUDY
Several limitations should be recognised.
First, historical CPI series have undergone methodological and base-year changes. Therefore, long-run comparisons should use linked CPI series rather than mechanically combining incompatible indices.
Second, basic salary does not represent total employee compensation. Allowances, bonuses, housing benefits, medical benefits and pension arrangements can materially alter total remuneration.
Third, employees at different grades have different consumption patterns. Therefore, a single CPI does not perfectly represent every employee's individual cost of living.
Fourth, this article primarily examines aggregate inflation rather than household-level expenditure data.
Finally, the ninth pay scale should be analysed using its final officially gazetted structure once it is approved and implemented. The official National Pay Commission portal currently provides historical pay-scale resources and Commission information, but historical analysis should not confuse a proposed/recommended scale with a legally implemented pay order.
CONCLUSION
The history of national pay scales in Bangladesh demonstrates a fundamental tension between nominal wage adjustment, inflation, fiscal sustainability and employee welfare.
Since the introduction of the first national pay scale in 1973, successive governments have repeatedly revised public-sector salaries in response to changing economic and administrative conditions. The historical government records confirm the progression from the 1973 scale through subsequent revisions, while the official pension authority maintains the principal pay-order references.
However, the central lesson of the historical analysis is that nominal salary growth alone is an inadequate measure of compensation adequacy.
The purchasing power of a salary depends on the relationship between wage growth and the general price level. This becomes particularly important when pay scales remain unchanged for long periods.
The experience since 2015 illustrates this challenge. Bangladesh experienced particularly high inflation in 2022–2025, with annual inflation reaching 7.7%, 9.9%, 10.5% and 8.8%, respectively.
Therefore, the ninth national pay scale presents an opportunity to move beyond a traditional approach based exclusively on periodic salary revisions.
A modern pay policy should combine:
Inflation protection + fair grade structure + productivity + fiscal sustainability + periodic review.
The objective should not simply be to provide a higher nominal salary. It should be to ensure that public employees receive fair, predictable and economically sustainable real compensation.
The ninth pay scale should consequently be designed not only as a new salary table but as a long-term public-sector compensation framework.
Such a framework would improve employee welfare while simultaneously supporting recruitment, retention, administrative efficiency, fiscal discipline and institutional performance.
REFERENCES
Mohammad Nazmul Huda*, Navigating Fiscal Policy And Real Wages: An Empirical Review Of Bangladesh’s National Pay Scales (1st To 9th Pay Structures) And Purchasing Power Parity, Int. J. Sci. R. Tech., 2026, 3 (8), 654-665. https://doi.org/10.5281/zenodo.21989816
10.5281/zenodo.21989816