On January 1, 2024, Ukraine launched the next stage of public administration reform: the system of remuneration for civil servants was changed. A key element of the reform is a significant reduction in the variable part of payments, i.e. various bonuses.
Since the fixed share of civil servants’ salaries (salary, bonuses for length of service and rank, vacation pay) was 40% by 2024 and the variable share was 60%, a significant reduction in their salaries was expected and, as a result, a massive outflow of employees to the private sector.
What was the purpose of the government’s reform of public officials’ remuneration, what are its first results as of April, and have the gloomy predictions come true?
“Fair” reduction of bonuses
The National Agency of Ukraine on Civil Service, citing the opinions of domestic and foreign experts, argued that the system of remuneration of officials should be reformed because it was unfair and inefficient. According to the agency, the reform of the civil servants’ remuneration system has the following goals:
1. Eliminate inequity in remuneration, which, according to modern global standards, should primarily take into account the qualifications, efficiency, level of responsibility and personal contribution of the employee.
2. Abolishing the “outdated and inefficient” current system, whereby the official salary is only 39-49% and approximately 50% of payments are variable (these are “bonuses, allowances, incentive payments, the amount of which is usually determined by the manager, often based not on performance, but on his or her own subjective vision and attitude towards the employee”). The reform aims to reduce the number of salary components, make the remuneration system transparent and the amount of salary dependent on the employee’s performance, and minimize abuse and corruption. Therefore, the main part of the salary should not depend on the decision of the manager and should be at least 70%.
3. Gradual approximation of salaries to market rates, which will help attract more highly qualified specialists to the civil service and motivate those who already work there.
The main program documents in this area are the Strategy for Public Administration Reform and the Concept for Reforming the Civil Servants’ Remuneration System, prepared in 2021 and 2020, respectively, and approved in 2022. At the end of 2023, the Cabinet of Ministers of Ukraine adopted Resolution No. 1409, according to which the variable part of a civil servant’s salary should not exceed 30%. In addition, in general, salaries are determined by the employee’s grade, i.e., their place in the classification of civil service positions depending on the type of body and level of position.
At the same time, according to Prime Minister Denys Shmyhal, the government intends to reduce the number of civil service vacancies by almost 20,000. The start date of the planned “purges” is April 1, 2024.
“According to the Ministry of Finance, the new remuneration system and the reduction of vacancies will save approximately UAH 8 billion of budget funds and will be used for security and defense needs in 2024,” Shmyhal emphasized.
Officials will flee to the private sector
These changes caused a wave of negativity. Experts and officials claim that the reform of the civil servants’ remuneration system will lead to a sharp drop in salaries and a massive outflow of personnel from the civil service. For example, in the winter, the head of the Lviv Regional Military Administration, Maksym Kozytskyi, calculated in his column for Ukrayinska Pravda how the salaries of civil servants in his region, where about 600 people are subject to Resolution 1409, would change.
“Now let’s compare how the salaries of LOVA employees will change. By 2024, the chief of staff would receive UAH 55,000, the head of the department would receive UAH 35,000, the head of the department would receive UAH 23,000, and the chief specialist would receive UAH 17,000.
Starting in 2024, the chief of staff will receive UAH 27 thousand, the head of the department – UAH 18 thousand, the head of the department – UAH 12 thousand, and the chief specialist – UAH 11 thousand.
As you can see, this year’s salary cut for LEA employees will range from 36% to 50%, depending on the position,” wrote the head of the Lviv Regional Labor Office.
According to him, even before the reform, in 2023, there were no queues of people wishing to work at the Lviv Regional Military District Administration. Last year, 59 people were hired and 93 people were fired. He expressed confidence that lower wages would exacerbate the shortage of personnel.
Kozytskyi also noted that, most likely, “specialists will look for work in the private sector and local governments, where salaries are higher. Only those who simply have nowhere else to go or those who are simply working until they retire will remain.”
Additional payments at the expense of local budgets
Apparently, having realized this threat, in late January, the government started looking for sources of additional payments to officials. And he decided to do it at the expense of local budgets.
On January 30, the representative of the Cabinet of Ministers in parliament, Taras Melnychuk, announced amendments to the government’s resolutions of November 9, 2016. No. 787 “On Expenditures on Remuneration of Employees of Local State Administrations” and of April 25, 2023. No. 391 “Certain Issues of Remuneration of Employees of State and Local Government Bodies during Martial Law”. The amendments stipulate that regional state administrations may receive additional funds from local budgets to pay officials, in particular to cover the components of their salaries. The document allows applying an additional coefficient of salary increase determined by the scheme approved by the Cabinet of Ministers Resolution No. 1409, which entered into force on January 31, 2023.
This initiative of the government, as in the case of the reform of the remuneration system, also encountered a wave of indignation among civil servants.
“Yeah, first they adopted the stupid Resolution 1409, which devalued the work of accountants, and now they can pay extra at the expense of the local budget? And if there is no local budget, then what? The chief accountant is responsible on a par with the head of the company, but is paid like a sector manager? That’s fair! ” users wrote on the social network.
Statistics show salary growth
Despite the negative expectations of a significant drop in wages, statistics show the opposite – at least on paper. Yes, On April 2 this year, the Ministry of Finance updated the dashboard, an analytical tool for the remuneration and number of civil servants. According to the agency, in February, compared to January, the average salary among central government agencies that submitted information through the Automated Information System for Online Interaction with State Budget Entities (AIS GRK-VEB) increased from UAH 38,000 to UAH 43,000, and the average salary increased from UAH 22,000 to UAH 25,000. Salaries of employees in some positions have also increased. In particular, in February, specialists in central government agencies who were transferred to the new remuneration system received an average of UAH 4.2 thousand more than in January this year.
“Compared to January, in February, almost all agencies switched to a new, graded system of remuneration. That is why we can see an increase in the average level of remuneration. The average salary level is affected by such one-time payments as compensation for unused vacation, health benefits, and severance pay upon dismissal.”Roman Yermolychev, Deputy Minister of Finance of Ukraine, commented on the data.
At the same time, government officials continue to say that due to the abolition of most bonuses and allowances in early 2024, wages have dropped significantly and can no longer compete with the private sector, as they did before the reform was implemented.
To what extent is the preform of civil servants’ remuneration will have an impact on their workload and the personnel situation in general, only time will tell.
