Why public sector needs compensation survey?
6/27/2024
Mariel Kivi, Estonian Ministry of Finance
Why has the Estonian government decided to centrally commission compensation surveys from 2011?
Under a decentralised pay system, central state interference in the human resource management of agencies will be reduced, making the existence and quality of a central classification of public jobs and the availability of comparative pay data more important.
The Classification of Public Sector Employment provides an overview of public sector employment and compensation costs. Once we know the number of jobs by classification of government jobs, we can analyse different indicators:
- how different functions are covered by human resources;
- how the levels of professional competence or management are distributed across the different functions;
- the number of posts in the different jobs and levels of government;
- how the nature of the work changes over time and whether it meets the country's development needs;
- plan the composition and preparation of the national workforce in the long term, in line with demographic developments and other challenges.
The classification also makes it possible to compare salaries paid in different institutions for similar work.
How are the results used and what value is created for the institutions?
Agencies use the results to implement their pay policy, i.e. if the objective is to pay the median market salary to staff, then staff salaries are adjusted according to the results (within the agency's budgetary possibilities). The majority of the institutions compare salary levels with the civil service, but there are also certain groups of employees (employers) whose reference group is the private sector. The information is also used to determine salary levels in recruitment.
Based on the results of the survey, what has changed or what decisions have been taken on the basis of the data?
On the basis of the results, the Ministry of Finance will make comparisons by agency and by government department to inform the government, which in turn will make decisions on changes to the wage bill. As the methodology is comparable with the private sector, a comparison between public and private sector salaries will also be made in order to be competitive in retaining and recruiting good professionals.
How is the process structured and how are roles shared?
The Ministry of Finance organises an annual procurement procedure for conducting the salary survey, distributes information to the institutions about the salary survey and organises harmonisation meetings of the service groups to review the placement of posts and propose changes. The Ministry then forwards the data to a partner for analysis. The latter then carries out the analyses and provides the institutions with access to the database for comparing their own institution's posts with both public and private sector pay statistics. In addition, the Ministry collects proposals for changes to the job classification and the partner prepares an updated document.
How do the private and public labour markets differ and does this affect pay practices?
Movement of workers between the public and private sectors is encouraged and easy, so compensation levels must be kept competitive. At the same time, there are a number of jobs that are difficult to compare with the private sector, e.g. police officers, rescue workers, policy makers, public supervision, etc.. As the methodology of the compensation survey is similar to the private sector, a comparison with the private sector can be established by scoring different jobs.
What is the experience of the Estonian civil service with the use of performance fees?
The Civil Service Act imposes limits on variable pay, or performance pay: it may not exceed 20% of a civil servant's annual basic salary. For this reason, public authorities do not pay very high performance bonuses. This, however, creates a larger pay gap with the private sector in terms of total pay.