The National Assembly adopts the proposed Common Foundations of the Public Sector Salary System Act

“The public sector salary system no longer meets the changed requirements faced by public service employers and employees. Therefore, the Common Foundations of the Public Sector Salary System Act is a necessary condition for reforming the public sector salary system," stressed the Minister of Public Administration, Franc Props, when presenting additional clarifications at a National Assembly meeting.

The new salary Act regulates common foundations that apply to the entire public sector, and it also defines the specifics within the five salary pillars: that of officials, of public employees in state bodies, municipalities and public firefighting institutions, of public employees in healthcare and social care, of public employees in research, education and culture, and the salary pillar of public employees in public agencies, funds and institutions.

The principle pursued in salary pillars is the principle of equal pay in comparable positions, titles and functions.

The new Act pursues the goal that no one’s basic salary is lower than the minimum wage, while at the same time laying down provisions for a better connection between pay for work and work results, provisions for introducing greater flexibility in determining wages, enabling better adaptation to labour market supply and demand, reducing disparities in compensation for the same work performed by older and younger workers, establishing appropriate mechanisms to facilitate attracting new staff, and eliminating unnecessary administrative obstacles. The Act also introduces changes to the system of employee compensation and promotion and redefines the method of indexing salaries for inflation.

The key part of the Act is the new pay scale, which sets out 67 pay grades, with the range between pay grades determined as a nominal value amounting to 3% instead of the current 4%. Salary grades are determined in nominal value, the first pay grade being set at the amount of the minimum wage for 2024. The value of pay grades is adjusted once a year, and the method of adjustment is determined by law. The adjustment of pay grade amounts will be negotiated by 1 April of each year; if an agreement is not reached by the relevant date, the pay grade amounts will be adjusted by 80% of the growth in consumer prices.

The transition from the current to the new pay scale eliminates the problem of a large number of jobs whose starting salary is lower than the minimum wage, and the problem of equal pay for public employees whose basic salary is lower than the minimum wage, regardless of whether they are classified in different pay grades. The Act also includes a safeguard that no public employee will receive a salary lower than the minimum wage upon or after entering the new salary system. If a public employee is categorised in a pay grade whose amount is less than the minimum wage, the aforementioned is achieved by classifying said public employee in the first pay grade whose amount is higher than the minimum wage and that can otherwise be achieved through promotion.

Transition to pay grades according to the new pay scale also means higher basic salaries at the start of careers, which will also be stimulating for young people who are just entering the labour market. The Act also changes the age criteria for calculating annual leave entitlement, so that public employees who have reached the age of 55 will be entitled to five additional days of annual leave. The current act sets this age milestone at 50 years of age.

The Act also includes a provision that prevents excessive real wage declines by adjusting pay grade amounts on the pay scale on an annual basis, by at least 80% of inflation. If there is an agreement between the social partners on a higher adjustment, then the agreed (i.e. higher) adjustment will apply; otherwise, the legally determined automaticity will be applied, i.e. an adjustment in the amount of 80% of the rate of inflation.

The Act also changes the promotion regime for public employees to a higher pay grade. Performance assessments, which have so far constituted a condition for promotion to a higher pay grade, have been abolished. As a rule, public employees will be promoted by one pay grade after a certain period of time (from two to four years), but only a limited number of civil servants (10%) will be entitled to (fast-track) promotion by two salary grades based on legally defined criteria. Reducing the difference between the pay grades in the new pay scale from 4% to 3% while introducing promotion by normally a single pay grade should contribute to a slower long-term wage bill increase in the public sector.

The Act provides for the integration of performance-related bonus payments for regular work and overtime, thus relieving the administrative burden and simplifying the system. Merging the two types of work-related performance facilitates a clearer and more transparent possibility of variable remuneration that prevents the possibility of double remuneration for the same work. The amount of the performance-based salary component for performing regular duties is also being increased to 30% of public employees’ basic monthly salary (up to 20% under the current regulation), thereby pointing to an interrelation between remuneration for work and work results. Moreover, employers can still allocate savings from salary and project funds for the payment of performance-based bonuses.

The new Act also brings greater flexibility in determining the salary amount for employees with relevant experience and special skills and competencies. Due to the higher amount of funds allocated for variable remuneration, department heads will be given greater opportunities to remunerate above-average performing public employees, as the Act seeks to provide more stimulating remuneration of employees with higher performance results and a greater workload. Since the new salary Act is also the result of joint efforts to make employment in the public sector, which offers a stable, stimulating and flexible working environment, attractive again, higher rankings of civil servants (up to 10 grades) are additionally enabled when employed in the public sector. Its purpose is to facilitate staff recruitment in the public sector and retain existing staff that are crucial to the provision of efficient, high-quality public services.

The Act also contains a new provision regarding the conclusion and validity of the Collective Agreement for the Public Sector, which is in line with the Constitutional Court’s Decision No. U-I-249/10-27 of 15 March 2012 that established the unconstitutionality of the provisions of the Public Sector Salary System Act (ZSPJS) relating to the method of conclusion and the terms and conditions regarding the validity of the Collective Agreement for the Public Sector as amended. The Act also ensures the full implementation of Constitutional Court Decision No. U-I-772/21-37 of 1 June 2023 pertaining to the unconstitutionality of judges’ salaries.

As regards the adjustment of the values of pay scale grades, the salaries of public employees will be adjusted first. The Government decided that the officials of the National Assembly and the National Council should obtain the right to a higher salary only at the beginning of the relevant body’s term. The salaries of other officials, including in the judiciary, would be adjusted gradually, similar to the salaries of public employees.

In line with the Implementing Decision of the Council of the European Union approving the Recovery and Resilience Plan, salary system reform is a constituent part of the Modern and Resilient Public Sector reform. The reform will be completed when the Act regulating the salary system in the public sector comes into force. The implementation of the Recovery and Resilience Plan is funded by the European Union – NextGenerationEU.