The outlook for public servants’ compensation, between flexibility and harmonisation

Although it is no longer the only basis for the appeal of public sector employment, pay rates and the prospects for increases provided by compensation rules are still the focus of attention, especially with the onset of a fresh round of inflation.

Compensation arrangements are intrinsically linked to the civil service system in place (career- or position-based) and are sometimes criticised for a lack of flexibility when addressing the demand in professions experiencing recruitment difficulties.

Faced with stiff competition from the private sector, Germany has overhauled the conditions for paying monthly bonuses to staff with technical responsibilities. The bonus can be paid in a lump sum in exchange for a commitment to remain on the government’s payroll for up to four years (the period may be renewed twice, in which case the bonus is cut by a third).

In Italy, the government has recently introduced a “high professional standards” category for professions requiring special skills and/or expertise across all hierarchical levels. It has its own pay scale, which means that  increases can be granted independently to more closely reflect the situation on the labour market.

With the exception of the senior civil service (where compensation still varies widely, by up to 2.5 times), civil servants in the United Kingdom, who are paid according to their grade level and the government department in which they work, have fairly standardised pay bands. This is due to the introduction of recognised professions to foster inter-department mobility.

Some countries are looking to promote mixed career paths. In Australia, the wage rise cap of 2% per annum has been removed to enable pay increases to match, but not exceed, rises in other sectors. The aim of the measure is to help redress the current imbalances.

With the bonus with individual choice (IKB), the Netherlands is allowing staff to decide how they use part of their income. This bonus, which totals 16.25% of the annual salary, can be converted into days of leave, contributed to a pension fund, used to finance personal training or be paid out (a mix of options is allowed, but only the first three are tax-free).

Very few systems still provide automatic inflation adjustments to keep up with the cost of living. Currently, this is the case in only Belgium and Luxembourg. A calculation formula determines a new increase coefficient if the consumer price index reaches or exceeds a certain threshold.

Collective bargaining (1) is still central to wage measures. Spain is the first European country to have indexed increases to the growth rate. As part of a labour package adopted in 2018, there are both fixed and variable portions. The variable portion (1.3%) is paid if a defined threshold is reached for each of three years.

Due to extraordinary circumstances (the COVID-19 pandemic and a fall in purchasing power), Switzerland has introduced an inflation compensation payment of 0.5%. Although it is a one-off measure, it could be renewed and has been presented as a strong message for the social partnership and a sign of recognition for staff.

¹ The most recent increases decided on are 3.2% in two stages over 28 months in Germany (October 2020) and 4.15% for three years in Italy (November 2021). Spain has just started fresh talks and is offering 2% in 2022. The United Kingdom has had a pay freeze in effect since 2018 but has granted a £250 payment to staff earning up to £24,000 per annum.