The goals of the reward system reform in public administration have not been achieved - State Audit 0 8

The institution reminds that the goal of the reform was to create a unified, transparent, and competitive wage system. Although overall compensation expenses have significantly increased, wage inequality between agencies and institutions persists. Employee compensation is still determined by historically established basic funding rather than the job's value and content, notes the State Audit.

Council member of the State Audit Gatis Litvins stated that the reform of the reward system was necessary, but the created system does not ensure equal and competitive wages if the reform's goals are not consistently adhered to across the public administration.

"The audit results show that the problem is not in the amount of available funds for public administration as a whole, but in their distribution. As long as wages are determined by historically established basic funding, equal pay for equal work in the public sector is impossible," explained Litvins, adding that the report is about "values - fairness and respectful treatment of everyone."

Among the positive steps during the reform, the State Audit notes the development of a job catalog with an updated structure and clear classification, where job coefficients are defined in relation to the basic monthly salary. The coefficients for the salaries of senior public officials have also been clarified, taking into account the principles of separation of powers and hierarchy, which strengthens the internal coherence of the system.

However, according to the State Audit, wage inequality for similar positions in public administration remains. For similar or very similar positions with comparable job content and levels of responsibility, the level of pay can differ between institutions by up to 30%.

In some cases, an employee with a lower salary group and even with a similar or lower job evaluation receives a higher salary than an employee with a higher group. It also happens that a lower group position in one institution is paid better than a higher group position in another. This indicates that the state as an employer evaluates equivalent work differently.

Despite the fact that in 2024, overall labor costs in the institutions included in the sample have significantly increased, inequality in resource distribution among them has not decreased. Auditors point out that basic funding has proven resistant to reform - some institutions can reach the average point of the salary scale with the existing funding, while others lack up to 62% of the necessary funds.

The State Audit reminds that since it is necessary to find funds for defense needs, the Cabinet of Ministers has decided to significantly limit the reward fund in the budget for 2025, establishing that its increase should not exceed 2.6%. Exceptions are provided, mainly for the defense and internal security sectors.

The State Audit emphasizes that the effectiveness of the growth of reward expenses can only be assessed in the context of the funding structure. These issues will be addressed in a separate audit dedicated to the accuracy of preparing the consolidated state report for 2025.

The audit showed that the variable part of the salary in a number of institutions is used systematically, rather than as an exception. In 2024, in 31 out of 40 institutions in the sample, bonuses for "significant contributions to achieving strategic goals" were received by an average of 31% of employees, and in some institutions, more than half, on a permanent basis. According to the State Audit, in practice, such bonuses replace the leveling of salaries.

Also, in 10 out of 40 institutions, the share of those receiving monetary bonuses exceeded 70% of the average number of employees.

If the majority of employees receive bonuses or awards, this, in the auditors' opinion, indicates compensation for insufficient monthly salaries, rather than encouragement for outstanding work results.

Comparing the situation before the reform and at the end of 2024, the State Audit established that the number of staff positions has hardly changed - 49,658 before the reform and 49,532 at the end of 2024. The number of vacant positions has also decreased slightly, while in several institutions, a high proportion of vacancies and long-unfilled positions still persist.

The audit confirms that non-competitive salaries continue to affect staff stability. In the overwhelming majority of institutions in the sample, employee turnover exceeds 15%, which is considered a high level in personnel management theory. Compared to 2022, turnover has increased in more than a third of institutions, including the Ministry of Health, the Procurement Oversight Bureau, and others.

A moderate level of turnover (less than 15%) was found only in two institutions - the Agricultural Support Service and the Civil Aviation Agency, the latter of which is not funded from the state budget.

High employee turnover and difficulties in filling vacancies are cited as the main reasons for requests for additional funding to increase salaries. This indicates a systemic risk: without competitive pay, public administration cannot attract and retain qualified personnel. In the long term, this threatens the quality and efficiency of the institutions' work, auditors emphasize.

The State Audit notes that after 2024, there have been changes in the application of bonuses and job structures in some institutions, but unequal opportunities for institutions to provide equal and competitive wages persist.

Bonuses of up to 75% of the monthly salary are awarded based on annual evaluations. Their size is determined by the institution in accordance with the employee's evaluation and the available budget. The audit analyzed the results of such evaluations and found that in a number of institutions, more than half of the employees receive the highest rating of "exceeds requirements."

Moreover, a significant proportion of employees receive the rating "partially exceeds requirements," indicating that high ratings have become the norm rather than the exception, as good practice requires.

The State Audit concludes that such a practice undermines trust in the performance evaluation system and its connection to actual achievements. In institutions, an average of 72% of employees receive bonuses annually. Of these, 41% receive the maximum amount, while 47% receive between 65% and 74% of their salary.

The audit also revealed significant differences in the availability of motivational elements in public administration. The amount of the health insurance premium in 2024 ranged from less than 375 euros to the maximum allowable 750 euros. In six institutions (15% of the sample), the premium reached the limit, while in three, it was less than half of this limit.

A similar situation exists with compensation for vision correction: the amount of compensation varied fivefold across institutions - from 50 to 340 euros, and the frequency of payments also varied.

The audit showed that the availability of motivational elements directly depends on the budgetary capabilities of the institution, rather than the nature or volume of work performed.

Based on the audit findings, the State Chancellery received five recommendations, and the Cabinet of Ministers received two proposals to address systemic issues.

The State Audit emphasizes: without a political decision to equalize the reward fund among institutions, the goals of the reform will not be achieved, and the existing differences in the public administration system will persist.