Public Sector Compensation in Times of Austerity
Austerity drives are leading governments to reduce operational cuts through the wage
bill and staffing levels. A big lesson from past experience suggests that when pay
cuts and freezes are necessary, it is essential to assess the savings relative to
the costs – the loss of institutional knowledge if key contributors retire or resign,
the time lost by managers and employees who have to deal with the issues related to
vacancies and reorganizations, the lost productivity while people acquire new skills
and learn new jobs, and the falloff in performance among employees who become discouraged
or unsatisfied. This assessment does not appear to have taken place in the current
crisis.
This report argues that any new approaches to public sector pay must help to: enhance
external competitiveness of salaries; promote internal equity throughout the public
sector; reflect the values of public organisations; and align compensation with government’s
core strategic objectives. It calls for a recognition of the supply and demand for
specific expertise.
Published on November 15, 2012