Industries Today, 20:174 Officials’ salaries should not be frozen, the government believes

The State Chancellery states that the MK has received the Saeima’s statement of January 12, 2023, with which, taking into account the current economic situation, the collective submission of 10,434 Latvian citizens “On freezing the salaries of the President, ministers and other public servants” has been sent to the MK for evaluation.

The MK has familiarized itself with the submission and also provides an evaluation. Namely, as stated in the State Chancellery, with the law “Amendments to the Law on Remuneration of Officials and Employees of State and Local Government Institutions”, a reform of remuneration was implemented, the overall goal of which was to improve the efficiency and quality of the work of the state administration by arranging the remuneration system, which had not been changed since 2010.

Remuneration reform was necessary to ensure its correct application, including the elimination of bonuses, replacing them with a monthly salary for highly qualified specialists and managers. In the comparative study on the amount of remuneration, labor market remuneration experts pointed to the critically low level of the overall remuneration trend in the state administration.

Thus, the unpredictability of the remuneration system, which resulted in the departure of high-level specialists and experienced managers from the state administration, has been eliminated. As an example of the need for compensation reform, one can cite the high turnover of employees, for example, in the Construction State Control Office. The average number of persons who left their positions during the year was 33%, including the lowest proportion of employees who left was 18%, and the highest – 50% of the number of positions in the relevant position group. Reviewing the amount of monthly salaries at the Construction State Control Office, the average monthly salary of 90% of employees was increased by 498 euros, or 32.7% on average, and the number of released employees has decreased by 50%, compared to the first half of 2022.

The State Chancellery states that the remuneration reform aims to improve the competitiveness of remuneration by setting the target level of monthly wages in the state administration corresponding to 80% of the wage level paid in the private sector, as well as changing the proportion between the permanent and variable part of wages and introducing other modern wage solutions.

Therefore, the remuneration reform imposed an obligation on institutions to develop an internal remuneration system for determining the monthly salaries of officials and employees, in which one of the important aspects is the work performance of each employee. At the same time, in the opinion of the State Chancellery, the reform makes the determination of remuneration much simpler – primarily determining the amount of the monthly salary according to work performance and the financial resources available to the institution, but bonuses – only in individual cases. Thus, the employee is also provided with stability and predictability of his regular income.

Remuneration reform was also carried out in connection with the findings expressed by the Constitutional Court that it is necessary to ensure a balance of remuneration between the branches of state power – the judiciary, the legislature and the executive – by setting the same monthly salary for all the highest state officials, including the Prime Minister, the Speaker of the Saeima, the President of the Supreme Court and To the President of the Constitutional Court, as well as to the President.

When balancing the branches of power and determining the coefficients, not only the values ​​of the coefficients determined so far for the highest state officials were taken into account, but also the fact that the state administration is unified, all state administrative institutions, including derived public entities, are arranged in a single hierarchical system, in which the highest institution according to the Constitution, there is a MK. Thus, all direct administrative institutions are arranged in a hierarchical order in such a way that they are directly or through another direct administrative institution subordinate to the MK.

Thus, the remuneration reform provided for an increase in remuneration for all levels, as officials in the state administration are included in a single hierarchical system, in which one official is subordinate to another official.

In compliance with the above, the law on remuneration of officials and employees of state and local government institutions stipulates that the amount of monthly salary for officials of state institutions is determined so that the monthly salary does not exceed the monthly salary set for the Prime Minister. On the other hand, the monthly salary of the employees of the municipal institution may not exceed the maximum monthly salary set for the chairman of the relevant municipal council.

After reviewing the remuneration system of all branches of government in a hierarchical manner, as well as taking into account the established trend towards determining competitive remuneration, which is adjusted to responsibility and work performance, as well as to be able to attract as many highly qualified managers as possible from the private sector as well, the remuneration reform provides that direct state administration in institutions, in order to determine the monthly salary for the manager, the type of institution, the number of positions in the institution and the amount of annual administrative budget expenses of the institution are also taken into account. On the other hand, when determining the remuneration of local government deputies, it is taken into account whether they have been elected to the capital council, city council, county council, whose administrative territory has a population of more than 20,000, or county council, whose administrative territory has a population of no more than 20,000.

In addition, it should be noted that the compensation reform provides that in the future the amount of the official’s monthly salary multiplied by the market coefficient may not exceed the monthly salary of the Prime Minister, as well as the monthly salary of the official together with the bonus may not exceed the monthly salary of the Prime Minister.

The MK, taking into account the current economic situation, the prepared macroeconomic forecasts and the available resources for ensuring the fiscal space, observing the fiscal conditions set by the Fiscal Discipline Law for the preparation of the medium-term budget framework bill, has ensured the implementation of several measures in connection with compensation expenses, including the law “On the State Budget 2023. and the budget framework for 2023, 2024 and 2025” for the year 2023 funds in the amount of 25.261 million euros have been allocated to the state’s direct administrative institutions to ensure that the monthly salary of those employed as of April 1, 2023 is not lower than the minimum of the specified monthly salary group interval.

During the following years, it is planned to gradually increase the compensation for groups of employees, where currently there are not enough funds to reach the middle point of the scale, taking into account that the maximum monthly salary for employees in state and local government institutions was determined when the Law on Compensation of Officials and Employees of State and Local Government Institutions was adopted in 2010.

Also, since according to macroeconomic forecasts and later the data published by the Central Statistics Office on the 2022 consumer price index and average monthly gross wage growth data of national economy employees, the law on the remuneration of officials and employees of state and local government institutions would provide that the increase in the base salary in 2024. should be +12.4% compared to 2023, which would be affected by the rapid increase in inflation and the increase in the average monthly gross wages of those employed in the economy,

Before the second reading of the draft law “On the state budget for 2023 and the budget framework for 2023, 2024 and 2025”, the MK submitted a proposal to supplement the draft law with a new article in the wording, which provides “to determine that if, when calculating 2024 or 2025 base monthly salary of officials of state and local government institutions, basic monthly salary of finance and insurance, basic monthly salary of the electronic communications and energy sector or basic monthly salary of the chairman of the port board, obtains a figure that is greater than six, then the corresponding basic monthly salary of the current year is indexed with the number six” .

The mentioned regulation on the reducing mechanism of the basic monthly wage increase, when choosing the number six, was determined because it corresponded to the average wage increase in recent years.

Thus, if the growth rate of the country’s overall economic growth remains slow, then the overall remuneration growth rate is limited for the public sector, which is directly dependent on the private sector and the overall growth of the country.

Also, it can be concluded that the institutions primarily evaluated the resources at their disposal, which could be directed to increase the remuneration. The review of expenses has given the opportunity to review and increase compensation for employees in some institutions from January 1, 2023.

Evaluating what was done in the initial period of the remuneration reform, it can be concluded that in the period from July 1, 2022 to October 31, 2022, monthly salaries in the state direct administration institutions were revised in total for 31.43% of the occupied positions and the average increase was in the range of 46, 20 euros to 981.16 euros.

According to the data provided by the authorities, the salary of most of the employees in the state direct administration institutions is in the range of 700 to 1500 euros (gross), while the salary of more than 3000 euros (gross) is set for 2800 employees.

On the other hand, analyzing the data of the Central Statistics Office, it can be concluded that the monthly salaries of municipal employees in some municipalities have also increased, including within the limits of 10-13%.