Directorate for Public Governance

Public Sector Compensation in Times of Austerity

Published on November 15, 2012

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.


Executive summary
Current trends in the compensation of public employees in OECD countries
Public sector compensation management in a changing world
Managing compensation in a post “New Public Management” era
Policies and practices governing public sector compensation planning
Key considerations in reforming the government compensation system
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