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Austerity drives are leading governments to reduce operational expenditures through the cuts to the wage bill and staffing levels.
Past experience suggests that when pay cuts and freezes are necessary, organisations should assess the savings relative to the costs. These costs can include the loss of institutional knowledge if key contributors retire or resign; the time lost by managers and employees in managing vacancies and reorganisations; the lost productivity while staff acquire new skills and learn new jobs; and the decrease in performance among employees who become discouraged or dissatisfied.
Recent policies affecting public sector wages do not appear to have included such an assessment of the relative costs and benefits.
This book 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.
Public Sector Compensation in Times of Austerity offers an evidence-based contribution to new thinking about human capital, government’s most valuable asset and the most difficult to replace
The current economic and financial crises – sometimes referred to as the "Great Recession" – have made compellingly clear the need to reduce payroll costs and manage employee compensation more effectively. These imperatives are in fact part of broader initiatives to restructure government so as to reduce costs more generally. Some countries have proceeded to freeze or reduce salaries; others have yet to make that decision. Plans have also been announced to reduce employee benefits – primarily pensions – but the savings from these changes would only be realised over extended periods.
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