1. THE REFORM OF THE REMUNERATION SYSTEM IN LITHUANIAN CIVIL SERVICE REASONS AND OBJECTIVES THE REFORM OF THE REMUNERATION SYSTEM IN LITHUANIAN CIVIL SERVICE REASONS AND OBJECTIVES Osvaldas Šarmavičius Director of the Civil Service Department under the Ministry of Interior of the Republic of Lithuania Workshop on Remuneration Systems for Civil Servants and Salary Reform Vilnius, 14 December 2006 CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR2006

2. Legal regulation of the remuneration system 1990 – 2000 (1) 1991 – Government Resolution of the Republic of Lithuania ‘On the Provisional Pilot Procedures of Remuneration for Work of Senior officials of the State, State management and law enforcement institutions as well as other officials’. 1995 – Law on the Officials of the Republic of Lithuania: Remuneration of officials shall consist of the official salary and other payments established by law. Salaries of officials shall be fixed by the law which regulates the remuneration of employees of all offices and organisations financed out of the state and municipal budgets and the attribution of offices to appropriate categories. 1996 – Republic of Lithuania Law on the Work Salary Bases of Republic of Lithuania State and Government Heads, Seimas Members, State and Municipal Institution and Organisation Workers : Salary – pecuniary evaluation of work – service salary (monthly salary), bonuses, allowances, benefits. CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006

3. Legal regulation of the remuneration system 1990 – 2000 (2) 1999 – Law on Civil Service: Remuneration of a civil servant shall be comprised of: 1) the basic salary; 2) a seniority bonus; an additional pay. The amount of the basic salary shall be determined in accordance with the coefficient of the basic salary. The basic salary coefficient as expressed in LTL and cents shall be equal to the amount of the minimum monthly salary (MMS) approved by the Government of the Republic of Lithuania (from June 1998 – 430 Lt). 2000 – The Law Amending the Law on Civil Service : Remuneration of a civil servant shall be comprised of: 1) basic salary or hourly (daily) pay; 2) bonuses, additional pay. The positions are divided into 30 job categories. CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006

4. CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006 2002 FEATURES OF THE REMUNERATION REFORM The amount of the basic salary depends on the job category and is influenced by the MMS. Jobs are divided into 20 job categories. BASIC SALARY (depending on the position level and grade) BONUS (Seniority, Qualification class or category, degree, rank) ADDITIONAL PAY (work during holidays and days off, night shifts, detrimental or dangerous, for additional tasks) REMUNERATIO N CONSISTS

5. LEGAL REGULATION OF THE REMUNERATION SYSTEM FOR CIVIL SERVANTS 2002-2006 Remuneration of civil servants is regulated by: 1.Law on Civil Service (2002 with later amendments); 2.Republic of Lithuania Government Resolutions ‘On the Increase of Minimum Pay’ (18 July 2003,No. 937; March 24, 2004 No. 316; April 4 2005 No. 361; March 27 2006 No. 298 (applied at the moment)); 3. Republic of Lithuania Government Resolution of May 20 2002 No. 684,’On the Approval of the Unified Job Descriptions of the Civil servants with political appointment of the Prime Minister, Office of the Government, Ministries, public institutions and institutions under the ministries’; 4. Republic of Lithuania Parliament Resolutions June 27 2002 No. IX-992 ‘On the Approval of the Unified Job Descriptions of the Civil servants with political appointment of the Parliament, office of the Parliament, the institutions accountable to the Parliament, the Office of the President, the Institutions accountable to the President, National Court administration, courts, prosecutor’s offices and municipal institutions’; 5. Republic of Lithuania Government Resolution of 3 March 2003 No. 280 ‘On the Approval of the calculation methodology of the salary fund of civil servants and employees, which are paid from the budget of the Republic of Lithuania, municipal budgets and other state funds’; 6.Republic of Lithuania Government Resolution of January 17 2003 No. 53 ‘On the Approval of Civil servants’ salary Calculation rules’ (revoked – rules were applied from January 23 2003 to the Ruling of the Constitutional Court on December 18 2004); 7. Republic of Lithuania Constitutional Court Ruling of 13 December 2004 ‘On the Compliance of some legal acts regulating the relations of the civil service and the ones related to the Constitution of the Republic of Lithuania’. CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006

6. CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006 State politicians State officialsJudges Heads of institutions Political appointeesCareer civil servants Statutory civil servants Professional military personnel Contract employees 17001000730500 2300025000780023000 Number of staff in public administration institutions

7. PAY FOR WORK - 2004 CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006

8. Advantages of the current remuneration system The concept of remuneration for work is quite clear and flexible. Unified job classification when one common job is provided for several possible categories according to the level of education and the institution group. Responsibility of management for the proper functioning of the system. The role of civil servants’ assessment commissions is clearly established. The role of the Civil Service Department as an observer is established. The link of contract employees to the pay – up to 2003 the pay of contract employees and civil servants was established under the same rate and the MMS depended on it. CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006

9. Reaction of the system to challenges (1) From January 22 2003 to December 18 2004 the pay of the civil servants was calculated on the basis of index coefficient. The application of the index coefficient was regulated by the Republic of Lithuania Government Ruling (January 17, 2003) No. 53 ‘On the Rules of calculation the Pay of Civil servants’. According to the Republic of Lithuania Constitutional Court Ruling of 13 December 2004 ‘On the compliance of some legal acts regulating the relations of the civil service and the ones related to the Constitution and the laws of the Republic of Lithuania’ the application of the index coefficient was recognised to be in violation to the Constitution of the Republic of Lithuania and was revoked from January 18 2004. CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006

10. Reaction of the system to challenges (2) Till September 1 2003 the pay of the civil servants and contract employees was established under the same rate and the MMS depended on it. Under the Republic of Lithuania Government Resolution July 18 2003 No. 937 ‘On the Increase of the Minimum Pay’ the MMS to contract employees was increased and that of civil servants was not changed. The Amendments to the Law on Civil Service of July 16 2006 linked the basic salary coefficient to the basic salary base value and changed the previous MMS. On July 13 2006 the Parliamentary group addressed the Constitutional Court on the amount of MMS which was applied to calculate the pay of civil servants. Civil Servants’ trade union encourages the civil servants to address courts with the demand to recognise the part of the salary, which was not paid from 2003 due to the applied MMS amount. CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006

11. Changes on the Lithuanian Labour Market CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006

12. Change of factors determining the pay (1) Įstaigų, kurios kreipėsi dėl LR Vyriausybės 2002 m. gegužės 20 d. nutarimo No. 684 pakeitimo, skaičius CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006

13. Change of factors determining the pay (2) Valstybės tarnautojų pasiskirstymas pagal einamų pareigų kategorijas 2004-2006 metais CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006

14. Change of factors determining the pay (3) Valstybės tarnautojų, turinčių kvalifikacines klases, procentas nuo bendro valstybės tarnautojų skaičiaus CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006 22,9 % 28,7 % 35,2 % 42,3 %

15. Change in pay structure CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006

16. Comparison of Average monthly salary CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006

17. Drawbacks of the current remuneration system Job assessment criteria are abstract and insufficient to establish the category precisely. Performance assessment of the civil servant is not directly related to the job goals, performance results and pay. The concept of the performance assessment of the civil servant does not provide for the reflection on pay in case of poor performance. Lack of clear guidelines and recommendations for civil service assessment commissions. From September 1 2003 different MMS levels were established to calculate the pay for civil servants and contract employees. CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006

18. SIGMA – Support for Improvement in Governance and management ( Sigma is a joint initiative of the OECD and the European Union, principally financed by the EU )OECDEuropean Union 2002 „The remuneration system is established in the Law but the variable part of the pay is still too big and too much in terms of scope left for the discretion of the management. When drafting secondary legislation such a problem should be addressed and the transparency of the remuneration system control should be ensured. The pay rise possibilities should be seriously considered“. 2003 „It is strongly recommended to implement more objectivity and transparency into the pay system, because of the progressive pay increase“. FROM THE LITHUNIA’S PRE-ACCESSION MONITORING REPORT (published by the EU, November 2003) „The remuneration system has also improved, however, the management still exercises too many rights in explaining the pay criteria and establishing the gradual pay to civil servants “. CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006 Assessment of the administration system in the civil service of Lithuania

19. The main problem of the current system are bonuses for qualification classes One may conclude that these bonuses were established as a pre- accession tool for Lithuania to retain highly-skilled professionals. Such bonuses could be a transitional tool measure which should be abolished since the pay and category establishment criteria are strengthening. 2004 World Bank expert recommendation with the aim to improve the remuneration system is to link the civil servants’ pay to the performance assessment results: To establish a joint ‘pay for work pillar’ by establishing a 15 level pay sale and provide for a 3% increase in each scale; Bonus for seniority and qualification class should be abolished, however, the pay should go up every 3 years by applying a higher pay scale. CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006 Assessment of Administrative System Recommendations of the World Bank on the Remuneration Reform of the Lithuanian Civil Service, which will be the basis for the implementation of performance management February 2004

20. The number of new entrants in the civil service is reducing. The number of applicants in civil service is reducing. The number of cancelled competitions is increasing, since there are no people who want to become civil servants. The interest of young people in civil service is reducing; the service is usually taken up by older people. The number of people who decide to leave the service on their own will is increasing. CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006 Is the remuneration system motivating today?

21. CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006 In 2002 after reforming the remuneration system, the imbalance of civil servants’ pay has reduced from 9 to 5,5 times. The basic salary of the lowest category civil servant has increased up to 1010 Lt. or by 2.2 times, the highest categories – up to 5590 Lt., or 1,3 times. The funding has improved by partially using the methodology of establishing the pay fund, the uncontrolled part of the pay started increasing in the best financed institutions. The change in pay was determined not by the increase in basic salary but by the increase in benefits. CONCLUSIONS (1)

22. Social tension became evident in the civil service (the trade unions are becoming more active in terms of statutory civil servants, the attractiveness and competitiveness of civil service is reducing as compared to the private sector). On 16 July 2006 the Amendments to the Law on Civil Service were adopted, they linked the basic salary coefficient to the basic salary base amount, which as proposed by the Government, and having assessed the proposals of civil service trade unions, with regard to the average annual inflation (when calculating national consumer price index) and the impact and change of other average pay amounts in public sector, will be approved by the parliament till the end of the spring session. Such legal regulation is not really a proper one since the change of the base amount is linked not only to the relevant economic indicators but also to the political will. CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006 CONCLUSIONS (2)

23. With the aim to ensure the even development of pay, there is a need to establish the principle of calculating the basic salary base amount, which would influence the increase in the basic salary with regard to economic indicators. This would ensure a more transparent and flexible system of remuneration of civil servants and a more attractive civil service. To this end, there is a need to modernise the system of remuneration of civil servants. The improvement of the pay system first of all requires the change in job descriptions and assessment methodology as well as civil servants’ performance assessment, when the performance becomes pay related. For the next 2-3 years to assess the experience of other countries and expert recommendations for the improvement of the civil service remuneration system of Lithuania and to provide for relevant proposals on the reform of this system. CIVIL SERVICE DEPARTMENT UNDER THE MINISTRY OF INTERIOR 2006 Proposals