Editorial Board

A Refereed Monthly International Journal of Management

Prospects on Implementation of the Payment System of Civil Servants based on the Grading Model

Nataliia Aliushyna

PhD, Assoc. Prof.,

National Agency of Ukraine on Civil Service,

 15, Prorizna Str., Kyiv, 01001, Ukraine,

E-mail:natalyushina@gmail.com

Abstract

Priorities of the reform of state administration and the indicator of EU membership include the reform of remuneration system for civil servants. Since 2020, a lot of work has been done to develop legislative framework and bylaws in accordance with best international practices both of civil service and private sector. In the article, scientific literature on remuneration of civil servants, public administration and the reform of civil service are analyzed, synthesized and summarized. These include special methods used is the SWOT analysis. Current problematic issues of remuneration of civil servants are analyzed by the author, and they relate to significant disparities in remuneration of civil servants, market non-competitiveness of salaries for civil servants, especially at the local level, and available corruption risks in fixing salaries. Characteristics of each component of the salary for civil servants in new remuneration system are presented. The SWOT-analysis of prospects for implemented reform of remuneration system for civil servants is carried out. Risks of introducing remuneration system for civil servants based on the grading model are identified by the author, and its suggestions on how to eliminate them are provided. To evaluate positions, the author has developed factors serving as evaluation criteria within each category of civil service positions, namely: complexity, responsibility, and communication skills. It is assumed that each factor includes two sub-factors. Considering current situation, the main steps on the reform of remuneration system for civil servants are proposed, including: approval of bylaws and regulations; development of “Classification of Positions” information system; classification of civil service positions; updating evaluation system of civil service positions and calculations; approval of the Classifier of Civil Service Salaries for 2025.

Keywords: Civil Service; Civil Servants; Reform Of Remuneration System For Civil Servants; Classification Of Positions; Grading; Labor Payment; Salary Structure.

Introduction

Since Ukraine has been declared an independent state, civil service has undergone significant changes and continues to develop. The Revolution of Dignity finally fixed strategic vector of Ukraine's development, aimed at membership in the European Union and NATO.

To achieve this, Sustainable Development Strategy “Ukraine-2020” was approved by the Decree of the President of Ukraine No. 5/2015 dated January 12, 2015, within which implementation of 62 reforms and state development programs are provided (President of Ukraine, 2015).

Consequently, in December 2015, a new draft of the Law of Ukraine “On Public Service” was adopted, which was a significant step in formation of public, professional, politically impartial, effective, citizen-oriented public service that operates in the interests of the state and society (Verkhovna Rada of Ukraine, 2015).

In 2016, First Edition of the Reform of State Administration Strategy of Ukraine for 2016-2020 was adopted by Order of the Cabinet of Ministers of Ukraine No. 474-r dated June 24, 2016, which provided for improvement of state administration system in accordance with European choice and European perspective of Ukraine. Moreover, the strategy envisaged modernization of civil service and human resources management. Development of professional and effective public service is impossible without involvement of motivated, honest and highly qualified personnel. Therefore, the reform of remuneration system for civil servants remains the priority being stated in the Reform of State Administration Strategy of Ukraine for 2022-2025, approved by the Decree of the Cabinet of Ministers of Ukraine No. 831-r of July 21, 2021 (Cabinet of Ministers of Ukraine, 2016).

According to evaluation of the reform of public administration on the OECD/SIGMA Program in 2018, the country received 1 of 5 points in terms of compliance with the EU Principle under the indicator “Fairness and competitiveness of remuneration system for civil servants”, which provides that: “Remuneration system for civil servants is based on classification positions It is fair and transparent.” This principle, in particular, is the basis of reforming remuneration system for civil servants (SIGMA, 2018).

In addition, as part of Ukraine's participation in Anti-Corruption Network of the Organization for Economic Cooperation and Development in 2019, due to progress lack on Recommendation “Wages”, within the approved Report of the Government of Ukraine it was proposed to implement some measures to reform remuneration system to maintain proper ratio of guaranteed and variable salary components, limiting bonuses based on the results of annual evaluations and unlimited incentive payments (Cabinet of Ministers of Ukraine, 2020).

In view of the above, the Concept on reforming the remuneration system for civil servants based on classification of positions was approved by Decree of the Cabinet of Ministers of Ukraine No. 622-3 dated May 27, 2020 to change the system and approaches to regulation of remuneration for civil service.

Considering problematic issues on remuneration for civil servants, reforming the remuneration system are priorities of the Anti-Corruption Strategy for 2021-2025, approved by the Law of Ukraine No. 2322-IX dated June 20, 2022, of the State Anti-Corruption Program for 2023-2025, approved by Resolution of the Cabinet of the Ministers of Ukraine No. 220 dated March 4, 2023 and are researched by many scientists.

Purpose of the article is to analyze current state of wages of civil servants; to characterize the grading model of remuneration for civil servants based on classification of positions; to analyze advantages, disadvantages and risks of implementation of the reformed system of remuneration for civil servants based on classification of positions; to propose main steps for implementation of reformed system of remuneration for civil servants based on classification of positions.

Literature review

The issue of introducing the grading model of remuneration based on classification of positions is discussed by many Ukrainian and foreign researchers as one of the most progressive systems for determining salaries.

The issue of the grading model of labor remuneration was widely studied within functioning of civil service system, in particular, Andriy T., Radu K., Dinсa D. et al.(2006), SlukhaiS. et al. (2020),CivinskasR. et al. (2011), Nalivaiko L. et al.(2018), KhuroshviliB. (2023), Profiroiu C.M. et al. (2021).

Research on impact of minimum wage fighting corruption among civil servants in Nigeria showed that the higher the level of guaranteed wage, the lower the probability of committing corruption offenses and misuse of public resources (Enitilo O. et al., 2017).

In Romania, as part of public administration reform, Law No. 153/2017 “On the unified remuneration system for employees of public sector” was adopted. By evaluating results of this Law, in particular, revealed the effect of increasing income of civil servants to the level of private sector on reducing the level of corruption Profiroiu C.M. et al. (2021).

In 2022, the National Agency of Civil Service (NACS) conducted research of international practices of job classification and grading in civil service of 20 countries. In general, annual comparison of remuneration level in public service with private sector is carried out the following countries, namely: Estonia, Cyprus, Moldova, Georgia, Singapore, South Korea, Japan, the USA, Germany, Latvia, Canada, Kazakhstan.

The unified remuneration system contributes to involvement and retention of the best personnel in public administration and to elimination of gaps between different categories of civil servants, as well as between public and private sectors (Verkhovna Rada of Ukraine, 2015).

At the same time, as experience of other countries, in particular Lithuania, shows, these transformations can lead to negative perception of proposed changes in wages. It was demonstrated within the study that civil servants who are younger and have less experience in public service are less opposed to planned changes and are flexible enough to implement the most radical changes CivinskasR. et al. (2011).

Within articles Blazio M. (2024), Dose N. (2016), LetíciaPaim Barbosa Da Silva et.al. (2024), risks of labor alienation of civil servants in Zimbabwe, salary level of civil servants in Germany, psychosocial aspects of the work of civil servants are analyzed. Also, in scientific works Nishioka Ryuichiro et al. (2024), Precinotto A. et al. (2022), RachmanantyaAnggita et al. (2020), Sari WahyuniEka et al. (2019), Tan Beijing et al. (2024), factors of satisfaction with the work of civil servants, role of the manager providing efficient work, remuneration system for civil servants were investigated.

Despite a wide range of scientific works, research of structure and features of grading model of remuneration for civil servants based on classification of positions requires further investigation.

Methodology

In the article, synthesizes and summarizes scientific literature on issues of remuneration for civil servants, public administration and civil service reform are analyzed, synthesized and summarized. Among special methods, the SWOT analysis is used.

Results

Remuneration system for civil servants until 2024 was outdated and inefficient, share of official salary in this system was less than 50%, biggest part of salary included variable payments (bonuses, allowances, incentive payments), which amount, as a rule, was determined personally by the manager at own subjective vision and attitude towards the employee, not based on work results.

Due to this, main problematic issues of payment for civil servants, which need to be solved, were outlined:

1. Existing structure of salary unbalanced, opaque and incomprehensible both to citizens and to most civil servants. The National Agency of Ukraine for Civil Service (hereinafter - NACS) conducted a survey in which more than 53,000 civil servants took part. According to the survey, only 57% of civil servants agree that salaries are clear and open. That is, more than 23,000 respondents answered that they do not understand salary structure (National Agency of Ukraine on Civil Service, 2021a).
2. Significant disparities in pay for positions with the same functional responsibilities in different authorities. Monitoring of salaries in 2020-2022 show that difference in average salary by ministries amounts to several tens of thousands of hryvnias. This happens year after year due to retention of vacant positions, which causes inequity in wages and establishment of excessive incentive payments (National Agency of Ukraine on Civil Service, 2021b).
3. Uncompetitive salaries of civil servants, especially at the local level. Salaries for specialists at district level are lower than minimum wage. This is due to low salary and lack of funds for incentive payments. In addition, it should be noted that high demands are placed on civil servants, employees for these positions are competitively selected, and there are also significant legal restrictions on additional earnings.
4. Bonuses are set automatically as a mechanism to increase low level of the basic salary. The bonus is perceived as mandatory component of salary. At the same time, its size does not mean real results of work. Thus, bonuses lose their motivational role and do not affect work efficiency.
5. There are corruption risks when setting incentive payments. Incentive payouts are unlimited. They depend solely on the manager's discretion and available amount of wage fund.
6. There is no legally defined mechanism for planning and distributing labor fund between state authorities. Currently, there is no document that would approve uniform approaches to planning salary fund for civil servants. Thus, components of remuneration are planned differently in state authorities.
7. There is no functional classification of positions for civil service. Civil service is widely represented by various professions with specific job duties. More than 200,000 civil servants participate in formation and implementation of public policy. These are positions of lawyers, accountants, human resources, reformers, auditors, clerks, IT specialists, etc. These positions have different requirements for education, experience, knowledge, skills and abilities.

According to statistical data, 36,187 people applied for positions of civil service in 2023, while 40,193 people resigned during specified period (Fig. 1).

Remuneration reform of civil servants should form transparent and comprehensible for society system of remuneration of employees, minimizing opportunities for abuse and corruption and, finaly, increasing efficiency of civil service.

Implementation of Draft Law No. 8222 (National Agency of Ukraine on Civil Service, 2021b) as basis for the reform of remuneration system for civil servantsis expected in 2025. By this time, NACS should develop some by-laws based on results of work on approving salary model considering classification of positions.

First, salary of civil servant should consist of guaranteed part, which should make prevailing part (position salary, rank allowance, seniority allowance, financial assistance during annual basic paid vacation), and variable part, which will depend on results of the employee's work (bonuses, compensation for additional load).

Specifics of components of salary for civil servant in new wage system are given in the Table 1.

Figure 1. Quantitative indicators of appointments
and dismissals from positions of civil service, 2023

Source: based on the data Solovyova A. (2024)

Table 1. Model of new system of remuneration for civil servants

To determine advantages and disadvantages by implementing the reform of remuneration system for civil servants based on classification of positions, taking into consideration provisions of Draft Law No. 8222, opportunities and threats that may stand in the way of its implementation, a SWOT analysis of prospects by implementing the reform of remuneration system for civil servants based on classification of positions are presented below (Table 2).

Table 2. SWOT analysis of prospects to implement remuneration system for civil servants based on classification of positions, considering provisions of the Draft Law No. 8222

Taking into account results of the SWOT analysis, when preparing strategic decisions on implementation of the reform of remuneration system for civil servants based on classification of positions, it is necessary to consider possible risks and to foresee ways of their elimination or minimization. In addition, it is necessary to take into account constant changes in the system of civil service, which relate to changes in duties of employees, workload, changes in functionality, while economic situation and situation in our country do not allow increasing costs of the state for labor. Due to this fact, it is important to increase effective management of these risks. It is necessary to constantly identify them, as well as to develop and implement strategy to minimize impact of risks on successful wage reform.

Thus, it is worth highlighting following risks by implementing remuneration system for civil servants based on classification of positions and ways to eliminate them.

1. Insufficient financial resources for introduction and maintenance of remuneration system for civil servants based on classification of positions. It can be minimized or eliminated by:

1) Implementation of unified mechanism for planning and distributing labor remuneration fund;

2) Implementation of outcomes of functional audit and optimization of the number of state authorities;

3) Gradual implementation of the reform;

4) Considering possible attraction of international technical assistance to finance first years of the most expensive positions.

2. Delays with classification of positions and procedure for approving its results. It can be minimized or eliminated, first, by introducing automated system for classification of civil service positions and its integration into human resources management information system in state authorities (HRMIS) to automate collection of statistical and analytical data on results of classification of civil service positions in state authorities of all jurisdictions. This system will provide:

- Ability to quickly process large volumes of information with lower costs of human resources;

- reducing number of errors when filling in classification data and preventing incorrect use of forms;

- Possibility of operational monitoring of status of classification data filling;

- Automation: transfer of classification data to NACS; preparation of statistical reports; approval of job classification results; storage of classification data in single system;

- Possibility of prompt entry of information about additional or re-classification.

It is also necessary to strengthen professional training of civil servants responsible for classification of positions by developing additional practical explanatory materials (for example, decision trees for determining levels of positions, examples of classification of typical positions), online courses, etc.

3. Absence of clear criteria to compare remuneration level in civil service positions with the market level. This can be minimized or eliminated by:

1) Approval of methodology to compare remuneration level for civil service positions with the market level;

2) Introduction of information system that will help to automate comparison remuneration level for civil service positions with the market level;

3) Consideration of possibility of abandoning division of state bodies by types in favor of job evaluation;

4) Consideration of possibility of introducing factor point system to evaluate civil service positions when comparing functional capabilities of individual civil service positions with market ones.

Job evaluation using:

- Classification of positions according to their functions;

- ensuring equal remuneration for equal work in different government bodies, where appropriate.

Factors have been developed to evaluate positions, which are evaluation criteria within each category of civil service positions: complexity, responsibility, and sociability. It is assumed that each factor includes two sub-factors (Table 3).

Table 3. Assessment factors for civil service positions

Given that there are some differences in characteristics that are valued across job categories, description of sub-factors for evaluation will also vary by job category. These descriptions form two axes, at which intersection a score is determined and assigned to factor. Based on these total points, coefficient of points corresponding to the specific point is determined.

4. Resistance of civil servants to implemented changes. It can be minimized or eliminated by:

1) Introducing effective communication campaign, conducting trainings and information events, as well as individual communication to explain advantages of new system;

2) Provision of additional payments in part of seniority allowance in the event of its reduction under new remuneration system for civil servants;

3) no-influence of vested interests of certain groups of civil servants by strengthening control by international partners;

4) Ensuring compliance with transparent and fair principles of new salary system by improving the control mechanism and conducting regular audits to identify possible inconsistencies.

5. Insufficient public support for new remuneration system for civil servants. It can be minimized or eliminated by:

1) Carrying out broad information campaign on following advantages of the reform of remuneration system for civil servant:

- increased openness and transparency of the system of civil service for citizens;

- improved quality of public service provision by increasing motivation and professional level of civil servants;

- increased efficiency of state administration system, in particular by optimizing some bureaucratic processes;

- Created offers of competitive jobs in civil service for citizens etc.

2) Public involvement in development and decision-making regarding the reform of remuneration system for labor;

3) Conducting a survey to study public opinion regarding introduction of new labor remuneration system;

4) Ensuring high level of transparency and openness regarding stages of implementation of the reform of labor payment system, providing access to documentation and reporting;

5) Strengthening cooperation with media to ensure objective coverage of advantages and challenges of new system.

In 2024, the NACS should be ready for full implementation of the reform of remuneration system for civil servants in 2025. This involves adoption of by-laws, classification of all civil service positions according to complete procedure, benchmarking with private sector and review of approaches to planning of salaries of civil servants.

In Table 4, main steps on implementation of the reform of remuneration system for civil servants 2024 after adoption of Draft Law No. 8222 are shown.

Table 4. Main steps of reforming remuneration system for civil servants in 2024 after the adoption of Draft Law No. 8222

Conclusions

Grading of civil service positions means grouping of positions according to certain factors to standardize wages, which leads to determination of the employee's salary as reward for actual performance of duties by him in accordance with job description, powers assigned to this position, and duration of the employee's performance of his work

To implement new model of payment of civil servants, it is necessary to:

1. classify positions and determine classification codes for each position.
2. build salary scheme that will reflect levels of positions, and assign position to appropriate grade, taking into account its classification code.
3. determine amount of salaries for corresponding grade.

Thus, salary level of each civil servant will depend on results of his work. In addition, wages will gradually be brought closer to the market and will help attract more highly qualified specialists to civil service, and motivate professional employees who are already working.

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