The wealthiest institutions in Latvia’s public administration are the Ministries of Health, Economics, Agriculture and Finance, while the least well-funded are the Ministries of Justice and Culture, State Auditor Edgars Korčagins said in an interview on TV3’s programme 900 sekundes.
Presenting the conclusions of the audit on the reform of the public administration remuneration system, Korčagins acknowledged that some positive steps have been taken, such as the creation of a clear and modern job classification catalogue.
“However, it seems that the devil lies in the implementation, or rather in the amount of money available for institutions to operate within this system,” he said, adding that in practice pay disparities between institutions have only increased.
Asked whether the use of bonuses and cash awards as a substitute for increasing base salaries is legal, Korčagins said that from a legal standpoint everything is in order, but the real issue is internal fairness within public administration. He noted that in some institutions employees receive such supplements for six months a year or even throughout the entire year, while in others they are not paid at all because the institutions simply cannot afford them.
Commenting on whether he accepts criticism from Finance Minister Arvils Ašeradens (New Unity) regarding the audit on the state’s approach to curbing the shadow economy,
Korčagins said he does not accept it, stressing that the report is the result of thorough and comprehensive work.
Asked whether the State Audit Office feels increased political activity during the pre-election period, Korčagins said that there is a slight increase in politicians’ initiatives to suggest issues for auditors to examine. However, he emphasized that any information is useful for auditors. He also urged politicians not to postpone decisions on important issues during the election period.
As previously reported, the State Audit Office has concluded that the objectives of the public administration remuneration reform launched in 2022 have not been achieved in practice. The institution recalls that the aim of the reform was to establish a unified, transparent and competitive pay system. Although total remuneration expenditure has increased significantly, pay inequality between ministries and institutions persists. According to the audit, employee pay is still determined by historically established base funding rather than by the value of the position or the content of the work.
For identical or very similar positions with comparable responsibilities, pay differences between institutions reach up to 30%. In some cases, an employee in a lower salary group—with an equivalent or even lower performance evaluation—may earn more than an employee in a higher salary group. Likewise, a lower salary group position in one institution may be better paid than a higher salary group position in another institution, the audit found.
Although total remuneration expenditure in the audited institutions increased significantly in 2024,
inequality in the distribution of resources between institutions has not diminished,
the State Audit Office stresses. Historically established base funding has proven resistant to reform: some institutions can reach the midpoint of salary scales with existing funding, while others lack up to 62% of the required funding.
The audit also found that the variable component of pay is used systematically in several institutions rather than as an exception. In 2024, 31 of the 40 institutions included in the audit sample paid supplements for “significant contribution to achieving strategic objectives” to an average of 31% of employees, while in some institutions more than half of staff received such payments over long periods. According to the State Audit Office, this indicates that supplements are effectively replacing salary equalisation.
In addition, in 10 of the 40 audited institutions, more than 70% of employees received cash bonuses.
If the majority of employees receive supplements for significant contributions or cash bonuses, this effectively compensates for insufficient base salaries rather than rewarding outstanding performance, auditors conclude.
Audit data show that uncompetitive pay continues to affect staff retention.
In the vast majority of audited institutions, staff turnover exceeds 15%, which is considered high in human resource management theory. Compared to 2022, turnover has increased in more than a third of institutions, including the Ministry of Health, the Procurement Monitoring Bureau and others.
The State Audit Office acknowledges that changes in the application of supplements and job structures have taken place in some institutions since 2024, but the audit’s findings on unequal institutional capacity to ensure competitive and equivalent pay remain unchanged.
Bonuses of up to 75% of monthly salary are awarded based on annual performance evaluations. The size of the bonus is determined by the institution according to the employee’s evaluation and available funding. The audit analysed performance appraisal results and found that in many institutions the highest rating, “exceeds requirements”, was awarded to more than half of employees.
In addition,
a significant share of employees in several institutions also receive the rating “partially exceeds requirements”.
This suggests that ratings of “exceeds requirements” or “partially exceeds requirements” have become the everyday norm rather than an exception, as good practice principles would require, the State Audit Office explains.
The audit identified substantial differences in access to additional employee motivation benefits across public administration. In 2024, health insurance policy premiums ranged from less than €375 to the maximum allowed €750. In six institutions (15% of those audited), the premium reached the maximum limit, while in three institutions it was less than half of that amount.
A similar situation exists with compensation for vision correction aids. The amount varies by as much as fivefold between institutions—from €50 to €340—and the frequency of compensation also differs.
The audit concludes that the availability of motivational benefits is directly linked to an institution’s budgetary capacity rather than to the nature or workload of the job.
Based on the findings, five recommendations have been issued to the State Chancellery and two proposals to the Cabinet of Ministers to address systemic problems.
The State Audit Office emphasizes that without a political decision to equalise remuneration funds between institutions, the objectives of the reform will not be achieved and existing disparities within public administration will persist in the future.
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