Fiscal Council: Unsuccessful salary grade reform in Serbia

The 2016 salary grade reform in Serbia, which the state has formally abandoned, has failed in concept, not in implementation, and was launched without a defined basic salary, with too narrow a range of coefficients and without a solid analytical framework, the Fiscal Council announced.

– Instead of objective work evaluation, the focus was shifted to negotiations on the level of coefficients, which led to further fragmentation, multiplication of exceptions and complete loss of the systemic character of the reform process – the Council stated in its analysis.

It is pointed out that control of the wage bill was achieved without unified salary grades, but was accompanied by strong compression (unification) of wages, and that the stabilization of the public sector wage bill resulted from fiscal rules and political will, not normative unification.

– On the other hand, the absence of systemic adjustments at the top of the salary scale and the strong increase in the minimum wage have led to a narrowing of the effective salary range. Wage compression has become one of the key structural risks to the functionality of the public sector, as it directly undermines the state’s ability to attract and retain key professional and managerial personnel – the Council assessed.

It is recommended that the future reform approach must be sectoral, transparent and institutionally realistic.

– A return to a single and centralized model of salary grades carries a high risk of repeating the same mistakes. Generic reform approaches, such as the uniform salary grades promoted by the World Bank in the region, often insufficiently take into account the local institutional heritage, which can lead to suboptimal outcomes, or even complete failures in the case of Serbia – the Council states in its analysis. A sustainable solution, they believe, involves sector-specific interventions and potentially in-depth reforms of individual parts of public services, based on reliable data, clear criteria and high transparency - primarily through the public wage register (“Iskra”).

Such an approach, as indicated, enables targeted mitigation of wage compression where it has the greatest systemic consequences, while preserving fiscal sustainability and socio-political feasibility.

In March 2025, the Serbian Parliament adopted a law repealing the 2016 Law on the Public Sector Wage System and accompanying regulations that regulated wages in local governments, the Autonomous Province of Vojvodina, public services (education, healthcare, social protection) and public agencies.

This decision officially abandoned the concept of single wage grades as a systemic framework for regulating wages in the entire public sector, which was one of the key elements of the reform agenda in the early phase of fiscal consolidation.

Fiskalni savet Republike Srbije

salary grade reform

salary grades