ALI article for the “Decentralisation” portal
In early May 2024, the Verkhovna Rada adopted draft law No. 10284 in the first reading. This law plans to provide for the payment of additional salary supplements to civil servants and local government officials at the expense of international assistance and grants. These additional payments will be made at the expense of funds provided for by such projects, and the amount of additional payments should not exceed 50% of the officer’s average salary.
According to the document authors, such economic incentives will delay the outflow of skilled personnel and keep them “in place,” as well as promote international cooperation.
The problem
The draft law was submitted shortly before the entry into force of the Law On the State Budget 2024, which increased the difference between the minimum salary and the salary of local government officials, which had not been revised since 2021.
The Law on the State Budget 2024 launched the reform of civil servants’ remuneration earlier this year. It is now based on the classification of positions according to the grade system A system that is determined by the level of duties performed in accordance with the position, the powers exercised by this position, and the duration of the employee's work. .
The new remuneration system has significantly limited the maximum salaries for civil servants, especially those in local state administrations. Therefore, civil servants involved in the management of international grants and programmes are paid under the same conditions as those established by the new reform for all categories of civil servants. Prior to the reform, salaries were more flexible, with incentive bonuses that could even exceed guaranteed payments.
The remuneration of local government officials did not change from year to year, as salaries were not revised from 2021 to April 2024. As a result, the minimum official salary was significantly lower than the minimum wage. That is why bonuses and incentive allowances compensated for the low salaries in local governments.
The Cabinet of Ministers tried to eliminate this imbalance in April this year by increasing the salaries of local government officials by resolution.
Despite legislative decisions, the remuneration of civil servants managing international programmes is more competitive in central bodies than at the regional and district levels.
In addition, during the full-scale invasion, amid insufficient remuneration, public authorities and local governments faced staff outflows and the overloading of officers who had to perform additional functions.
The initiators of the draft law emphasise that the need for changes is caused by the insufficient remuneration of civil servants and local government officials.
The situation is also influenced by other factors, such as a shortage of personnel, a decrease in the workforce, including due to migration both within the country and abroad, mobilisation, budget shortages, rising unemployment, inflation, etc.
The situation is becoming more complicated due to the process of reducing vacancies. Moreover, it should be acknowledged that reducing public service positions in the context of a state budget deficit is one of the measures to save financial resources.
Communities are more and more often facing the risk of losing their financial capacity to fulfil their responsibilities at the expense of their own revenues. In such circumstances, attracting international assistance and grants is a promising tool for community development and infrastructure reconstruction.
Therefore, the public service needs to retain and attract skilled project management staff capable of developing and implementing joint initiatives, events, projects, programmes, and strategies in various fields.
Anti-corruption legislation also prohibits persons authorised to perform state or local government functions from combining their work with other paid activities, except in cases prescribed by law Except for teaching, scientific and creative activities, medical practice, instructional and refereeing practice in sports. . Accordingly, this also confirms the need to prepare a draft law.
What’s wrong with the draft law
The shortcomings of the draft law that stakeholders are currently pointing out include the following:
- The terminology of the draft law is not consistent with the legal provisions of the Budget Code of Ukraine;
- Provisions of the document on the formation of the payroll fund for local government officials require a distinction between local budget funds and funds received by the local budget under assistance programmes or grants;
- The draft law does not define a further mechanism for the formation of payroll funds and the use of such funds for payments to officers of public authorities and local governments;
- The editorial inaccuracy of the draft law’s provisions may lead to misinterpretation in the course of its implementation;
- The term of the law’s entry into force, if it is adopted “from the day following the day of its publication”, also raises doubts due to the need to bring regulatory legal acts in line with this law and adopt new ones within three months from the day of entry into force.
In addition, the draft law is inconsistent with several other For example, the Strategy for Public Administration Reform in Ukraine for 2022-2025 and the Concept for reforming the system of civil servants salaries. existing documents. Most importantly, it is at odds with the new reform of civil servants’ remuneration envisaged by draft law No. 8222, namely the introduction of unified approaches to civil servants’ remuneration based on job classification
Consequences of the potential adoption of the law
Draft Law No. 10284 is aimed at solving a significant problem that is not actively discussed in public. The adoption of this draft law will have both negative and positive consequences. The positive ones include:
- retaining human resources in government agencies and local governments;
- increased international cooperation, strengthening of international partnerships and attraction of international assistance (grants);
- diversification of sources of the payroll fund, increase in tax revenues to budgets and other mandatory contributions;
- increased implementation of project management by public authorities and local governments.
The consequences of the risks include:
- Transfer of officials working with aid programmes (projects) from some bodies that do not provide for such payments to other bodies that guarantee such payments as part of the implementation of programmes;
- Imbalance of the remuneration system for civil servants and local government officials since, on the one hand, uniform remuneration conditions will be effectively undermined, and on the other hand, the additional payment may, in fact, duplicate the already existing similar bonus for high performance for local government officials;
- Significant disproportions in salaries, as not every programme stipulates expenditures for the remuneration of executives in its budget. On the other hand, such funds are earmarked (that is, such remuneration can be paid only to the person who directly manages the program (project), within the framework of which the funds were received), so they cannot be used to pay other persons. This could result in a significant gap in salaries.
It is also important that the proposed document does not take into account the rights of officers of executive authorities with special ranks (police, military and others) who manage programmes (projects).
Conclusion
In general, draft law No. 10284 is an important step in promoting community development, an incentive to attract international assistance and strengthen international cooperation, which is a separate important point in the context of Ukraine’s European integration.
In addition, in the context of a full-scale Russian invasion, attracting international funds to local budgets helps find funding for communities in the regions amidst wartime budget austerity by the state and retain managerial staff in the regions, countering the trend of outflow of local government officers and officials.
However, the current document needs to be revised, and the changes it proposes need to be justified in more detail. Their adoption will require discussions with international partners on the goals of targeting assistance in connection with corruption risks in the aforementioned EU integration process.
It is also worth noting that the adoption of the draft law will not fix all the problems of local government functioning: From the lack of project management units and specialists to the lack of skills. In other words, the entire change process should include comprehensive measures to optimise administrative resources and take into account the risks that may arise during implementation.
