Cyprus Mail 30 March 2025 - by Elias Hazou
Caution needed in discussion over bill to unfreeze new civil service appointments
Ending the hiring freeze on permanent jobs in the public sector is not in itself an adverse development but it has to be done in a considered way that doesn’t amount to a throwback to the practices of the past, experts told the Cyprus Mail.
One cautioned that the rate of increase in the public payroll is faster than inflation, faster than the growth in government revenues, and faster than GDP growth.
“If you factor in all these things, it’s just not sustainable,” head of the Fiscal Council Michalis Persianis said.
Growth in the public payroll has been a permanent aspect of the public sector, and is most acute in the public education sector.
“Bureaucracies feed off of themselves and keep expanding to meet their own demands,” he added.
The comments come after parliament this week discussed a government bill that would do away with the hiring freeze on vacancies for full-time jobs in the broader public sector instituted in 2013 to curb spending in the wake of the financial crisis.
Since 2013, whenever the government wanted to hire people for permanent positions it had to go to parliament and ask for their ‘unfreezing’ on a case-by-case basis.
Critics have cited two main reasons for ending this practice: delays in filling positions in the public sector, and the steep rise in hiring temps to get around the restrictions.
Just this week, the International Monetary Fund (IMF) urged Cyprus to maintain fiscal discipline and avoid unbudgeted spending, particularly in public sector wages, as inflation risks remain elevated.
This caution was outlined in the IMF’s concluding statement following its consultation mission to Cyprus from March 17 to 28.
The IMF warned against “fiscal loosening”, particularly in the form of additional cost-of-living allowance (CoLA) increases or public sector pay hikes, which could further fuel inflationary pressures.
On Friday, opposition party Disy reiterated it won’t vote for the government legislation coming down the pipeline.
Party leader Annita Demetriou said her party will not support the filling of vacancies in the public sector if the bill does not provide for an assessment process.
“The Democratic Rally cannot support a bill that will lead to wanton hiring,” Demetriou stated.
“It’s one thing to unfreeze positions on the basis of documented needs… and another to unfreeze without any checks and balances.”
In parliament this week, Persianis made what was arguably the soundbite of the week when he said it takes three days to get any given task done in the private sector, compared to five days in the public sector.
Evidently he was highlighting the issue of productivity.
“The legislation of 2013 is clearly a failure,” Persianis told the Cyprus Mail.
“It did not even decrease the cost of the public payroll or the rate of hiring. It worked only for the first three years. But the process of the hiring freeze was and is cumbersome, so they started hiring temps and people on fixed-term contracts, in other words employing people through the backdoor.”
On the other hand, he stressed, you cannot go and hire en masse suddenly – as would likely happen if and when the 2013 law is repealed and replaced.
According to the expert, the problem of going back to the same system as pre-2013 is that the budgeting process lacks scrutiny when it comes to hires. Parliament neither has the time nor the resources to do thorough checks when balance sheets come before it.
“One way is for the finance ministry to screen the various government department budgets before these are brought to parliament.”
What ought to happen, he says, is that during the budgeting process the responsible managers throughout the government sector should ask formally and in writing what, if any, steps were taken by their department/ministry to meet their needs without hiring extra people.
“In other words, what has been done to streamline operations before resorting to hiring more workers? That should be the screening before the budgets are submitted to parliament.”
During the House finance committee session this week, a government official spoke of 977 positions being opened up once the hiring freeze ends.
But Persianis said that, in fact, the number of vacancies instantly opening up once the new law is passed comes to 2,000. That figure includes the broader public sector – semi-governmental organisations like CyTA, the CyBC, the EAC and so forth.
So the 977 positions cited by the government official concerned only the vacancies in the central government. It will take approximately two years for these vacancies to be filled up.
By ‘normal’ standards, it’s not a huge number: recent data showed that employment in the broader public sector rose by 1,476 individuals between the fourth quarter of 2023 and the fourth quarter of 2024.
That said, it’s the direction of travel that worries Persianis and other government watchers.
He also revealed to the Cyprus Mail that another IMF report handed over to the government months ago has seemingly gone Awol.
The government had earlier asked the IMF to put together a report on how to improve the public payroll.
Persianis understands the IMF handed the dossier over to the finance ministry in September.
“And we haven’t heard of the report since. Where is it – gathering dust in some filing cabinet?”
In parliament, Persianis asked government officials about the report. Their response was vague, telling him that they were “examining” it before releasing it.
Chairman of the Economy and Competitiveness Council Demetris Georgiades also expressed concerns about going back to the ways of the past.
“Here’s what we think should happen: when the budgets are prepared, the Public Administration and Personnel Department should go through the documents and see what the new hires will cost – be it for the state budget or the various budgets for the agencies submitted separately.
“Next, parliament should ask every department to justify the spending. They don’t have to look at every single new hire, just use a sampling method.”
To illustrate, Georgiades mentions the government’s IT department.
“Do we in fact need more people there? What about the use of Artificial Intelligence, could it perform some of the tasks instead? They’ve got to make sure that, whenever they do hire people, certain positions won’t become redundant in a few years’ time.
“So let’s say they hire four or five new people at this IT department. At first glance, it doesn’t look like a lot. But do you really need these people? Because when you hire someone in the public sector, it’s a commitment lasting 30 to 40 years – a major expense. Not to mention their pension benefits on retirement.”
