The measure does not apply to senior positions within existing staffing structures, as these are usually filled by employees already working in the public sector.
The state saves €20.1 million annually by reducing entry-level pay scales for new civil service hires by 10%. The Finance Ministry has no intention of abolishing or revising the measure, which applies for 24 months.
Among Cyprus’ efforts to contain the government payroll is a practice agreed with the troika—a measure that reasonably prompts questions about whether it should be modernized or redirected to meet today’s needs, some 15 years later. This comes against a broader push to reduce the government wage bill, to which the International Monetary Fund also recently contributed through a report.
Studies have consistently shown that public-sector salaries exceed those in the private sector, with exceptions for certain staff categories.
In a response to a question from Famagusta MP Nikos Georgiou, submitted to Parliament, Finance Minister Makis Keravnos explained that the reduction in starting pay scales took effect on Jan. 1, 2012, as one of the measures to contain the government payroll during the financial crisis.
However, it had originally been agreed between the government and trade unions during a review of public-sector pay in 2002. When Parliament voted on the relevant supplementary budget, Law 42(II)/2002, it did not approve the measure, proceeding only with provisions that benefited employees.
According to the minister, the reduction remains in place because it constitutes a structural measure.
Studies have consistently shown that public-sector salaries exceed private-sector salaries, apart from certain categories, such as managerial staff, he noted in his written response.
The latest available Statistical Service figures on average gross monthly earnings for full-time employees by occupational category, covering 2022, show substantial differences between the public and private sectors among professional, technical and clerical staff. Unlike managerial employees, these workers earn considerably more than their private-sector counterparts.
For hourly paid government workers, the measure took effect on Jan. 1, 2014, following a Cabinet decision dated Dec. 19, 2013.
That decision approved several arrangements following a series of discussions, including with the unions representing hourly paid government workers—OEKDY-SEK, PASYEK-PEO and DEEKDOKO-DEOK.
The arrangements included revising or abolishing various allowances and changing the employment arrangements for seasonal hourly-paid workers. The aim was to preserve their employment despite cuts to spending and projects in the state budget during the troika bailout program.
The 10% reduction in pay scales for hourly-paid government workers mirrored the provisions already applying to civil service posts.
It applies to newly recruited hourly paid staff, except office cleaners on the E1 scale, whose reduction was smaller because their starting hourly wage fell within the occupations covered by the applicable minimum wage decrees.
€18.83 million and €1.27 million in savings
According to the minister, the average annual saving from reducing starting pay scales for new government hires is estimated at approximately €20.1 million: €18.83 million for salaried employees and €1.27 million for hourly paid workers.
The calculation takes account of employees’ gross earnings, including salary and the 13th-month payment, along with employer contributions to funds such as Social Insurance and GESY, and contributions to the new pension scheme or a provident fund.
The estimate does not include savings on staff in the broader public sector, including public-law bodies and local authorities.
No plans to scrap the measure
According to the response submitted to Parliament, the Finance Ministry considers the reduction in starting pay scales for new hires to lower-level positions within existing staffing structures to be a structural measure. Given that public-sector pay generally exceeds private-sector pay, with some exceptions, it considers neither abolition nor revision appropriate.
The letter also explains that previous public-sector employment must be continuous for it to count toward the reduced entry-pay period or, more generally, toward placing an employee above the first salary step for their position.
If an employee resigns or their contract expires, the employer-employee relationship ends. There is then no obligation to recognize that previous employment if the person is recruited again.
Consequently, an employee who completes two years on a reduced starting pay scale leaves government service and is subsequently appointed to a permanent position or hired on a temporary basis after a break in service is placed on the reduced starting scale again for 24 months. This is because the appointment or recruitment is considered new.
Under the relevant provision of the Budget Law in force at the time, previous service on a reduced starting scale counts toward the required period only if there is no break between the employee’s two periods of employment under different arrangements.
Teachers are an exception. For salary purposes, the Educational Service Commission may recognize previous employment with breaks as prior service or technical experience under the Educational Officers Regulations on the Recognition of Service, Prior Service and Technical Experience for Appointment, Promotion and Salary Increments of 2019 and 2026 (Regulatory Administrative Act 136/2019).
