Over the past six months, the head of wage and labor agreements at the Ministry of Finance has carried out a pilot program with the participation of 3,000 civil servants. As part of the trial, wage bonuses are paid to employees, up to an additional monthly salary per year, depending on their performance at work. Employees ranked at the bottom of the table will still earn a bonus, in most cases, but a lower bonus than they are currently used to.
According to the report of the finance ministry’s salary supervisor, the average monthly salary of a civil servant in Israel is currently over NIS 17,000.
The pilot program will run for two years, ending in June 2023, and includes employees from the Ministry of Economy and Industry, the Ministry of Transport and Road Safety, and the Department of Customs Duties and VAT. of the Israeli tax administration. The aim of the experiment is to switch to differentiated remuneration for civil servants and to create incentives for excellence. This is compared to the current mechanism, which often encourages mediocrity. If successful, the trial will gradually be extended to all departments and related units and will be included in employee collective agreements.
In the current situation, civil servants included in collective wage agreements are entitled to “incentive bonuses”. In other words, a fixed bonus of 25% of their annual salary if they achieve high “efficiency percentages”. However, the targets are so low or loosely defined that almost all civil servants are entitled to the maximum merit scholarships.
In the Ministry of Economy and Industry, for example, an employee who achieves 100% of the objectives does not receive a bonus and it is only after having achieved a performance of 133% that he will receive a bonus of 20%. The average efficiency percentage of employees of the Ministry of the Economy is between 150% and 160%. In other words, the incentive salary intended to reward excellence has become an integral part of the salary of all employees.
The pilot project is being carried out in cooperation with the Histadrut union, after lengthy negotiations with the salary supervisor of the Ministry of Finance. Although the new merit scholarships of the pilot project do not replace the incentive bonus to which employees are entitled but within the framework of the parties’ agreements, it was decided to tighten the conditions for granting the bonus of encouragement. Following the agreements, there will be an annual review to raise the threshold of the objectives linked to the bonuses and the method of calculating the efficiency percentages will be automatically updated, without the need to have separate agreements each time. between Histadrut, works councils and management. . The average incentive bonus per employee is expected to rise from its current level of 19-20% to 13-14%, after the changes.
In the current situation, the state pays NIS 600 million annually to its officials as incentive bonuses. Raising the targets to meet the bonuses could save the state 200 million shekels per year. The first automatic revision of the objectives was carried out after the pilot project started in May and the next revision will take place in February 2022. In the short term, the pilot project will not save money on the expenses of the company. State for civil servants, but rather the reverse. . The implementation of the new salary incentive model, alongside the existing bonuses, will mainly increase spending at this stage. Employees entitled to the new bonuses will receive them every six months, the first payment being provided for in their payslip for July 2022.
Each of the units participating in the pilot project uses a different method of remuneration. At the Ministry of Transport and Road Safety, the 717 contracted employees will be classified according to their performance curve. On the one hand, the 10% of employees with the best results will receive a salary bonus of 8% on average. The next 40% will receive a 5% bonus and the lower 50% will receive a 2% bonus.
Why pay employees for a lack of excellence? The explanation is that this is to avoid resentment among employees classified in the lower echelons who will continue to be entitled to a salary bonus of 20% plus the new differential bonuses.
The Ministry of Economy and Industry has preferred to refrain from individual rankings and leads the pilot by ranking its different units, once every six months. The ranking fixes the bonus premium for the following six months. Unit employees will receive bonuses of between 2% and 8%, depending on their performance.
So far, it looks like the pilot is rolling out more carrots than sticks. But the method is different for officials in the Israel Tax Administration’s Customs Duties and VAT Department. The 1,967 employees who work there, unlike those of the Ministry of the Economy and Industry and the Ministry of Transport and Road Safety, have something to lose in the pilot project. In the units of the Israel Tax Administration, the incentive bonuses are anyway higher than elsewhere, with a ceiling of 25% of the base salary against 20% in the Ministry of Economy and Industry and at the Ministry of Transport and Road Safety. At the Israel Revenue Authority, it was decided to reduce the incentive premium to 20% and convert the remaining 5% into differential payments. In other words, the bonuses received by the less efficient employees should decrease.
The monitoring of the output of employees providing services will be examined – for example the number of requests processed. In more administrative positions, the nature of the work sometimes makes it more difficult to measure in quantitative terms. In these jobs, the appraisal will be based on managers’ evaluations, with those responsible for the pilot project trying to ensure that the ranking is not influenced by the civil servant’s relationship with the manager.
How will the units be valued?
At the Ministry of the Economy and Industry where there will be competition between the different units, each unit manager will choose a flagship project according to which the unit will be classified. The managers will have to realize the influence of the project on the target population of the unit and the involvement of all the employees of the unit and the cooperation undertaken outside the unit. Additionally, managers will refer to how much the project is improving services as well as issues such as schedules and budgets.
At the moment, the pilot project mainly rewards employees and does not save government money in the short term. But in the longer term, changes in the bonus model are expected to lead to a rationalization of work in departments and an increase in job performance. At the same time, the pilot must lead to tighten the criteria of excellence and avoid a situation where everyone is excellent and receives bonuses – regardless of the quality of their work and the effort that they devote to it.
The Ariel University expert in public economic and political policy said: “Adding differential pay is desirable, but on the other hand, what is really needed is a change in the employment model itself. even in the public sector so that it is more efficient.
“The change leaves the bonus for employees and even if it changes a bit in size, those who are not efficient will still continue to work in the public sector. The problem is structural because they have seniority. You need a system that encourages them to work, in the sense that there is also the threat that if they are not good, they will not progress and they will not even stay in their jobs. in public coffers. Maybe it will improve the performance of some of the workers slightly, but it will still continue to keep workers who are not good. “
Ministry of Finance deputy head of the department of wage agreements and employment with responsibility for compensation and incentives, said about the pilot project. “We consider it important to encourage efficiency, productivity, effectiveness and improvement in the service of civil servants using the latest flexible and differentiated incentive models. To this end, the unit is cooperating with the Histadrut on a pilot project aimed at improving the incentive mechanism practiced in government ministries. The pilot started in three departments – and if successful, it will expand to the rest of the civil service.
The Histadrut said: “The pilot project in three government units was formed in full cooperation with the Ministry of Finance. The aim of the plan is to improve labor relations and promote the most recent and efficient working methods, while paying equal pay for all workers.
Posted by Globes, Israel business news – en.globes.co.il – December 9, 2021.
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