In 2021, the Government of Croatia (GoC) committed to reforming its public sector wage-setting mechanism with the primary goal of making the system more equitable, transparent, internally consistent, and financially sustainable. This reform was a key element of Croatia’s National Recovery and Resilience Plan (NRRP), endorsed by the European Commission. The GoC recognized that the existing system was inequitable as not all similar jobs were paid equally. It also lacked transparency and clear rules for setting job complexity coefficients and supplements, as well as for job grading and wage setting.
To address these issues, the GoC sought assistance from the World Bank. The World Bank's task was to conduct a technical analysis of the current system and use international practices to develop options and recommendations that would enable the GoC to create an implementable reform proposal for a new public pay system.
The Reform Advisory Services (RAS) were implemented in close collaboration with the Ministry of Justice and Public Administration (MoJPA) and the Ministry of Labor, Pension System, Family and Social Policy (MoLPSFSP). The components provided under RAS included: i) a legal and institutional assessment of the current system, ii) a technical evaluation of its outcomes, iii) a proposal for a new pay grade structure and job catalog, and iv) support for designing and implementing a change management strategy.
The reports produced during this process are as follows:
**Diagnostic Report on the Legal and Institutional Framework of the Public Sector Wage-Setting Mechanism in Croatia (Report #1)** – This report reviewed Croatia's wage-setting system, including legislation governing wages, job complexity coefficients, wage supplements, and practices used to apply this legislation. It included best international practices from EU and OECD countries with four in-depth country case studies: Austria, Denmark, Lithuania, and Slovenia.
**Review of the Wage-Setting Outcomes in the Croatian Public Sector (Report #2)** – This report assessed whether the existing system led to fair outcomes regarding horizontal and vertical equity—whether jobs of comparable complexity were paid equally across the public sector—and if wages were competitive enough to attract high-quality employees. These findings formed recommendations for designing a simpler, fairer wage-setting system.
**Report with a Proposal for a Revised Pay Grade Structure (Report #3)** – This report provided technical inputs needed for developing new public wages system legislation. It offered guidance on transitioning to this new system and outlined necessary bylaws. Recommendations were based on technical work by the World Bank, international experience, and Croatian context.
**Report on Transitioning to the New Pay System: Mapping Public Sector Jobs to the New Grading and Pay System and Fiscal Scenarios (Report #4)** – This report proposed options for transitioning all job posts from the current to newly designed systems while considering revised coefficients, job positions prepared by the government, estimates of overall fiscal costs, final options adopted by GoC, along with further improvement recommendations.
**Recommendations for Improving Performance Management and Evaluation (Report #5)** – This report provided options for enhancing performance management in Croatia's civil service through international good practices analysis. It recommended improvements based on an assessment of current performance management frameworks.
**Political Economy Analysis and Stakeholder Engagement Study & Draft Implementation & Communications Strategy (Report #6)** – This report outlined strategies for engaging different stakeholders in reform efforts. It included political economy analysis forming an integrated change management strategy.
Lastly,
**Reform of the Public Wage System in Croatia: Options & Recommendations (Policy Note)** – Though not a formal RAS deliverable but requested by GoC; it supported developing primary legislation for a new pay system offering preliminary data contained in Reports 2, 3 & 5.