Employers have questioned whether the Government can afford the steep wage increase given to its employees and expressed concern it would generate greater demands in private companies.

There is no mention of productivity benchmarks

Malta Employers’ Association director general Joe Farrugia and the director general of the Malta Chamber for Small and Medium Enterprises (GRTU), Vince Farrugia, both queried whether the country could afford such increases at a time when other countries in Europe were taking action to slash costs.

The recently signed collective agreement for 30,000 public sector employees will cost the country €190 million over six years and will give each government employee a 2.5 per cent salary increase every year.

By the end of the term in 2016, each worker’s pay will have risen by 13 per cent.

Joe Farrugia questioned whether the economy would grow at a sufficient rate to sustain the level of expenditure.

“It would have been wiser to link this expenditure with a targeted reduction in public sector employment to make the agreement cost neutral, or at least reduce its cost to the taxpayer,” he said.

He also criticised the new agreement for lacking a fundamental pegging with productivity benchmarks.

“There is no mention of productivity benchmarks, which one would have expected, given that public sector wages are being reduced in many countries across Europe,” he said.

Vince Farrugia was more forceful in his criticism over the affordability of such an agreement, saying the Government should immediately carry out an impact assessment of the wage hike.

“This is a hell of a lot of money we are talking about and it will surely impact expenditure in other areas if we want to reach the deficit targets.

“I just hope this expenditure cut does not come from programmes meant to create jobs because that is where we will surely be in serious trouble,” he said.

Mr Farrugia said such a study should be carried out before the forthcoming Budget and must be discussed at the Malta Council for Economic and Social Development.

He also expressed disappointment that the promised increases were not pegged to a “serious reform package” related to productivity and efficiency.

“Whereas in the past the private sector used to influence the public sector, this collective agreement will do exactly the opposite. I am sure we will see some request for exorbitant increases the private sector cannot afford,” he said.

The Finance Ministry said the employees’ duties and responsibilities had increased significantly, primarily due to EU membership, which had brought about increased pressures and demands.

“This cannot be denied and could be said for practically all sectors across the public service including education, agriculture, finance, international affairs and health,” a ministry spokesman said when contacted.

Moreover, he added, the public is also more aware of what to expect from public sector employees to which “the public service is responding well and without unnecessary disputes or issues about carrying more responsibility”.

He said the financial package had to ensure public sector workers were not lost to private industry.

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