A fit-for-purpose public sector workforce is a fundamental driver of effective governance, and pay policies determine, in part, the ability of governments to attract and retain the workers they need. As such, pay policies are a fundamental part of future-oriented public service strategies, which aim to develop skilled and trusted workforces that can make best use of emerging technologies to address complex policy problems. While pay is not the only reason that people apply for or leave jobs, it is an important factor. Public sector employment and remuneration policies and tools need to keep pace with the rest of the economy.

This report analyses the pay system in Israel’s public sector, and provides recommendations to align it with the strategic priorities of the government. It recommends ways to simplify job classification and better match pay to market rates, particularly in areas where the public sector has trouble competing for talent. It also identifies opportunities to better reward performance, productivity and job responsibilities. In Israel, no pay reform is possible without the agreement and active collaboration of public sector unions, and so the second part of this report focuses on public sector labour relations and makes recommendations to improve the functioning of the collective bargaining process in Israel’s public sector. This report contributes to the ongoing work of the OECD’s Public Employment and Management working party, to support the implementation of the Recommendation of Council on Public Service Leadership and Capability.

The report was drafted by Maya Bacache (consultant), under the guidance of Daniel Gerson, senior project manager in charge of public employment and management in the OECD’s Public Governance Directorate (GOV). Donal Mulligan of the OECD Secretariat provided drafting and editorial support, and helped co-ordinate the project. The report benefitted from review by Jon Blondal, Head of the Public Management and Budgeting division (GOV), and from Sandrine Cazes and Chloe Touzet in the Directorate for Employment, Labour and Social Affairs. The OECD would also like to thank Jamie Knights, who participated in the fact-finding mission and provided essential input as a peer reviewer from the UK’s Revenue and Customs Agency.

The OECD would like to thank the Government of Israel and the Israeli Delegation to the OECD for their ongoing support and collaboration.

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