Government report proposes scrapping annual performance review bonuses in Latvia's public sector

State and municipal institutions in Latvia could stop paying bonuses for the annual performance review. This is proposed in an information report submitted to the government, which outlines identified problems and possible changes to the public sector pay system. The aim is to use limited budget funds more efficiently while keeping some incentive elements of pay.

Bonuses and cash awards

The report concludes that the funding earmarked for annual performance review bonuses has already been redirected to the state priority "Security", so it suggests removing this pay element from the system. Bonuses for courageous action and for preventing a serious threat to national security or a crime would remain. The option of paying cash awards of up to half of a monthly salary per year would also stay.

Tighter limits on supplements

The plan is to set stricter limits on the supplement for a significant contribution to an institution's strategic goals. In any given month, no more than 20% of an institution's employees could receive it, and managers of various levels could make up no more than a quarter of recipients. The report says existing practice shows the supplement has been used too widely: in 2025 more than 10,300 employees, or 31% of all staff, received it, and in some ministries it was paid to a substantial share of employees.

Vacancies and pay spending

The State Chancellery found that about 10% of positions in public administration are still vacant. From 1 January 2027, it is therefore proposed to remove from staffing lists any vacant posts that have no funding for hiring.

The report stresses that pay spending has already been consolidated: when drawing up the 2026 budget, remuneration costs were cut by 31.7 million euros, including by dropping performance review bonuses and limiting other variable pay elements. Supplements are gradually playing a smaller role while monthly salary matters more. Between 2024 and 2026, the average monthly salary in public administration rose by 7.3%, while growth in supplements was considerably more modest.