Public-sector wages will rise by 8 per cent from December, while employees in the social welfare sector will receive an additional 12 per cent increase, in an effort to make up for years of lagging pay in the sector. With inflation expected to be a few percentage points, employees will benefit from real wage growth, but economists warn that wages are already rising faster than output. This raises the question of how long wages can continue to grow faster than GDP and productivity without the gap having repercussions for the wider economy.
Aleksandra Anić, a professor at the Faculty of Economics in Belgrade, believes that real wage growth should follow the growth of labour productivity and gross domestic product (GDP). If inflation comes in at around 3 per cent, as forecast by the National Bank of Serbia (NBS), an 8 per cent nominal increase in wages would amount to real growth of almost 5 per cent, while real GDP growth in 2026 is also estimated at around 3 per cent. “This means that nominal wage growth of around 6–7 per cent would be preferable,” Anić observes.
This year, too, public-sector wages have grown faster than those in the private sector. According to data for the first half of the year, they increased by 8.2 per cent compared with the same period last year, while growth in the private sector stood at 6.1 per cent. According to the professor, speaking to Bloomberg Adria, the difference recorded so far in wage growth between the public and private sectors should not widen further. “It would be desirable for wage growth to be similar in the two sectors, or even higher in the private sector.”
Dragan Aleksić, also a professor at the Faculty of Economics, believes that the announced wage increase is not economically justified. “This increase represents the main instrument available to the Serbian Government in its attempt to achieve the previously set target of an average wage of €1,400 in 2027.” Nor should the pre-election factor be overlooked.
Larger increase for social welfare
Aleksić adds that wages in the social welfare sector are being increased because the sector is unattractive due to difficult working conditions and low pay. This was also evident from the Serbian President’s presentation of the latest package of economic measures. In this sector, even after the extraordinary increase, wages will be 2.5 times higher than they were in 2012, while in the healthcare sector they have tripled.
Aleksić, meanwhile, interprets the larger wage increases in the healthcare sector as a way of countering the narrative that Serbia loses large numbers of doctors and nurses every year to jobs in Germany. In this way, the impression is created that the state has improved the relative position of employees, so that in future they will no longer feel the need to leave the country.
In any case, the Faculty of Economics professor points out, the 12 per cent increase in the social welfare sector does not represent a precedent. “In previous years, too, some sectors were treated separately and their wages were increased more than those of the rest of the public sector.”
Aleksandra Anić considers this increase more justified, although it will not resolve the problems that have accumulated in the sector over the years. “Wages in social welfare have been undervalued for decades and have remained significantly below the national average. The average wage in residential social welfare was 89,000 dinars, while in non-residential social welfare it was 98,000 dinars, equivalent to 74 and 81 per cent, respectively, of the national average in the second quarter of 2026,” the professor explains.
At the same time, poor working conditions and the large number of families and users for whom employees are responsible have contributed to a decline in the number of workers in social welfare centres. Most are highly qualified professionals, including psychologists, educationalists and lawyers. “The trade union representing social welfare employees estimates that there is a shortage of around 1,700 workers in the sector in Serbia. A report by the State Audit Institution (DRI) indicates that, between 2020 and 2022, eight social welfare centres had no social worker at all, 21 centres operated without a lawyer, 17 without a psychologist and 57 without even one educationalist. The social welfare system urgently needs new recruitment, wages brought at least up to the national average, and significantly better working conditions,” the Faculty of Economics professor underlines.
Education sector moves closer to the average
In the education sector, it should be recalled, the aim is to bring the starting salary of teachers with higher education qualifications up to the national average, as stipulated as early as 2023 in a protocol signed by the Serbian Government and trade unions. Although wages in this sector have increased significantly in recent years, they have still not reached the average salary in Serbia.
They currently stand at 97 per cent of the national average, Anić says, adding that she expects them to move closer to the country’s average wage in the period ahead. Aleksić, on the other hand, considers education one of the most uncertain sectors at present, stressing that future wages will depend to a large extent on what happens at the election. “The governing coalition has already announced that it will implement certain reforms in the education sector in the coming period, and the other political option seeking to govern probably has some ideas of its own in this area. That is precisely why it is very difficult to predict what might happen to wages in this sector.”
The uncertainty concerns not only future changes in the education sector, but also the fact that wages in some parts of the public sector can change outside general wage increases. This is particularly important for the police and armed forces, where the basic salary is generally adjusted in line with overall public-sector wage growth, but coefficients and allowances can be changed through specific regulations, Aleksić explains. As a result, their wages can receive extraordinary increases that are greater than those of the rest of the public sector. “That is exactly what happened in previous years.”
The interviewees point out that data on the number of employees and wages in the police and armed forces are not fully public for security reasons. The Statistical Office of the Republic of Serbia (RZS) does not publish separate data on their wages.
Coefficients are also important for understanding the previous increases received by some public-sector employees in March, as happened, for example, in healthcare. “An increase normally takes effect from the same month and, as a rule, that month is January of the following year, with the salary paid in February. This year, however, with the December increase, a precedent will be created. These increases in March were not increases in public-sector wages; they were specifically changes to the coefficients. The same thing happened a few years ago in higher education,” Aleksić recalls.
Wage increases in recent years
A more substantial increase in public-sector wages began in 2019, through general increases as well as targeted increases for individual sectors. In January of that year, wages rose by between 7 and 12 per cent, depending on the category of employee. Healthcare and dental technicians received a 12 per cent increase, doctors 10 per cent, while employees in education, social welfare, the police, armed forces and the Security Information Agency (BIA) received a 9 per cent increase. A further increase, ranging from 8 to 15 per cent, followed in November of the same year, with nurses and healthcare technicians receiving the largest increase.
In 2020, healthcare workers received a further 10 per cent increase, while in 2021 they received an additional 5 per cent, and other public-sector employees reached a total increase of 5 per cent through two separate rises. In 2022, the wages of most employees increased by 7 per cent, while employees in healthcare, the military and social welfare received an 8 per cent increase.
In 2023, public-sector wages increased by 12.5 per cent, with an additional 5.5 per cent for education workers, nurses, healthcare technicians and personal assistants in social welfare from September. From January 2024, all public-sector employees received a further 10 per cent increase.
In 2025, wages increased by 8 per cent in the public sector and by 11 per cent in education, with further 5 per cent increases for education in March and for education and healthcare in October. From January 2026, a further general increase of 5.1 per cent followed.
Pay reform remains on hold
A systemic issue that remains unresolved is the way wages in the public sector are determined. Pay reform and the introduction of salary bands were initiated 13 years ago, when the Serbian Government announced plans to rationalise and increase the efficiency of the public sector, but the system has still not been reformed. The following year, in 2014, the Public Administration Reform Strategy was adopted, and in 2016 the Law on the Salary System in the Public Sector was passed.
However, the state’s attempt to introduce salary bands in the public sector and establish the principle of “equal pay for equal work” formally came to an end in March 2025, when the National Assembly passed a law repealing the Law on the Salary System for Public-Sector Employees, along with three other laws governing wages and employment relations in different parts of the public sector. When proposing the repeal of this legislation, the Government stated in its explanatory memorandum that the pay system would be reformed on a different basis, with the support of the International Monetary Fund, but no deadline was set for introducing the new system.
In its analysis of salary bands and the lessons from the unimplemented reform, the Fiscal Council stated that abandoning this model does not represent a failure of implementation, but rather an acknowledgement that the reform covering approximately 500,000 public-sector employees had been conceptually flawed from the outset, with bargaining power, rather than objective criteria, ultimately determining the structure of public-sector wages.
Aleksić considers the great heterogeneity of the public sector to be one of the main obstacles. “Many of its components are governed by specific laws and regulations that further define coefficients and the various rules according to which wages are determined.”
The introduction of more uniform salary bands would therefore inevitably produce winners and losers and, in these circumstances, the professor points out, it is very difficult to explain to someone why their salary has been reduced from one day to the next.
The Bloomberg Adria interviewees believe that the fundamental conditions for introducing salary bands do not currently exist: strong political support and a sufficiently developed model.
In the meantime, the state has introduced a central information system for calculating wages, Iskra. Five years ago, Finance Minister Siniša Mali said that it “puts the salary system in order” and would be introduced gradually. This is not the same as salary-band reform, but it is a system that brings together data on employees and wages and replaces several applications used to calculate salaries, with the aim of enabling better planning, execution and control of staffing expenditure. The idea is for the state to have, in one place, data on employees, their wages and other payments and, through the system, to be able to monitor how much is allocated from the budget for their employment.
The Fiscal Strategy for 2027, with projections for 2028 and 2029, states that the system is now at an advanced stage and includes direct and indirect state-budget beneficiaries, including the judiciary, culture, social welfare, education (with the exception of higher education), healthcare and local self-government units together with their indirect beneficiaries. “The remaining segments of the public sector, including employees of the Ministry of Defence, the Ministry of the Interior, the Security Information Agency and the higher education system, will be included in the system by 2029,” the document states.
(Bloomberg Adria, 23.09.2026)