According to Rose et al. (2003), gender pay gap can be corrected by strengthening the enforcement of the equal opportunities law. Another way to shatter the glass-ceiling and reduce position segregation is flexibility of working conditions - introduction of so-called women-friendly internal organizational policy (see, for example, Alkadry et al., 2006, p. 890).

Figure 9. Estimated public-private wage differentials in UK

Resource: Bozio et al., 2011

Figure 10. Racial earning gap by year in the private and public sectors of USA

Resource: Semyonov et al., 2009

The racial pay disparities in different countries are regulated and corrected by the policy of minimal wages (National Minimum Wage, 2005).

Another tool for promoting equal pay in contexts of race and gender pay disparities is the obligation for employers to monitor pay practices in the workplace (Prechal, 2007). These actions enable to identify the cases of pay discrimination and to prepare action plans for introduction gender or race equal pay.

The next type of pay differentiation is interregional pay differentiation. Despite the fact that civil service wage determination remains centralized in many countries, public employees' pay differs substantially across different areas of the country (Garcia-Perez et al., 2007; Oshchepkov, 2007a, 2007b; Meurs et al., 2007). According to Oshchepkov (2007a, 2007b), “the price of labor cannot be the same throughout a country because the national labor market and the territory of the country are not homogenous”. Moreover, as it shown in figures (see Appendix 3) regional disparities in wages differ significantly across countries. For example, official UK's earnings data shows that, outside London and the South East, there is little difference in earnings between the regions (IDS, 2012). While, there is significant interregional wage differentiation in such countries as France, Spain and Russia (see Appendix 3). Table 6 shows that the magnitude of territorial wage differences in Russia is much higher than in other countries.

Meurs et al. (2007) argue, that such interregional wage differentiation can be explained by institutional, structural and regional effects: the institutional factor operates through receiving “regional compensation” by public employees, the structural effect operates through pay differences between different public sector organisations, and the regional effect operates through differences in career paths (Meurs et al., 2007, pp. 481-482). According to Oshchepkov (2007a), the “magnitude of interregional pay differentiation depends on the country's particular administrative division”. Furthermore, labor market's compensating wage differentials can be generated in the market economies.



Table 6.

Interregional wage differences in Russia and other countries

Resource: Oshchepkov, 2007a

According many researchers, the theory of compensating differences is able to explain most of territory wage differentials in different countries: USA (Roback, 1982, 1988; Beeson et al., 1989; Dumond et al., 1999), EU countries (Furdato, 1996) and Russia (Lukyanova, 2007; Oshchepkov, 2007a). In order to compensate for regional climate differences in some countries the government regional wage coefficients were introduced. In Russia, for instance, there is the system of government regional wage coefficients for public workers. This system provides different levels of compensation for government workers depending on the location of the job. It is necessary to note, that magnitude of compensation is greater for areas to the north and to the east in Russia where climate is harsher (see Figure 11).

The literature on regional pay disparities (Berger et al., 2007; Prechal et al., 2007) provide the evidence of strong relationship between employees' compensation and regional wage coefficients across regions. For example, there is the evidence that compensating differentials for differences in climate, environmental conditions, ethnic conflicts, crime rates, and health conditions, exist even after controlling for the regional pay differences (Prechal et al., 2007). Thus, the introduction of regional coefficients can be considered as optimization mechanism of pay differentiation both in private and public sectors.



Figure 11. Government Regional Wage Coefficients, 2000

Resource: Berger et al., 2007

The next type of pay differentiation, which can be explained by the Opportunity cost theory, is connected with public-private pay disparities. There is the evidence, that in some countries public sector wages are consistently higher than private. For example, in China the annual average salary of the public sector was higher than that of the society as a whole since 1992 (see Appendix 4). Furthermore, the annual average salary of the public sector was also larger than per capita GDP (Chan et al., 2011, p. 303). In France, wages in the Public sector are also higher than in the Private Sector (see Appendix 3).

In other countries the public sector pay rates are significantly lower than for comparable jobs in the private sector organisations (see Appendix 4). For example, in Russia the average salaries of civil servants consist from 31 to 85 per cent of the average earnings of a comparable position in the private sector (see Figure 12).

Figure 12. Average salaries of civil servants in the average earnings of a comparable position in the private sector in Russia, % (2005)

Resource: Institute for Comparative Labour Relations Research, 2006

Moreover, in some countries the organizational and pay structures influence on the public-private pay disparities (see Figure 13).

One of the ways of optimization public-private pay gaps is market supplements, which have been used in both public and private sectors to bring the pay level for job positions with a higher `market' value in line with the market (IDS, 2006, pp. 9-14). According to IDS (2006), market supplements can be very useful in differentiating between occupational groups.



Figure 13. Base pay comparisons for different grades of public and private sectors in UK

Resource: Hay Group, 2011

The second widespread optimisation mechanism of public-private pay disparities is the wage indexation (Eurofond, 2010). According to Aizenman (2008), “wage indexation is based on regular adjustments of wages in line with general changes in price levels”. In the majority of EU countries the CPI is usually used for automatic wage indexation (Eurofond, 2010). However, the application of such tool as wage indexation is different across countries. For example, in Australia there is no automatic indexation mechanism for federal employees, but past inflation is taken into account in the negotiating process. In Russia the annual wage indexation of civil servants is also linked to the inflation (CPI). In Belgium automatic wage indexation is linked to the health index (Giordano et al., 2011, p. 23).

The last theory, considered in the previous section, elucidates the Psychological pay differentiation. Martin et al. (1993) wrote that civil servants productivity depends on so-called “social psychological rewards” which refer to employees' satisfaction of their jobs and interpersonal relations. It is also important how fair civil servants feel they are treated. The assumption of such concept is that employees who garner more social psychological rewards claim greater satisfaction and, in turn, higher performance. In order to raise the employee satisfaction it is essential to involve personnel to the process of wage setting (Giordano et al., 2011). In most countries of the EU collective bargaining plays a major role in public wage setting. However, the bargaining results generally differ across sectors (see Table 7).

Table 7.

Some basic features of wage bargaining in EU countries, 2011

Resource: Giordano et al., 2011

Moreover, Lucifora et al. (2004) argue, that “different set of institutional rules that govern pay determination in the public sector provides a source of variation for assessing whether collective bargaining practices, private sector pay comparability standards, as well as other factors, have an impact on the public sector pay differentiation”.

Therefore, a further way to raise the employee satisfaction of their wage level is to do the procedure of wage setting more open and transparent. According to the Hutton Review of Fair Pay in the public sector (2011), greater transparency of senior pay will play important role in making pay in public services fairer (Hutton, 2011, p. 65). In line with the Fair Pay Code, “processes for setting executive remuneration should be open and transparent to allow public scrutiny” (Hutton, 2011, p. 85).

The following two types of pay differentiation are not substantiated by theoretical models. These types were identified through the cases of civil servants' pay differentiation.

The example of the Vertical pay differentiation between different levels of civil servants earnings according to the level of job position is illustrated in Appendix 5. Some evidence shows that an appropriate type of pay structure can optimize this pay differentiation (IDS, 2006; O'Riordan, 2008). In particular, according to O'Riordan (2008), it is critical to ensure that “grades are well defined, thereby making it easier to differentiate between them, and to evaluate jobs carefully to ensure the best fit between individual role profiles and grades”. Therefore, talent management can also optimize vertical pay differentiation by attracting, retaining and development of high calibre employees (Hutton, 2011, p. 85). Hutton (2011) argues that “this would not just help ensure adequate competition for top jobs to restrain unnecessary pay inflation, but also help match public servants' desire for greater opportunity and progression with the need to develop people capable of leading public services as they are reformed”.

The Horizontal pay differentiation between the comparable levels of civil servants' earnings in different organizations can be explained from the efficiency perspective by the introduction of PRP. In the past decades, as improving staff performance took on a new urgency, elements of PRP were introduced in many countries (OECD, 2008, p. 50). In fact, the impact of PRP depends on the multiplicity of objectives. In a comparative perspective, however, the development mirrors a widespread belief that PRP approaches on many countries have increased performance of civil servants.

Furthermore, it is essential noting, that in order to estimate whether or not pay in line with the market, such indicator as compa-ratio can be used (IDS, 2006) for optimization all types of pay differentiation. By definition of Hay group (2011), “the Compa-Ratio is actual remuneration for a position as a percentage of a given market level”. Therefore, the pay policy chosen will determine the level of compa-ratio to be applied. For example, organisations wishing to pay higher-than-average should choose a compa-ratio greater than 100 per cent (IDS, 2006, pp. 25-26).

Summarizing the theoretical part, we may conclude that theories of pay differentiation can partly explain the phenomenon of civil servants' pay differentiation. Each theory justifies particular type of pay differentiation: Human capital theory and Glass ceiling theory explain the gender and racial pay differentiation; Compensating differences theory accounts for the interregional pay differentiation; Opportunity cost theory elucidates the sectorial pay differentiation and Effective wage theory clarifies the psychological pay differentiation. Moreover, horizontal and vertical pay differentiation are not substantiated by theoretical models. However, these aforementioned types are widespread in organisations of public and private sector.

It must also be noted that the factors of pay differentiation are different for each theory and each type of pay differentiation. Furthermore, the ways which can be involved in optimization are appropriate for certain types of pay differentiation. The author-established systematization of the main theories, factors, types and possible ways of optimization civil servants' pay differentiation is represented in Appendix 6.

Before we embark to the practical part of research, it is essential to note that the calculation of compa-ratios will be used in the following section to analyze pay gaps, pay differentiation and pay compression of civil servants in Russia and OECD countries.

The influence of factors on the level of pay differentiation will be estimated by means of regression analysis. Thus, optimization mechanisms will be used to propose recommendations of pay differentiation' feasibility of Russian civil servants in the FEBs in accordance with the systematization mentioned above.



PRACTICAL PAPT

Section 4. Civil servants' pay in the Federal Executive Bodies of the Russian Federation

This section provides an overview of civil servants' pay in Russia's FEBs. The first part of this section details some peculiarities of civil servants' pay system and the structure of FEBs of the Russian Federation. The second part contains the analysis of pay gaps, pay differentiation and pay compression in FEBs. The primary data for this section are drawn from the Federal State Statistics Service and from the Ministry of Finance of the Russian Federation.

It is necessary to note, that some Russian experts of the public administration are of opinion that the current remuneration structure of Russian civil servants is complicated and unrelated to performance (Klistch, 2007; 2012; Âarabashev et al., 2010; Obolonsky, 2011; Klimenco et al., 2012). Therefore, to make larger inferences about this opinion it is worth to delve deep in the analysis of Russia's case, identify some peculiarities of Russia's civil servants' remuneration system.

The order of payment for civil servants and employees of the federal government established by the Federal law N 79 (2004) “On the State Civil Service in the Russian Federation”.

The total pay received by Civil Servants of the Russian Federation consists of monthly pay and monthly (and other) additional payments. The monthly pay contains:

· Official Salary (“Oclat”) - monthly salary according to the civil service's position held;

· Qualification Grade Salary (“Class rank salary”) - monthly salary according to the rank as determined by the level of Civil Service examinations passed.

The sizes of Oclat and Class rank salary of federal civil servants are established by the Presidential decree (2006) N 763 “On the salaries of federal civil servants” on representation of the Government of the Russian Federation. The sizes of these salaries of civil servants of the constituent territories of the Russian Federation are established according to the statutory instruments of the constituent territories of the Russian Federation (Federal law N 79, 2004, article 50).

The additional payments include:

· Length of Service Allowance - a percentage of Official Salary which varies according to the number of years the employee has worked in the civil service (see Table 8).

Table 8.

Seniority Allowance of Russian Civil Servants

Number of years	Percentage of Official Salary, %
1-5	10
5-10	15
10-15	20
More than 15	30

Resource: Federal law N 79, 2004

· Special Conditions Allowance - monthly allowance as a percentage of Official Salary (ranging to 200 percent) for special conditions of civil service;

· Confidentiality Allowance - monthly allowance which recognises the different degrees of confidentiality of documents handled by civil servants (The size varies by the level of confidentiality);

· Bonus pay - an additional amount can be paid for performance of critical and complex tasks. Maximum size of this premium is not limited, but based on the available budget of each FEB;

· Monthly allowance - monthly monetary allowance, established by decrees of the President of the Russian Federation differentially for each FEB;

· Lump sum payment for the provision of paid annual leave and material assistance which are paid using the funds of FEB's budgets.

Moreover, civil servants receive other payments provided by the relevant federal laws and other regulations. Furthermore, in the cases established by the legislation of the Russian Federation, regional coefficients used to compensate civil servants for living in regions that are designated as less desirable (Federal law N 79, 2004, article 50). The Figure 13 illustrates interregional pay differentiation of municipal civil servants by regions and cities with federal status of the Russian Federation. It is easy to note, that magnitude of compensation is greater for areas to the north and to the east in Russia (Ural and Far East Federal districts) and in the cities with federal status (see Figure 14 and Appendix 7).

Figure 14. The average monthly salary of municipal civil servants, 2011

In addition, civil servants' pay is adjusted regularly in line with general changes in price levels (inflation). This pay correction called indexation on CPI (Federal law N 79, 2004, article 50).

It should be noted that the budget for civil servants' pay is based on the number of authorised positions in FEB. This number is currently calculated on a historical basis and is not based on an up-to-date analysis of the number of positions required to carry out the work of the FEBs.

It was already briefly pointed out, that the remuneration structure of Russian civil servants is complicated and unrelated to performance - only about 3 per cent of payment (“bonus pay”) depends on results of professional activity (see Figure 15).

Figure 15. Civil servants' remuneration structure in Russia, %

Resource: IPAMM NRU HSE, 2011

In accordance with the Federal law N 79 (2004), the special order of payment at which compensation is made depending on performance indicators can be established for certain positions of civil service. Moreover, the composite performance indicators of FEBs are enacted by the President of the Russian Federation and the Government of the Russian Federation. However, the list of job positions with special order of payment, as well as the procedure for establishing a special order of PRP for certain groups and categories of civil servants, still have not been determined. Furthermore, Russian civil servants have not got any guarantees of career growth based on merits. Thus, outdated incentive schemes and methods raise the problem of civil servants' motivation for effective action. This phenomenon is also caused by the low rate of remuneration as compared to the private sector (Obolonsky et al., 2000; Âarabashev et al., 2008; Prokopjeva, 2008). Moreover, attempts to introduce PRP in Russia does not correspond to the requirements, which are contained in the Administrative Rules, Federal Target Programmes, principal directions of the government's activity and other planning documents (Barabashev et al., 2010, p. 60).

Therefore, in spite the fact that the attempts of reforming public employees' incentives system and the introduction of PRP as outlined in Russian legislation (see Appendix 8), the system of PRP is only slightly used in Russia's civil service. Nowadays, there are only a few cases of successful implementation of performance indicators of public servants in Russia:

· Ministry of Defence: pilot system of performance indicators to measure the activities of civil servants of the officership.

· Federal customs service: performance indicators of customs authorities fixed in normative acts, provided the heads of departments' responsibilities for the achievement of them.

· A number of regions of the Russian Federation have developed and tested the criteria the effectiveness and efficiency of the civil servants (Klistch, 2012).

Concerning the ways of optimisation Russian civil servants' pay system it is worth to consider the recent initiatives of the President on perfection of Federal civil servants' pay in the Administration of the President (Presidential decree N 1100, 2012) and in the Government of the Russian Federation (Presidential decree N 1548, 2012). In accordance with Presidential decrees mentioned the positions of civil service in the Administration and the Government are correspondent to the military posts of militaries contractually employed. Moreover, the Class ranks of civil servants of the Administration and the Government are also correspondent to the military ranks. Therefore, the official salaries and all allowances of Administrations' and the Governments' civil servants are correspondent to the official salaries of militaries. It is commonly known that salaries of the military is higher than salaries of civil servants, therefore civil servants of the Administration and the Government receive higher pay than civil servants of FEBs of the Russian Federation. However, this initiative is unrelated to civil servants' performance.

For further analysis of Russia's civil servants `pay, it is essential to consider the classification of civil service' positions. According to the legislation, positions of civil service are divided into categories and groups (Federal law N 79, 2004, article 9). There are four categories of civil service' positions:

1) Senior managers - positions of heads and deputy heads of the government bodies and their structural divisions, positions of heads and deputy heads of territorial bodies of FEBs and their structural divisions, positions of heads and deputy heads of representations of the government bodies and their structural divisions, replaced for a certain term or without restriction of a term of office;

2) Assistants (advisers) - the positions established for assistance to persons, replacing the state positions, the heads of the government bodies, the heads of territorial bodies of FEBs and heads of representations of the government bodies in realization of their powers, replaced for the certain term limited to a term of office of persons or heads mentioned;

3) Professionals - the positions established for professional performance of tasks and functions by the government bodies, replaced without a term of office restriction;

4) Support professionals - the positions established for organizational, information, documentary, financial, economic and other support of activity of the government bodies, replaced without a term of office restriction.

Moreover, positions of Russia's civil service are divided into the following groups:

1) Senior staff;

2) Chief officers;

3) Leading officers;

4) Senior officers;

5) Junior officers.

Positions of the categories of Senior managers and Assistants (advisers) are subdivided on Senior staff, Chief officers and Leading officers groups. Positions of the category of Professionals are subdivided on Senior staff, Chief officers, Leading officers and Senior officers groups. Positions of the category of Support Professionals are subdivided on Chief officers, Leading officers, Senior officers and Junior officers groups (Federal law N 79, 2004, article 9).

Table 9 shows the average monthly pay (comprising all the above elements) for all categories and groups of civil service' positions in both Central apparatus of FEBs and in the Territorial bodies of the Russian Federation.

Table 9.

The average monthly pay of FEBs' civil servants by categories and groups of civil service' positions, rubles per civil servant (2011)

Groups of civil service' positions in FEBs	Total pay (averagå)	Categories of civil service' positions in FEBs
		Senior managers	Assistants (advisers)	Professionals	Support professionals
In Central Apparatus:	56 982	117 274	85 415	51 447	33 523
Senior staff	-	152 420	117 294	-	-
Chief officers	-	82 821	60 530	84 430	49 156
Leading officers	-	62 415	-	54 104	45 602
Senior officers	-	-	-	38 241	34 490
Junior officers	-	-	-	-	26 234
In Territorial Bodies:	23 672	34 674	30 274	23 119	15 886
Senior staff	-	-	-	-	-
Chief officers	-	61 214	-	-	-
Leading officers	-	33 861	30 274	28 892	-
Senior officers	-	-	-	21 975	18 562
Junior officers	-	-	-	-	14 398

Resource: Ministry of Finance of the Russian Federation, 2011

It is clear from the table above that there is a large pay gap (more than 50 per cent) between different levels of executive bodies, which illustrate the vertical pay differentiation. Moreover, it is evident that the higher the category of civil service, the larger the pay gap. Thus, such factor as civil service's category is of considerable interest. Other illustration of vertical pay differentiation is represented in Figure 16.

It is essential to note, that pay gaps between the lowest and the highest categories of civil service varies from 0.85 to 9.91 times across FEBs (see Appendix 9). However, the highest pay gaps (from the 75 percentile) are in FEBs mentioned. It is worth to underline, that the most of these FEBs are FMs. Therefore, such factor as the type of FEB matters.

Figure 16. Vertical pay differentiation of civil servants in some FEBs, 2011

Before proceeding to the further analysis, it is essential to examine the system of the FEBs of the Russian Federation. In this respect it is important to note, that the system of power division is adopted in the Russian Federation. Therefore, the following bodies are acting at the federal level of the state authorities:

· Legislative Branch is represented by the Federal Assembly of the Russian Federation, a bicameral parliament, comprising the State Duma and the Federation Council.

· Executive Branch is represented by the Government of the Russian Federation, the FEBs and their respective territorial bodies.

· Judicial Branch comprises the Constitutional Court, the courts of general jurisdiction and the dedicated courts relating to economic disputes - the arbitration courts.

According to the decree of the President N 314 (2004) “On the system and structure of federal bodies of executive power”, the FEBs of the Russian Federation are represented by the Federal Ministries, Federal Services and Federal Agencies.

The Federal Ministry is a FEB responsible for performing functions of public policy making and statutory regulation in the field of activity established by acts of the President of the Russian Federation and the Government of the Russian Federation. Federal Ministries coordinate and supervise the activities of the Federal Services and Federal Agencies which are under its authority.

The Federal Service is a FEB responsible for performing functions of control and supervision in the field of activity established.

The Federal Agency is a FEB responsible for performing functions of rendering the state services, management of the state property and law-enforcement functions in the field of activity established, except for the functions of control and supervision.

In accordance with the recent Presidential decree N 636 (2012) “On the system and structure of federal executive bodies”, the current structure of FEBs is presented by 79 executive bodies: 20 FEBs, management of which activity is carried out by the President of the Russian Federation and 59 FEBs, management of which is carried out by the Government of the Russian Federation (see Appendix 10). There are 20 Federal Ministries, 34 Federal Services and 25 Federal Agencies. However, it is worth to note that the main limitation of this research is that only civil servants of the central apparatus of FEBs of the Russian Federation have been considered. These executive bodies have been chosen on purpose to capture more comprehensive and objective results of the research, which is based on organisations with different structure, functions and powers.

Below is a table that is designed to illustrate all components of average monthly pay of civil servants in Central Apparatus of FEBs by types of FEBs in 2011.

Table 10.

Components of average monthly pay of civil servants in Central apparatus of FEBs by types of FEBs in 2011, rubles per civil servant

This table clearly shows that the total pay of civil servants in the Government is twice as much as pay in the other FEBs. Moreover, it is evident that there is no direct relation between pay components of civil servants and type of the FEB. However, the magnitude of monthly pay (median level) is in direct relation with type of FEB. As it shown in Figure 17, civil servants in the Federal Services receive higher pay than in the Federal Agencies, but lower pay than in the Federal Ministries. The average monthly pay of Federal civil servants of each FEBs by categories of civil service' positions is represented in Appendix 11.



Figure 17. Pay differentiation according to the type of FEB

The next limitation of research that should be mentioned is that statistical data, essential for practical part of the research, are available only for 2011, therefore we conduct a cross-sectional study. Furthermore, the structure of FEBs have been changed since 2011 - in particular, the Ministry of Healthcare and Social Development was converted into the Ministry of Healthcare and the Ministry of Labour and Social Protection; the Ministry on Far East Development was established; the Ministry of Sports, Tourism and Youth Policy was converted into the Ministry of Sports (its youth policy-related functions were transferred to the Ministry of Education and Science, while functions pertaining to the coordination of tourist activities were assigned to the Culture Ministry). Other authorities are remained without changes (Presidential decree N 636, 2012). Therefore, research was conducted on the basis of FEBs' structure of 2011.

Other limitation of research is linked with the absence of statistical data of some FEBs. For example, a number of FEBs under the President's direct authority (“presidential bloc”) have the so-called “security bloc” of FEBs of the RF, which does not publish data on civil servants' pay:

· The Ministry of the Interior;

· The Ministry of Defence;

· The Ministry on Far East Development;

· The Federal Security Service;

· The Chief Directorate for Special Programs of the President (Federal Agency);

· The Foreign Intelligence Service (Federal Service).

Moreover, for the following new FEBs of the RF data are also not available:

· The Ministry of Labour and Social Security;

· The Federal Accreditation Service;

· The Federal Service for Intellectual Property;

· The Federal Technical and Export Control Service;

· The Federal Service for Ecological, Technological and Atomic Supervision;

· The Federal Agency for Construction, Housing and Utilities.

Thus, in our sample we have only 66 FEBs from 79 FEBs.

In order to analyse the influence of such factor as the FEBs activity, all FEBs were divided into the following clusters (see Table 11).

Table 11.

The median of monthly pay of civil servant of the Central apparatus of FEBs by occupations in 2011, rubles per civil servant

Clusters of FEBs	Median pay	Number of FEBs
Production Sector	40 121	11
Infrastructure	40 503	12
Social Policy	43 196	13
Economy and Finance	55 098	23
Defence	57 368	6

Appendix 12 contains the details of clusters mentioned. As it shown in Table 11, the median monthly pay of Federal civil servants is differentiated by the area of FEBs' activity: the heist pay in Defence cluster and the lowest - in Production sector cluster. Therefore, the area of FEBs' activity plays a great role in pay differentiation.

Before the analysis of pay compression it is essential to consider the definitions and formulas of the coefficients of pay compression (or compa-ratios). The literature on compa-ratios (ICLRR, 2006; IDS, 2006; Hay group, 2006; 2007; 2008; Vagina, L., 2007; Mayhew, R., 2011) identifies that there is no universal definition of these coefficients. Being guided by the analysis of the above-stated researches, it is possible to draw a conclusion that definition and components of compa-ratios depend on the purpose and tasks of specific research. In our analysis we will calculate two types of compa-ratios: chain compa-ratios and basic compa-ratios of civil service' categories.

The chain compa-ratios ( show the ratio of pay of civil service' category considered to the pay of the previous (by hierarchy) civil service' category. Thus, the magnitude of means the increase or decrease (compression) of civil servants' pay in the case of career advancement from the previous civil service' category to the next.

The formula (1) for chain pay compa-ratio is:

- the average monthly pay of the particular civil service' category, for which we calculate ; - the average monthly pay of the previous civil service' category.

Figure 18 illustrates the median chain compa-ratios for civil service' categories in the Federal Ministries, Services and Agencies. It is essential to note that in the case of career advancement from “Support Professionals” to “Professionals” the average monthly pay increases on approximately 50 per cent in all FEB. However, in case of further career advancement the increase of pay varies from 96 to 139 per cent according to the type of FEB. Thus, civil servants of Federal ministries have more benefits than civil servants of the rest FEBs. This phenomenon can be defined as the horizontal pay differentiation, then employees of the same civil service' categories receive different levels of pay.

Figure 18. The horizontal pay differentiation of civil servants in FEBs, 2011

Furthermore, the horizontal pay differentiation can be illustrated by some exceptional instances of FEBs with pay compression in the cases of career advancement (see Appendix 13).

The basic compa-ratios ( show the ratio of pay of civil service' category considered to the median of pay for this civil service' category in the FEB. Thus, if the magnitude of equals 100 per cent, the level of civil servants' pay is appropriate for this category of civil service in FEB. A Compa-Ratio of less than 100 per cent means that the actual remuneration is lower than the reference level; a Compa-Ratio exceeding 100 per cent means that actual remuneration exceeds reference level.

The formula (2) for basic pay compa-ratio is:

- the average monthly pay of particular civil service' category, for which we calculate ; - median level of the average monthly pay of civil service' category in FEB.

According to the calculations of basic pay compa-ratios, we can conclude that the level of civil servants' pay is appropriate for the category of civil service in most FEBs. However, if we consider this indicator by civil service' categories in different types of FEBs, we can underline that in all Federal ministries the level of civil servants' pay is appropriate for all categories (except for Support Professionals in 3 Ministries), but in most Federal services and agencies the actual remuneration of employees is lower than the reference level for all civil service' categories (see Appendixes 14-16).

Below is a table that is designed to summarise all coefficients of pay compression of civil servants in Central Apparatus of FEBs in 2011. This table gives the evidence of vertical and horizontal pay differentiation of civil servants of FEBs. civil payment work

Table 12.

Chain and Basic compa-ratios by civil service' categories in FEBs, % (2011)

Indicators	By categories of civil service	By categories of civil service
	From “Professionals” to “Senior managers”	From “Support professionals” to “Professionals”	Senior managers	Professionals	Support professionals
Mean	125%	59%	122%	108%	109%
Min	-11%	-36%	38%	49%	42%
Lower quartile	82%	36%	82%	84%	87%
Median	115%	53%	100%	100%	100%
Upper quartile	140%	65%	130%	123%	137%
Max	408%	314%	435%	244%	180%

The above provided analysis of civil servants' pay in the FEBs of the Russian Federation leads to the following conclusions.

The civil servants' pay can vary according to the budget of FEB. However, the budget is based on the number of authorised positions in FEB, calculated on a historical basis. Therefore, such factors as functions, powers and services provided by FEBs can indirectly influence on the level of civil servants' pay differentiation.

The civil servants' pay has unequal distribution across FEBs. The average pay for “Senior managers” category is 103 711 rubles. However, in 44 (from 66) FEBs this indicator is lower than the average level. The average pay for “Professionals” category is 45 196 rubles. Nevertheless, 66 per cent of FEBs pay less than this figure. The average pay for “Support professionals” category is 29 899 rubles. However, only 30 FEBs have this level of pay. Therefore, there is a large pay gap between different levels of executive bodies, which illustrate the vertical pay differentiation.

Moreover, it is evident that the higher the category of civil service, the larger the pay gap. Thus, such factor as civil service's category is of considerable interest. However, in some FEBs the differences in total pay and allowances between different categories of civil service are small. Thus, there is little incentive for staff to take on higher level responsibilities

In addition, pay gaps between the lowest and the highest categories of civil service varies significantly across FEBs. Moreover, such factor as the type of FEB matters in this context. However, there is no direct relation between pay components of civil servants and type of the FEB. In contrast, the overall magnitude of monthly pay is in direct relation with the type of FEB.

According to the calculations of chain and basic pay compa-ratios, we can conclude the following:

· Civil servants of Federal ministries have more benefits than civil servants of the rest FEBs. This phenomenon illustrates the horizontal pay differentiation.

· The level of civil servants' pay is appropriate for all categories in Federal ministries, but in most Federal services and agencies the actual remuneration of employees is lower than the reference level for all civil service' categories. These findings support the argument that the type of FEB influence on the level of civil servants' pay differentiation.

Summarizing the findings above and discussion of the theoretical part, we may conclude that factors influencing on the level of civil servants' pay differentiation can be divided on the three groups (see Figure 19). The first group considers the pay structure in general. The second group accounts for the peculiarities of FEBs. The last group explains the activities of FEBs.

Figure 19. Determinants of the level of civil servants' pay differentiation

The next Section includes a comparison of the above mentioned measures of pat differentiation in the OECD countries.



Section 5. Comparative analysis of civil servants' pay differentiation in Central government of Russia and OECD countries

This section provides an overview of pay gaps and pay differentiation of civil servants working in Central Government. The first part of this section contains the comparison of pay differentiation in Russia and OECD countries. The second part provides the overview of pay differentiation comparisons between UK' and Russia' FEBs.

The following research methods are applied in this section: observational research, statistical and graphical analysis. The research is based on comparison analysis of publically available data on compensation of civil servants in central government from the report “Government at a Glance 2011” (OECD, 2011). Additionally, in order to compare pay gaps and pay compression between FEBs, there have been employed data from the UK Office for National Statistics and Rosstat of the Russian Federation.

Before beginning the comparisons of civil servants' pay differentiation across different countries, it is essential to consider in more detail the data employed. It was already briefly pointed out that data on compensation of civil servants in central government have been employed from the report “Government at a Glance 2011” prepared by OECD. This report is based on the survey on the annual compensation of employees for a sample of occupations in central/federal/national government in order to build a database on remuneration levels for typical positions in central government. Therefore, this cross-sectional data is comparable with data of Rosstat, because it excludes local levels, social security institutions and public and quasi-public corporations.

According to the methodology on compensation of government employees (OECD, 2011, pp. 199-210), the data from the survey cover information concerning 12 occupations within central government grouped into four basic headings: top managers, middle managers, professionals and secretaries.

The selected occupations are considered representatively and relatively comparable across countries because it is adopted from the International Standard Classification of Occupations (ISCO-08) developed by the International Labour Organization. The classification and the definition of the occupations represented in Appendix 17.

As mentioned in previous section, there are also four categories of civil service' positions in the Russian Federation, which can be divided on five groups. Therefore, after the detailed analyses of ISCO-08 classification, the following comparability table of Russian and OECD civil servants' occupations have been developed (see Table 13).

Table 13.

Comparability of civil servants' occupations in Russia and OECD countries

OECD countries	Russia
ISCO-08 Occupations	ISCO-08 Positions	Groups of job positions	Categories of civil service
Senior managers	D1 position	Senior staff	Senior managers
	D2 Position	Chief officers, Leading officers
Middle managers	D3 Position	Senior Staff	Assistants (advisers)
	D4 Position	Chief officers
Professionals	Economists, policy analysts, statisticians	Chief officers, Leading officers, Senior officers	Professionals
Secretarial positions	Administrative executive secretaries	Chief officers, Leading officers	Support Professionals
	Secretaries (general office clerks)	Senior officers, Junior officers

It is essential to note that the OECD survey focuses on total compensation and employers' social contributions - contributions payable by employers to social security funds or other employment-related social insurance schemes to secure social benefits for their employees (OECD, 2011, p. 203). However, this component was excluded from the comparisons because of the fact that statistics of Rosstat does not contain such data. The initial data of civil servants' compensation in OECD countries (with employers' social contributions) is represented in Appendix 18. Total compensation includes wages and salaries, as well as unfunded employee social benefits paid by the employer.

Moreover, OECD data refer to 2009. Initial data of compensation was converted to USD using PPPs for GDP from the OECD National Accounts Database. Therefore, to convert this data to rubles, Russia's PPP for GDP was used (1 USD = 14,22 rubles in 2009). In order to get compensation measured in 2011 rubles, data was corrected on inflation by means of Russia's GDP deflator (114,2 % in 2010 and 115,5 % in 2011). Appendix 19 illustrates the data received. It should be mentioned that the average monthly civil servants' compensation in OECD countries varies from 22 502 rubles (for Secretarial positions in Chili) to 506 345 rubles (for Senior managers in Denmark).

It is evident from the Figure 20 that civil servants of OECD countries in all positions receive higher compensation than Russian civil servants. However, there are few countries with the same level of civil servants' compensation for some occupations by ISCO-08: Chile, Estonia and Hungary.

Appendix 20 demonstrates the level of the average monthly compensation of civil servants in different countries as a per cent of the average OECD level. The level of civil servants' compensation in Russia is lower than the average OECD level on 47 per cent. Moreover, it is interesting to note, that the lowest level of civil servants' compensation in Russia have Senior managers of Chief officers and Leading officers groups (33 per cent from OECD mean) and Assistants (advisers) of Chief officers group (44 per cent from OECD mean).



Figure 20. Compensation of central government civil servants in Russia and OECD countries, 2011

The next figure demonstrates pay gaps between Professionals and Secretarial positions, Middle managers and Secretarial positions and Senior managers and Secretarial Positions. These indicators vary from 1,5 times (between Professionals and Secretarial positions in Denmark) to 9 times (between Senior managers and Secretarial Positions in Chili) (see Figure 21). It is worth to note, that pay gaps in Russia are significantly lower than in OECD countries. Supposing it can be explained by low level of compensation in Russia. However, the largest pay gaps are in Chili, where the same level of civil servants' compensation.



Figure 21. Pay gaps between civil servants' occupations, 2011

Figure 22 illustrates the chain compa-ratios for civil service' occupations in Russia and OECD countries. It is essential to note that in the case of career advancement from “Secretarial positions” to “Professionals” the average monthly pay in OECD countries increases on 103 per cent (in Russia only on 52 per cent). However, in case of further career advancement the increase of pay varies from 0 in Brazil to 116 per cent in Italy. However, there is pay compression in 3 countries: in Austria, Spain and USA. Thus, in the case of career advancement from “Professionals” to “Middle managers” the compensation of civil servants is decreased in countries mentioned. The magnitude of chain compa-ratio between Middle managers and senior managers varies from 10 per cent in Israel to 154 and 212 per cent in New Zeeland and Denmark respectively. Thus, Senior managers in New Zeeland and Denmark have more benefits than Senior managers of the rest countries. This phenomenon can be defined as the horizontal pay differentiation across countries.

Figure 22. Chain compa-ratios in Russia and OECD countries, per cent (2011)

The next part of this section provides the comparison of pay differentiation in FEBs. The research is based on comparison analysis of publically available data on compensation of civil servants in FEBs of UK from the Civil Service Statistical Bulletin (ONS UK, 2011b) and Civil Service Statistics Data Summary Tool (ONS UK, 2011a).

The FEBs of UK are the Government departments which report to Ministers (24 departments) and a number of non-Ministerial Government Departments (more than 300 departments and bodies). However, only 43 of al FEBs of UK were used in this analysis (see Appendix 23).

Therefore, after the analysis of UK's civil service responsibility levels, the following comparability table of Russia's and UK's civil service' categories have been developed (see Table 15). However, because of the absence of data for Assistants (advisers) in Rosstat data, the category of Administrative stuff (grades 6-7) was excluded from the comparisons.

Table 15.

Comparability of civil servants' levels of responsibility in Russia and UK

Responsibility levels of UK's civil service	UK's categories of civil service	Russia's categories of civil service
SCS	Senior Civil Service	Senior Managers
Grade 6	Administrative stuff	Assistants (advisers)
Grade 7
SEO	Officers	Professionals
HEO
EO
AO	Administrative stuff	Support Professionals
AA

It is essential to underline, that UK statistics are based on gross salary. Gross salary is the annual salary inclusive of basic pay (including consolidated performance pay) and pay-related allowances such as regional and skills allowances. The main limitation of this part of research is that UK statistics does not include bonuses. According to the IDS (2009), the magnitude of bonuses varies across departments (see Table 16-17). Therefore, there is significant variation in pay multiples among individual organisations of UK civil service, reflecting different workforce medians as well as top pay ones (Hutton, 2011, p. 33) (see Appendix 21).

Table 16.

Examples of UK's central government bonuses in different organisations, 2008

Organisation	Bonus
Defra	an annual performance bonus worth 7.5 per cent of the midpoint of each pay range is awarded to the top of 10 per cent of performers. There are also in-year bonuses available, up to a maximum of £750, to recognise one-off achievements of high performance
DFT	`achieved' (box 2), £150 to £550; `exceeded' (box 3), £450 to £1,650
HMRC	`top' performance marking, 2 to 2.5%
HMT	`rating 2', £480 to £1,200; `rating 1', £960 to £2,400
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