Upon the authorities’ request, the IMF’s Fiscal Affairs Department provided technical assistance to Palau on implementing the recommendations of the technical report produced by the November 2023 mission on government compensation and employment. The creation of the Employment and Compensation Committee (ECC) demonstrated the authorities’ commitment to reform and the mission supports the authorities’ proposal to reorganize the ECC into a Steering Committee and a Working Group. Before awarding pay increases to address issues of recruitment and retention, the government needs to assess its fiscal space and determine its expenditure priorities. The importance of systematically and prominently advertising vacancies online cannot be overstated. Human resource laws and regulations are generally fit for purpose, but current practices governing new position creation and recruitment merit review by the ECC with support from FAD.
Upon the authorities’ request, the IMF’s Fiscal Affairs Department provided technical assistance to Palau on reforming government employment and compensation policies. Palau is facing significant challenges in recruiting and retaining qualified staff for essential public services due to emigration. The government's compensation structure has become increasingly compressed, making it difficult to recruit and retain skilled workers, particularly in the health and education sectors. The mission suggested that targeted pay increases, subject to available fiscal space, could alleviate these issues. Additionally, innovative approaches, such as merging some state government functions with the national government and facilitating the recruitment of foreign workers, could improve public service delivery efficiency. The recent establishment of the Employment and Compensation Committee (ECC) marks a significant step towards the necessary development of a medium-term strategy to address these challenges.