Kuusk told around a hundred officials in February that the rise would help mitigate the effects of tax and price rises, but has also said that this involves merely a reorganization of the existing ministry salary fund, mainly with the scaling down of annual performance-related bonuses.

Monday, February 3 this year turned out to be a tense day at the Ministry of Defense. Early in the morning, an article was published by investigative weekly Eesti Ekspress which charged Defense Minister Hanno Pevkur (Reform) with indecision and a lack of control over things. It could be inferred from that article some of the minister's subordinates had spoken to Eesti Ekspress, on condition of anonymity.

Just a few hours later, a ministry staff meeting brought another piece of news. The ministry's secretary general, Kaimo Kuusk, was introducing structural reforms which, among other things, involved the dismissal of two deputy secretaries-general. These officials learned of the decision during that very same meeting.

Some of the questions arising within the ministry found their way into the media that very same day. However, overshadowing all of this was the fact that Kuusk also had some good news for the remaining ministry officials: He said that while no substantial wage rise could be pledged at that point in time, basic salaries might be hiked enough to compensate for the impact of the new tax rises.

Those who spoke to ERR described the meeting in this way. Some said Kuusk spoke of a security tax, others that he was simply referring to tax rises and inflation more generally. But for the critics, the idea is the same: While the whole of Estonia tightens its belt in the name of national defense, the Ministry of Defense itself is discussing raising its own pay.

Kuusk: Bonuses will be cut in order to raise base salaries

Secretary General Kuusk also recalled that he might have said something along those lines, although he claimed not to have explicitly mentioned a security tax. He also repeatedly stressed that the ministry's wage fund is not rising.

"We are moving things around within this framework. The idea is to cut the variable salary portion, while the monthly wage, in turn, will become slightly higher," Kuusk said.

Up to now, 12 percent of the Ministry of Defense's salary fund was allocated to performance bonuses. Broadly speaking, each official and department was given quarterly goals. Some had to complete draft bills or development plans, while others had to prepare procurements. The list of various tasks was extensive. Then at the end of each quarter, the completed work was reviewed, with performance bonuses being determined accordingly.

Kuusk said: "I went through two such cycles during the autumn, and if we are talking about cutting bureaucracy, then this is definitely the place to start," noting that the secretary general previously had a dedicated advisor just to manage this process. This position is being vacated and will now be used to strengthen the ministry's auditing capacity, he added.

Kuusk emphasized that over time, the bonus system had lost its purpose. "Many people would send their completed work to the secretary general on the evening before the deadline — all those policies and implementation plans — and assume that results had been achieved," he noted, adding that the real work should only begin after this document is completed.

The wage reform has both supporters and critics within the ministry itself. The latter argue that the performance bonus system helped officials maintain their focus on specific goals. In response, Kuusk stated that objectives would continue to be set within the ministry. However, he believes that the bonus system made management too automated.

"As a leader, you didn't really have to do anything yourself. There was just this constant flow of bonuses, and this seemingly took care of management," Kuusk went on. "If there are people who cannot motivate themselves any other way, then it is worth considering whether they might find a better role within the ministry or the sector."

Not everyone's base wage will rise equally

Performance bonuses, as the name suggests, were based on results. They were not guaranteed, and some staffers' salaries were restricted to their base pay.

The majority of heads of department received bonuses amounting to about 16 percent of their base salary in 2022. A year later, the most outstanding department head received a 17 percent bonus in addition to their base salary. Some department heads, however, only received a bonus of 2 percent or lower.

An official's direct supervisor proposes any performance bonus. In the case of the secretary general, the supervisor is the defense minister.

For example, Kuusk's predecessor as secretary general of the ministry made an annual salary of €67,846 during the first year of the full-scale war, plus €13,162 in bonuses. The following year, i.e., in 2023, a base salary of €75,778 was supplemented by €14,804 in bonuses. This was about the maximum in bonus the minister could have awarded their secretary general; current law allows for a maximum bonus of 20 percent of the base salary.

"You don't take out a mortgage hoping you might get a bonus at the end of the quarter," Kuusk stressed. He stated that this is one of the main arguments in favor of changing the system. "You're not going to convince a loan issuer by telling them you're a very good employee," he explained.

Performance bonuses will not be completely abolished, he added, but their share will be reduced from 12 percent to 7 or 8 percent. Kuusk noted also that the base salary increase might not reach all officials.

"I am not in favor of distributing wage rises evenly. The idea is that leaders should decide who needs and merits a higher monthly wage, based on their results," Kuusk said.

Larger wage rises happened a few years ago

Looking at previous years, wage rises at the Ministry of Defense have not been rare.

In 2023, the average monthly salary for department heads stood at €3,827 gross. A year later, it had risen to €4,120, meaning that on average, department heads got a 7.7 percent hike in base salary.

A more pronounced change can be seen when comparing the salaries of department heads who remained in their positions throughout 2022 and 2023. According to publicly available data, there were three such department heads. The highest-earning of these took in €51,492, including bonuses, in the first year of the war, i.e., 2022. The following year, this sum rose to €68,577, an increase of 33 percent. The total salary of the second official rose by 20.6 percent over the same period, while the third got an 11 percent rise. Their base salary hikes were of a similar magnitude.

According to the secretary general, in terms of base salary, the defense ministry ranks somewhere in the middle compared with the other 10 ministries. However, when taking into account previous bonuses, it ranks among the better-paying ones.

Be that as it may, the labor market also needs competition with private sector companies, and the growing defense industry and IT sector are not the only competitors, Kuusk argued.

"At the start of the year, we invited a mid-level manager from a media company to apply for a similar position in our ministry, but they declined because they would have lost too much in pay by joining us," Kuusk noted.

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