FISCAL Commissioner Courtney Williams has called for a sweeping overhaul of the public sector wage negotiation process, proposing that it should take place over a 14-month cycle and conclude before the annual budget.

This recommendation comes as Finance Minister Fayval Williams announced that the Government has set aside $33 billion in contingency — equivalent to about a five per cent increase — for wage settlements in the upcoming fiscal year.

But as Commissioner Williams points out, this figure is based on estimates that may prove inaccurate, and he warns the unions’ demands could push it even higher, potentially derailing fiscal plans.

“Let’s say if that’s the case, the Government puts in five per cent and when you get to the negotiation table you end up signing at six per cent or seven per cent,” Williams, a 30-year veteran fiscal economist hypothesised, highlighting the potential for budget overruns. With a contingecy of $33 billion, every one-point increase above the level the Government is hoping to settle with the unions means it will have to find an additional $6.6 billion.

To avoid such risks, the commissioner wants to see the Government adopt the Compensation Negotiating Cycle outlined in the country’s laws. His proposal calls for the Government to settle wage increases a full seven months before they take effect so that budgets can be crafted with some certainty around the size of the wage bill. Currently, the Government negotiates wage settlements with public sector unions after the start of the fiscal year, and so have to pay retroactive amounts.

“So we’d say the Government should issue a wage call in say January, and that’s for next year,” Williams started. He said that wage call should give the unions until March to submit claims, with the Government outlining its forecasts for various economic variables such as economic growth, inflation, fiscal balance and so on, and indicating what it can afford to pay.

“And then between April to, say, August, the Government would meet with all the different unions…. to try to settle. So when the budget call goes up in September the Government would have already settled. You know the cost, so you know exactly how much the wage budget should be, and you would avoid that risk of exceeding — whatever the contingency. A significant risk would be reduced,” he continued.

He said that approach would be better than negotiating with a contingency that may not be enough to satisfy the unions’ demand.

“I’ve seen many situations before where, whatever Government offers in the first instance, by the time the unions come to the table, that shifts upwards,” he said.

The fiscal commissioner emphasised that completing negotiations before the budget cycle would provide greater fiscal certainty and reduce risks. “If you have the negotiations taking place between, in this period, this election period… the bargaining prowess would be in the hands of the unions,” he cautioned, pointing out the potential for political pressures to influence negotiations.

Finance Minister Fayval Williams has acknowledged the start of wage negotiations, confirming that 11 claims have been received from various public sector unions. “The continued engagement of all stakeholders remains key to the maintenance of harmony in the public sector,” she stated during her recent budget presentation.

The Government has allocated $495.8 billion for public sector compensation in the 2025/26 budget, including new pay rates for various groups and back pay for some categories of workers. This figure represents a significant portion of the country’s $3.5-trillion economy, highlighting the importance of effective wage negotiation processes.

While the finance minister has emphasised the Government’s commitment to pay-for-performance and productivity improvements in the public sector, the fiscal commissioner’s recommendations suggest a need for more fundamental changes to the negotiation framework itself.

As these discussions unfold, the debate over public sector wages has also reignited conversations about wage caps. The Government abolished the previous nine per cent wage-to-GDP cap in 2023, a move that has been met with mixed reactions. While unions have welcomed the increased flexibility, fiscal watchdogs, including Commissioner Williams, have expressed concerns about the long-term sustainability of wage growth.

“We would like to see the cap,” Williams stated, arguing that a fiscal rule on wages helped in past negotiations by providing a clear benchmark.

He continued: “Because I tell you something, while the cap was there, believe it or not, it actually helped in the negotiations because one of the things that the ministry had in its cap was that it could always put that on the table to the unions.”

He pulled on his previous stint as permanent secretary in the Ministry of National Security to highlight his point.

“While I was a permanent secretary at national security, from time to time I would make requests to finance [ministry] for approval in terms of maybe some restructuring here or there, and every letter that would come back from finance would quote that nine per cent of GDP. So it was so much a part of the DNA of the Government, every single letter, to say, ‘Okay, yes, regardless of how much we increase, it will not surpass this nine per cent.’ “

The decision to maintain the abolition of the wage cap comes despite calls from fiscal monitors like Keith Duncan, chairman of the Fiscal Advisory Commission, who warned that public sector wages — projected at 13.3 per cent of GDP next fiscal year — risk destabilising Jamaica’s debt trajectory and crowding out critical investments.