Ten years ago, with a B.A. in business administration, Ram Kandil was a lecturer at private colleges, earning NIS 13,000 a month. The pay was good, but since it was suspended over the summer months he decided to try his luck with the Central Bureau of Statistics. The pay was much lower, but he believed the stability, steady income and social benefits would make up for the gap.

"I thought the employment terms of public-sector employees, such as pension benefits and tenure would make up for the lower salary," says Kandil, who got the job and now heads the business surveys sector at the bureau. But he quickly discovered there was no tenure for employees on individual contracts, only for workers belonging to unions, who work under group contracts. In fact, he found out that his contract was an individual-group hybrid, depriving him of tenure on the one hand, but also the possibility of negotiating with his employer on the basis of performance.

"The public sector could have many more excellent people in its employment were it not for the detrimental management style it follows and the distorted salaries," says Moti Shapira, CEO of Lahav, the Israel federation for the self-employed, and a former deputy director general of the Housing and Construction Ministry. "These lead to lack of motivation and an atmosphere of suspicion and infighting. Even good workers don't fulfill their potential."

Employees on individual contracts advance up the customary promotional ladder, and Kandil's rank when he started gave him a monthly salary of NIS 5,500. Today, a decade later and with several bonuses attached to his base salary, he makes NIS 8,500 a month, with no prospects of further advancement. "With an individual contract I should be able to conduct real negotiations over my salary", he argues.

Kandil belongs to a group of around 7,000 public-sector employees (11% of a total of 64,000 ) who are employed on individual contracts. These contracts are divided into several types. There are contracts with senior personnel or experts, who make NIS 16,000 to NIS 30,000 a month. These usually include director generals and their deputies, and qualified professionals. Other contracts include professional ones, usually for economists and statisticians; "essential" contracts with various academicians; and contracts with employees earning hourly wages.

Employees on individual contracts are often frustrated with their working conditions and frequently leave the system. They claim to come up short on two counts. Firstly, the average salary of academicians in the public sector is lower by 20% in comparison with the private sector. Secondly, they are not compensated for the reduced salary by being granted tenure.

A new study released by the Bank of Israel confirms Kandil's perceptions, finding that employees who switched to individual contracts in 2001-2002 were three times more likely to quit their jobs compared to workers under group contracts. The main reasons for leaving public-sector jobs are work conditions that do not justify the lower salaries. According to the study, establishing personal contracts did not prove helpful and only increased defections.

Kandil decided not to give up but to fight the system instead of abandoning ship. Together with colleagues he set up an organization that includes hundreds of public-sector, mainly government, employees who work on individual contracts. "The state cannot have it both ways", he says. "We either get genuine individual contracts, or we switch to a group contract that will protect and empower us. We favor a flexible group contract that will enable flexible management and fair employment terms".

What keeps Kandil in the public sector if conditions are so bad?

"I enjoy the challenges my job offers, and I believe we can improve our situation by banding together," he says. "On the other hand, stellar employees do not stay for long, since they are continuously worn down by bureaucrats, as well as encountering inflexible mismanagement with no mechanisms for work evaluation. Many have moved to the private sector, to finance and high tech.

Drivers make lead the pay pack

This was not how it was supposed to turn out, when it was decided back in the 1990s to expand personal contracts to cover all academic employees, instead of only senior ones. The intentions were good, with salaries 25% to 30% higher than those given under group contracts, and the measure was expected to attract young people to the public sector.

However, salaries are still not competing with the private sector. Data for 2012 shows that the entry-level salary for academicians in the public sector is only NIS 5,337 a month. This is paid out, for example, to survey analysts in the Central Bureau of Statistics and workplace supervisors. Employees in the next two higher posts in the public sector earn monthly salaries of NIS 5,990 and NIS 6,597. The starting salary for lawyers in the State Attorney's Office or in public-sector legal departments is NIS 6,758.

However, not all public-sector workers start out at these low salary levels. The Civil Service Commission gives enhanced salaries to employees with desired qualifications. Thus, environmental inspectors start out at NIS 7,000 a month; special economists make NIS 9,300; and, surprisingly, cabinet members' drivers start out at NIS 12,000 a month. The commissioner's office says this is due to overtime and weekend work, although some attribute it to pressure from ministers.

The Civil Service Commission is concerned that the best workers in public service view their jobs as springboards into the private sector. Henya Markovich, senior manager of the planning and supervision division, says the commission's hands are tied. Her aim is to have young workers give five to seven of their best years to civil service. "It's not possible to provide individual contracts allowing real salary negotiations, since the civil service operates under a unified system with limited budgets," she says.

"Exceptions are made only in rare cases. Employees on individual salaries advance through the ranks, with occasional perks. If they are unhappy they can leave for the private sector, although the work experience they obtain in the public service is incalculable. The challenges facing an economist in the treasury are of a different magnitude than those in the private sector."

Markovich claims that individual contract employees have de facto tenure and enjoy 90% of the benefits of tenured employees. They can obtain formal tenure by relinquishing their individual contracts and joining group contracts, which entails a drop in salary.

Recently, the Industry, Trade and Labor Ministry has initiated some changes in the way things are managed. Incentive-driven raises were introduced based on achievement and productivity. Employees reportedly worked harder and the whole system became more productive. It seems every task has now become a team effort, with willing participants. The Prime Minister's Office was impressed enough to expand the initiative to all ministries.

Another program involved giving performance-related end-of-year bonuses, with the aim of stemming the flow of managers to the private sector. This happened in the Industry Ministry's foreign trade department, which has many attaches returning to Israel, who face a substantial drop in income compared to their jobs abroad.