In many cases, salaries in the public sector are now even higher, especially when adjusted for the number of working hours per year and vacation days. For instance, the Collective Labor Agreement (CAO) for the public sector has a 36-hour workweek, while the private sector typically works 40 hours per week. When converted, the salary prospects in the public sector are on average more favorable than those of many private employers.
CAO pays off — and companies feel it
According to Highberg and the CBS, salaries in CAO sectors rose on average by 5.3% in 2025. Companies operating with an AVR did not exceed 3.0%. Over a period of four years, the total increase in CAO environments is 23%, compared to 13% for AVRs. This difference is becoming increasingly difficult to compensate, especially now that inflation, tight labor markets, and performance-based pay are putting additional pressure on wage costs.
Employers are losing margin and flexibility
The wage gap means more than just higher costs. Entrepreneurs are stuck: many SMEs do not have enough margin to pass on wage cost increases in prices or productivity. This makes it difficult to keep up with CAO-organized employers or government institutions, where wage development is managed at a collective level.
Even companies with a CAO are struggling. Negotiations with trade unions are difficult; often more is demanded than is realistic or feasible. At the same time, employees expect growth — especially now that the inflation of 2022 is still felt. At AVR companies, the loss of purchasing power is still an average of 10%.
Large differences in reward systems
Highberg distinguishes between two reward models: companies with both collective and individual salary increases, and companies that work with an 'all-in' increase. The latter group (22% of the organizations surveyed) raised practical salaries by an average of 3.7% (median) in 2025. Companies with separate increases had a median of 5.7%. It is also clear here that a structural reward policy makes a difference — both in costs and in attractiveness.
Individual growth is also influenced by age structure and promotion opportunities. Companies with young employees face more pressure for advancement. In organizations where employees have already reached their maximum scale, there is less room for performance-based increases.
Lower positions are rising the fastest — but the top lags behind
According to consultant Emmy Kooloos from Highberg, the public sector is now ahead of the private sector — although this mainly applies to positions in lower salary scales. Higher positions lag behind, partly due to the Income Standardization Act (WNT). However, the impact on the labor market is significant: accounting firms, for example, see how young tax advisors are switching to the Tax Authority, where the CAO of the public sector applies.
Public sector leads in wage development - for now
The wage development in the public sector surpasses that of many private employers, thereby putting pressure on the competitiveness of companies, especially in the SME sector. CAOs not only offer employees higher salaries but also more security and a more attractive overall package. For entrepreneurs, this means it is time to reassess their employment conditions. Those who want to remain competitive in the labor market must strategically invest in reward policies, development opportunities, and employer branding — with or without a CAO. The coming years will be decisive for those who want to attract and retain top talent.
