Government is now spending more than $700 million each year on salary and benefits for a growing public sector workforce.

The cost of remuneration for the entire public sector rose from $521 million in 2020 to $712 million in 2024 – more than half the total budget of the country, according to an auditor general’s report tabled in Parliament this week.

The spike in spending has continued beyond the time frame covered by the report, with government adding hundreds of new employees and increasing pay across the board in 2025.

There are now more than 8,000 people on the public pay roll, according to a separate HR report from the Cayman Islands government also tabled in Parliament Wednesday.

The auditor general’s report indicates costs from increased hiring and cost-of-living pay adjustments have led to a surge in spending that has outstripped government’s revenue growth putting a strain on the country’s finances.

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It also highlights increased spending on performance related pay from several statutory authorities and more than $1 million in spending on Christmas gifts for Water Authority-Cayman staff members over five years.

The report is presented as a fact-finding exercise and includes no specific recommendations.

Auditor General Patrick Smith said in a press release, “The public sector relies on its staff to deliver services. It is not surprising, therefore, that around half of all public sector expenditure is on staff remuneration costs.”

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The number of employees across the civil service, statutory authorities and government companies rose from 6,900 in 2020 to just under 7,900 in 2024, the period covered by the report. Meanwhile the pay and benefits package for the average public sector worker increased by 20% to $90,000 annually, including the cost of healthcare and pension.

Government announced a hiring freeze in September of last year amid concerns that it would be in deficit by the end of the year. But that did not prevent headcount increasing by 3.6% in 2025, with the public service growing by a further 287 employees over the course of the entire year.

The pair of reports show that one in four Caymanians now works in the public sector – in a labour market where public servants account for roughly one in eight of all workers island-wide.

# Spending outstrips revenue growth

The auditor general’s report makes pointed reference to the fact that spending increases, driven by pay and benefits packages and new hiring, are outstripping new revenues. In 2024, the report notes, more than half of government spending went on staff costs.

“Government expenditure increased by 26 per cent, from $1.1 billion in 2020 to $1.4 billion in 2024, and public servants’ remuneration increased by 37 per cent, from $521 million in 2020 to $712 million in 2024.”

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The auditor goes on to point out that this pattern has continued, noting public sector expenditure increased by 51% between 2018 and 2023 – double the 25% increase in public sector revenues over the same period, “indicating a risk to the Government’s long-term financial sustainability”.

# Pay increases and Christmas gifts

The government awarded pay increases totalling around 10% to all public servants between 2020 and 2024 through two cost-of-living adjustments, on top of $27.8 million in one-off honorariums, with a further 5% increase, costing an estimated $25.2 million annually, taking effect in January 2025.

Health care and pension, costs the government pays in full on top of salaries with no employee contribution required, are growing faster than salaries themselves. The report found that health care costs increased by 54% to $105 million over the five years, while pension costs rose by 49% to $53 million.

The report also highlights some unusual spending patterns.

The Water Authority spent $1.8 million over five years on staff benefits including approximately $1 million on Christmas gifts – around $1,200 per employee annually – as well as Christmas meals, corporate wellness activities, gift cards, honorariums and employee awards. The auditor general’s report noted the utility’s benefits bill alone accounted for more than three-quarters of the entire public sector’s staff ‘welfare spending’.

Performance-related pay also surged from $696,000 to $2.4 million. The increase was confined to three statutory authorities – The Cayman Islands Monetary Authority ($4.9 million over the five years), the Civil Aviation Authority of the Cayman Islands ($933,000) and the Maritime Authority of the Cayman Islands ($853,000). The auditor general’s report noted that despite civil servants being eligible for performance-related pay, no civil service entity paid any such awards during the entire five-year period.

Public sector payroll tops $700M as costs outpace revenue