This Wednesday, the Cuban government unveiled a new legislative package, Decree 127/2025, published in the Official Gazette. The decree is designed to expand the wage authority of state entities and introduce new incentive mechanisms to curb the exodus of workers from the budgeted sector.
Approved by the Council of Ministers and supplemented by resolutions from the Ministries of Finance and Prices, Labor and Social Security, and Economy and Planning, the decree will take effect 30 days after publication. It impacts approximately 2,443 budgeted units, which make up over 50% of the active state workforce.
Overhaul of Wage Structures
A significant change is that budgeted units with "special treatment" can now establish their own wage systems based on performance, effectively aligning them with the state enterprise sector. These entities are also allowed to generate profits, create reserves at the end of the fiscal year, and utilize these for institutional development, social responsibility, housing, or restocking.
"We are achieving stability, an equality between the budgeted sector and the state enterprise sector," stated Berta Iris Rojas Gatorno, Director of Financial Policies at the Ministry of Finance and Prices.
Increased Autonomy for State Entities
The decree further enhances the autonomy of agency heads to authorize self-financed activities without requiring funding from the State budget. "Budgeted units can engage in self-financed activities without needing State budget financing and without altering their structure," explained the official.
Regarding labor structure, the decree mandates that positions not directly tied to each entity's specific activity should not exceed 30% of the total workforce, aiming to streamline oversized structures.
Guillermo Sarmiento Cabaras, Director of Labor Organization at the Ministry of Labor and Social Security, emphasized that "when designing the structure and staffing of a budgeted unit, it must be done rationally."
Addressing the Exodus Due to Low Wages
These initiatives are part of a broader strategy to prevent the migration of state workers to the private sector, driven by the wage gap: in 2025, the average salary in the budgeted sector was around 5,900 pesos, compared to 7,331 pesos in the state enterprise sector.
The immediate precursor to this decree is Agreement 10199/2025, approved in August 2025. It authorized reallocating savings from the wage fund—generated by vacant positions, unpaid leave, or maternity benefits—as additional payments to workers, recognized as "salary for all legal effects" though not permanent.
The special treatment enabled by the new decree does not apply to high-impact social sectors like health and education but to activities capable of self-financing, such as certain registries and specialized services.
The decree also introduces, for the first time, a legal definition for the budgeted sector and grants legal personality to the financial management of these entities.
Rojas Gatorno highlighted that the goal is "to seek greater efficiency in human resources, contributing to fair labor recognition and higher remuneration for this sector," in a context where Cuba's GDP has declined by 15% since 2020, due to 67 years of a centralized economic model that has exhausted the nation's productive capacity.
Understanding Cuba's New Wage Policy
What is the purpose of Decree 127/2025 in Cuba?
Decree 127/2025 aims to expand wage authority for state entities and introduce new incentive mechanisms to prevent the departure of workers from the state sector.
How does the new decree affect Cuban state workers?
The decree allows certain state entities to establish their own wage systems based on performance, aligning them more closely with the state enterprise sector, and provides more autonomy in financial management.