The policy of higher education in the public sector is being developed and that has brought about the need to systematize the education given by private and public higher educational institutions. This way, an attempt is made to improve the organisation and division of work in the public sector and also in the provision of higher education. The aim of the present paper is to discuss the wage policy in Estonian higher educational establishments and the analysis is based on current theories of performance management and work compensation. The paper provides a survey of salaries of the academic staff in Estonian higher educational institutions and the system of performance appraisal and compensation in the Faculty of Economics and Business Administration of University of Tartu. The paper also offers ideas for those seeking to improve teaching, research and public ations performance in universities.
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