The amount and structure of remuneration of civil servants should be competitive and comparable to the level of payment in the private sector. Presently, the salary level in central public administration sector in Ukraine is lower than in the private sector. This can lead to the outflow of qualified workers from public administration sector to the private sector or create the preconditions for corruption. The objectives of our research are to study international experience of the remuneration reform in public sector, analyze the mechanism of the salaries formation in public administration sector and total expenditures on remuneration in public sector in Ukraine (as well as other countries), determine if the remuneration in public sector is competitive compared to the private sector. Based on the analysis, suggest ways to improve current remuneration system in public administration sector, which will not cause a significant increase in budget expenditures and will encourage employees’ efficiency.