Cuban Government Introduces "Decentralized" Wage System for State Enterprises: What Does It Mean?

The Cuban government has enacted Decree 138/2025, which reshapes the wage structure within state-owned enterprises under a conditionally decentralized model.

Published in the Official Gazette on December 20, the decree outlines how state sector enterprises can autonomously establish their wage systems, directly linking workers' earnings to productivity and economic efficiency.

This new regulation replaces Decree 87 of 2023, deemed outdated, and introduces broader mechanisms for salary flexibility.

Accompanying the decree is Resolution 332/2025 from the Ministry of Finance and Prices, which governs the financial interactions between state enterprises and the government, including profit distribution, voluntary reserve creation, and dividend payments.

Flexibility in Wage Organization... With Constraints

One of the most notable aspects of Decree 138 is that state enterprises, their subsidiaries, and superior management organizations are granted the ability to define their own wage systems. This encompasses:

• The salary scale.
• Wages based on job complexity.
• Performance-based payments.
• Additional compensations.
• Various forms of remuneration.

Article 3 of the decree states, “The wage system prioritizes payment for job complexity and performance-based rewards to measure individual worker contributions.”

Additionally, the wage design must be discussed within the Board of Directors, approved by the union, and ratified in the Collective Labor Agreement.

By law, wages cannot fall below the national minimum wage or the basic salary of the previous year for the same position.

Core Principles: Equality, Proportionality, and Agility

The decree rests on five fundamental principles:

• Equality: Equal pay for work of equal complexity.
• Differentiation: Based on responsibility, conditions, and suitability.
• Proportionality: Related to work time and amount.
• Agility: Wages depend on business outcomes.
• Minimum Protection: Ensures a non-regressive base salary.

Article 7, subsection d, notes, “The wage is determined by the company's results.”

Additional Payments and Incentives

Entities can implement additional payments linked to job conditions, seniority, extra knowledge, and performance.

These payments should not exceed 50% of the salary scale and require verified economic backing.

The regulation also confirms output-based and piecework pay, which should constitute at least 30% of the salary fund (with some exceptions), as an incentive to boost individual productivity.

Profit Sharing: Conditional Incentives

Decree 138 and its complementary resolution authorize profit sharing among workers, subject to strict requirements: no tax debts, no “deficient” audit ratings, and adherence to state contributions.

Article 45 of Resolution 332 states, “The head of the economic entity is authorized to make advance payments... directed towards profit sharing among employees.”

These payments are not considered wages and do not contribute to social security. They are paid in CUP and subject to personal taxes.

Voluntary Reserves and Special Funds

Companies can establish voluntary reserves with retained profits, intended for:

• Research and development.
• Employee housing purchase or repair.
• Collective incentives.
• Internal compensation fund.
• Social responsibility, among others.

These reserves require approval and are subject to financial plans and accounting validations. They can only be executed if the state performance contribution is met and other obligations are not impacted.

State Control Remains: Criticisms and Limitations of the Decree

Although Decree 138/2025 employs the language of decentralization and autonomy, its structure reveals a strong dependency of state enterprises on the central financial and political apparatus.

Instead of genuine autonomy, a conditional and staggered form of flexibility is established, subject to multiple levels of validation and fiscal criteria.

Notably:

• Companies can only pay more if they contribute more to the state. Otherwise, they are forced to reduce their wage fund to the historical minimum.
• Negative audits block profit payments, even if errors are unrelated to the worker.
• The salary of the company head can exceed established caps, according to the discretionary decision of higher authorities, breaking the principle of proportionality.
• The model of additional payments and voluntary reserves depends on external approvals and does not guarantee stability for workers, especially in less profitable sectors or those affected by the national economic context.

The decree acknowledges, “The wage fund is conditioned on meeting the performance contribution of state investment or dividend payment,” in several articles.

In practice, this means that labor productivity continues to be measured by state profitability rather than direct improvement in workers' conditions.

Those working in non-profitable enterprises—due to structural causes or external decisions—will find their opportunities to increase income limited, regardless of their effort or commitment.

An Ideologically and Fiscally Limited Reform

Decree 138/2025 undeniably signifies a significant shift in the official narrative concerning wage management. It acknowledges the value of individual performance, wage differentiation, and the need to motivate workers through incentives.

However, it does so without relinquishing political or fiscal control over the state enterprise, leaving little room for true structural transformation.

Ultimately, the Cuban state transfers the responsibility of increasing productivity to the enterprises but does not provide them with sufficient tools to operate with full autonomy. The proposed decentralization is thus shackled from the start.