Albania undertook the territorial reform in 2015 with the main goal of reducing the administrative burden and improving public services.

Despite this fact, municipalities account for a significant share of total public employment compared to the region.

A study by the Organization for Economic Cooperation and Development (OECD) highlighted that local authorities in Albania employ 30% of public sector workers.

This percentage is lower in Serbia, where local authorities employ 15% of public sector workers. In Montenegro, it is 24%, in North Macedonia 16%, and in Kosovo 33%, with the highest share of local government employment in total public sector employment.

Efficiency improvement in resource utilization is a continuous challenge for municipalities worldwide, including in developed countries.

In Albania, the expansion of the range of local public services to be performed by municipalities in 2015 significantly increased personnel, and consequently, their personnel expenses.

At the end of 2022, the budget with its own funds for personnel expenses of municipalities reached a level of around 25 billion lek, increasing by about 5% compared to the previous year and representing about 43% of the expenditures with their own funds for the same period.

This is the highest historical level recorded for personnel expenses with municipalities’ own funds, partly influenced by the increase in the number of employees in municipalities by around 5.3% annually at the end of 2022.

On average, for an employee in municipalities in 2022, around 56,868 lek per month were spent, about 1% less than the previous year.

The average cost per employed varies in an interval with a maximum average value of about 70,915 lek in the Rrogozhina municipality and a minimum average value of about 32,917 lek per month in the Memaliaj municipality.

Around 72% of municipalities (44/61 municipalities) are assessed to have an average cost per employed below the average value for 61 municipalities.

Compared to the reference level used by the World Bank of fewer than 25 employees per 1,000 residents, it appears that 51 municipalities have a low level below the reference.

In contrast, 8/61 municipalities (Dropull, Fushë-Arrëz, Memaliaj, Përmet, Këlcyrë, Skrapar, Pukë, Tepelenë) exceed this reference level, suggesting an overstaffing of employees in relation to the municipality’s population.

However, expenses incurred by municipalities account for 9% of total general government expenses. The local CO-plan report shows that decentralization indicators in the expenditure direction in 2022 slowed down.

Coverage of current expenditures (for personnel, operational, and other expenses) continues to significantly absorb resources (with own and earmarked funds).

The investment component presents high variability, depending on the contribution from earmarked investment funds.