The objective of this paper is to analyse the legal framework of the civil service salary system in the BiH institutions and to assess its compliance with international standards, in particular the SIGMA Principles of Public Administration. After a detailed assessment, the author concludes that the salary system of civil servants in the BiH institutions is to a moderate degree aligned with international standards. The principle of equal pay for equal work has still not been consistently introduced throughout the civil service, which undermines the fairness of the system. The existence of certain salary allowances (i.e. allowance for performing the work of another job), also poses a risk to ensuring the legality, fairness and transparency of the salary system. The performance related pay scheme envisaged by the Law on Salaries and Benefits of BiH institutions is in line with the SIGMA principles, but its effectiveness in practice has still not been properly assessed. In order to enhance the overall quality of the system, the author proposes that additional efforts be invested in carrying out job evaluation and increasing the transparency of the system, through publishing regular salary reports. Furthermore, the author proposes introduction of regular motivation surveys in the BiH institutions, which would assess the effectiveness of the analysed legal framework on the motivation of employees and ensure that the salary system has the capacity to attract and retain qualified staff.