Taking into account the requirements and challenges of dynamic business environment, New Public Management becomes a dominant paradigm in managing the public organizations. The paper aims to identify the main features, i.e., challenges and barriers of new public management generally, and particularly in Serbian public organizations. Therefore, the paper focuses on analyzing the NPM as a contemporary management paradigm in public sector which contributes to enhancing effectiveness and efficiency of public organizations. The results of empirical research conducted in public sector organizations in the Republic of Serbia are presented with the aim to reveal employees’ perceptions regarding challenges and barriers of NPM implementation. The results demonstrate that, although some aspects of NPM can be observed, the practice of NPM is not sufficiently developed in Serbian public sector organizations. Additionally, the results indicate the need for emphasizing the employees as one of the main factors of success by public managers, with enabling the appropriate training for employees, effective communication as well as an adequate leadership style.