MINISTER ANNOUNCES DETAILS OF NEW PUBLIC SERVICE REMUNERATION POLICY

  • Jenny Shipley
State Services

The Government is introducing a new remuneration policy for public sector chief executives, State Services Minister, Jenny Shipley announced today.

This was agreed to by the Government in conjunction with the accountability arrangements for the Public Service released yesterday.

"The Coalition Government wants top quality people running the Public Service to high standards and accepts that requires more competitive remuneration levels. The new policy gives us the flexibility to match remuneration to the skills and qualities of the CEs who are or will be leading our 39 government departments.

"We need to be able to recruit and retain the best people to serve the public interest. At present there is a modest remuneration gap between CEs in smaller ministries and comparable positions in the private sector. But in our medium and particularly our large departments, the gap between public and private sector pay rates is very significant," the Minister said.

Mrs Shipley says the new policy includes an increase in the range of base salaries depending on the size of the department, an increase in the annual performance bonus system and a further ability to reward CEs who have been responsible for major strategic projects.

"The achievement of any New Zealand Government's long-term policy objectives depends on the performance of Public Service departments and a great deal of that comes back to the performance of the chief executives.

"The State Services Commission has developed a "strategic incentive plan" which will link CE remuneration to their contribution over time to any New Zealand Government's overall policy objectives in areas deemed to be of critical importance or major significance.

"The Government acknowledges that even with these changes, Public Service CE pay rates may not keep up with some in the private sector. In setting remuneration levels, the State Services Commissioner will from now on be making comparisons with the wider public sector, including crown entities, crown corporations and SOES.

"The new policy does not and will not mean an immediate across-the-board pay rise for CEs. New CEs will be employed under the new policy, and existing CEs will be moved to the new system by early 1998.

"All CEs are employed on individual contracts, and I expect the State Services Commissioner, in implementing this policy, will focus on individual performance when considering any increase in remuneration, " the Minister concluded.

The new policy is expected to cost up to approximately $500,000 extra over the coming financial year, estimated to increase to up to $2 million by 1999-2000, with departments finding the money from within existing budgets. In the last financial year, 1996-1997, the total cost of CE remuneration (including salaries, bonuses, superannuation and other costs such as ACC levies and leave liabilities) was $6,522,000.

Inquiries: Janice Rodenburg (04) 4719113

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BACKGROUND:
PUBLIC SECTOR CHIEF EXECUTIVES REMUNERATION

The new remuneration policy provides more flexibility in matching remuneration to the skills and qualities of individuals. There are three main components:

A package which may include benefits such as superannuation or the provision of a motor vehicle. These will be expressed as a "total remuneration cost", rather than the present "base salary plus benefits"

A performance-tested annual bonus. CEs are already eligible for annual performance bonuses, of up to 10 per cent of base salary. However, the SSC is revising its performance review system to improve the assessment process for annual bonuses. The maximum bonus which a CE will be eligible for under the new policy is 15 per cent of the remuneration package.

A strategic incentive plan for critical portfolio areas. This is a new development, where the Minister of State Services, in consultation with the State Services Commissioner and a particular portfolio minister, could establish a strategic incentive plan for a particular CE in areas which any Government had identified as critical to the overall progress of that Government's policy.
The CE would be rewarded where they and their department met the requirements of the strategic incentive plan, most probably over several years. There would be a rigorous measurement regime to assess performance against the plan. The number of strategic incentive plans will be limited and the Government will have discretion over the portfolios where they apply.

The State Services Commissioner will introduce a system of remuneration bands which are linked to the wider public sector, including crown entities, crown corporations, and SOEs. Public sector chief executives will be appointed within the appropriate band for their position. Further movements in remuneration would be based on demonstrated performance.

The State Services Commission annual report for the year ended June 30 1996 reported that chief executives earned base salaries of between $ 90,000 and $200,000 a year. The average base salary was $138,000.

A State Services Commission survey of CE remuneration for the year ending March 1996, covering 300 organisations, found private sector CEs were paid between 50 and 100 per cent more than public service CE's depending on job size.

Public Service CE salaries increased by 43 per cent between 1988 and 1996. Over the same period, Private Sector CEs base salaries increased by 122 per cent.