The Government has scrapped performance pay for public sector chief executives in a move that will save taxpayers’ $4 million by 2022.
Until now, these chief executives’ remuneration packages have included the potential to receive a discretionary payment of up to 15% for exceptional performance.
But State Services Minister Chris Hipkins says the Government will be “putting the breaks on the growth rate of chief executives' pay” by removing performance pay.
The Government will also be dialling back pay settings, including the appointment and re-appointment of chief executives at lower points in the remuneration range.
The moves will reduce the total potential forecast expenditure on chief executive remuneration by up to $4 million by 2021/2022, Hipkins says.
Speaking to reporters in Wellington, he said the Government set a “very clear” expectation when it was elected that it wanted to see the “significant pay increases” at the top levels of the public sector curtailed.
He says at senior levels of the public service he has a basic objection to performance pay.
The move follows Prime Minister Jacinda Ardern freezing MPs pay increases until a “fairer” way of determining politician’s salary increases is found.
Two months prior, Hipkins lifted a “cap” on core public servant numbers, introduced under the previous Government, to reduce the number of costly consultants contracted by the Government.
Tuesday’s announcement has nothing to do with industrial action happening across the country, Hipkins says.
Hipkins says the Government believes that performance pay is “counter-productive” to achieving better outcomes for New Zealanders.
He does not think the pay changes will make it any harder for the Government to recruit top-class chief executives.
“I’m confident that the people that go into those senior roles [have] a spirit of public service… I don’t think they are expecting to be paid salaries that are significantly ahead of the market.”
He says all the chief executives of core public service agencies, whose remuneration is set by the Commissioner, agree with the new approach.
All 30 public sector chief executives have signed new individual employment agreements. Hipkins says there is a recognition that they want to “lead by example.”
But the moves do not mean no pay increases will be given.
“The chief executives will have salary reviews just like everyone else, but they won’t have the significant performance bonuses.”
Any pay increases will be a matter for negotiations with the State Services Commissioner, who will consider a “variety” of factors, Hipkins says.