Following a freeze on senior executive pay rises last March, a new government edict has directed independent remuneration panels that bonuses are only appropriate in limited circumstances of commonwealth entities.
According to reports by The Age, the direction was sent on Friday and outlines that any performance bonus must ‘carefully target who is provided with the opportunity to earn’ one as part of their remuneration package.
“Performance bonuses should normally only be used in cases of high levels of performance and achievements greater than the inherent expectations of the position and within agreed risk parameters,” the direction read, further warning that bonuses should not be used to top-up remuneration packages or be paid for ‘adequate or satisfactory performance’.
Assistant minister to the minister for the public service, Ben Morton, said that the exercise of ‘rigour and restraint’ was important when awarding bonuses to public servants.
“Commonwealth entities and companies exist to deliver outcomes for the public,” Morton told The Age.
“They should act in line with community expectations regarding remuneration, regardless of their level of independence from the government.”
Most APS roles in policy, service delivery, regulation and corporate position were not appropriate for bonus arrangements, the directive said, and should be used as rewards for those senior staff whose work involved significant, at-risk investment outcomes, were required to meet significant public milestones or in positions involving non-tax revenue raising.
A review of personal bonuses to government business enterprise and agency employees was ordered by the federal government in November last year. That review was partly called in response to figures tabled in parliament that showed employees of NBN Co had shared $78 million in personal bonuses for the 2020 financial year.
Other examples of healthy bonuses for more than 1,700 executives and senior staff of The Reserve Bank, the Australian Competition & Consumer Commission, the Australian Securities & Investments Commission, and the Australian Prudential Regulation Authority amounted to $13.2 million in the previous financial year.
In addition to the review of APS bonuses, a new pay deal was struck with public sector workers that outlined during times of recession, pay rises would no longer be guaranteed and that employees will be paid in line with private sector wages instead.
Morton added that there were a number of commonwealth entity companies which operated in sectors where the use of short-term incentives and variable pay was common — indeed expected — as part of a remuneration package.
The assistant minister also said that while commonwealth entities needed to be accountable to the communities they served as members of the APS.
“While the commonwealth public sector employs people with a diverse range of responsibilities, skills and qualifications supporting the prosperity of Australians, commonwealth entities and companies need to be accountable to the community they serve,” Morton said.