Public servants shouldn’t be earning the same soaring salaries as private sector executives, declared New Zealand’s State Services Commissioner in his annual senior pay report, and is developing a new policy to ensure motivations other than remuneration are included.
The new Labour Prime Minister Jacinda Ardern yesterday said the government is also concerned and will consider legislation to make accountable those public sector entities that give executives pay rises above those of other workers.
Today the Minister of State Services, Chris Hipkins, clarified he won’t cut top public servants’ existing salaries. Instead he is exploring how to limit future pay increases.
“I’m not at all convinced that we couldn’t recruit and retain good people with smaller salaries or more modest salaries,” Hipkins said.
At the centre of the concern are three public sector board that approved chief executive pay rises well above the recommendations of State Services Commissioner Peter Hughes — increases in the order of NZ$50,000 to $120,000. The offending agencies were the Guardians of NZ Superannuation, Accident Compensation Corporation, and Telarc.
While some of the worst cases in the Crown entities saw rises of up to 30%, in the public service the rises were on average far more modest.
The average remuneration increase for public service chief executives in the 2016/17 year was 2.0%. Over the same period the average salary increase for public service staff was 2.3%.
There were a few departmental secretaries that received hefty pay rises last year, between $30,000 and $50,000. The outgoing top bureaucrat in New Zealand’s Ministry of Business, Innovation & Employment was on more than NZ$800,000 (AUD$730,000) — an increase of around $190,000 on the previous year.
“The upward trajectory of chief executive salaries in the State sector, in particular some Crown Entities, is not sustainable and it’s time for change,” Hughes said.
“I expect public accountability and transparency around the remuneration for public sector chief executives and that includes Crown entities. Crown entities have a strong element of public service, operating with public money for the public good and executives should reasonably expect to earn less than in a private sector company.
“Crown entities who choose not to follow State Services Commission advice with respect to the chief executives’ remuneration are now identified in this report. This information can inform Ministers’ decisions about the tenure of board members.
“While the Board has the right to make these decisions, I do not believe increases of the magnitude given are warranted or justifiable in a public agency, especially where the increase follows previous increases over and above my advice.”
Hughes said a new policy was being developed, but it could two to three years before the public would see the change.
“There has always been, and should be, a differential between the pay of senior executives in the public and private sector,” Hughes said.
“There are important guiding principles that underpin the role and function of the Public Service which are relevant to chief executive remuneration. One of those principles is the spirit of service, a duty to act responsibly in the public interest and to be a good trustee of public resources, including remuneration. The second principle is around public trust, an expectation that the State sector is accountable, transparent, fair and reasonable.”
Hughes was appointed to head the State Services Commission by the previous Bill English National government just last year, but was no plant to make life difficult for an incoming Labour government. He’s a 36-year career public servant who has led multiple government agencies including Social Development, Internal Affairs and Education.