Crown entity CEs - terms and conditions
Terms and conditions, including remuneration and model employment agreements for Crown entity chief executives.
The State Services Commissioner's role
The State Services Commissioner (the Commissioner) advises on or approves the proposed terms and conditions, including remuneration, of Crown entity chief executives (including the chief executives of Crown entity subsidiaries).
The extent of the Commissioner's involvement is determined by the relevant legislation:
- The State Sector Act 1988 requires the boards of tertiary education institutions (universities, polytechnics and wānanga) to obtain the written concurrence of the Commissioner to the terms and conditions of employment for their chief executives.
- The Public Health and Disability Act 2000 requires district health boards to obtain the consent of the Commissioner to the terms and conditions of employment for their chief executives.
- The Crown Entities Act 2004 requires boards of statutory entities to consult with the Commissioner about the terms and conditions of employment for their chief executives.
- There are a small number of other agencies whose enabling legislation requires the Commissioner to be involved in setting the terms and conditions of employment for their chief executives.
Setting Crown entity chief executive remuneration
Crown entity chief executive remuneration is set by Crown entity board chairs after consultation with the Commissioner. To provide consistency in the Commissioner's guidance around Crown entity chief executive remuneration, the Commissioner provides all board chairs with additional guidance when considering increases to chief executive remuneration. This indicates the Commissioner's expectations for reasonable increases to remuneration, taking into account individual performance, and a chief executive's position in a remuneration range. The consultation process provides for Crown entity board chairs to make modest increases within defined parameters. The Commissioner's guidance to Crown entity board chairs continues to be that no increases are given to chief executives who do not meet performance expectations.
Components of Crown entity chief executive remuneration packages
The Commissioner takes a total remuneration approach to chief executive remuneration packages, which means that all benefits for Crown entity chief executives are valued as components of their remuneration package as follows:
- base salary
- performance component - the Commissioner's guidance for performance components for Crown entity chief executives is that they are between 10% of base salary and 15% of total remuneration, but the actual proportion will vary as agreed between the chief executive and the board as the employer. In addition, there are a small number of chief executives with long term incentive performance components. These are typically linked to the successful management of significant funds over a period of time.
Other components that may be included are:
- employer contributions to superannuation, including KiwiSaver
- annual leave - any additional leave in excess of 20 days per annum and organisation leave days (usually the days between Christmas and New Year) is valued into a chief executive's remuneration at 0.4% of total remuneration per day
- Crown entity chief executives may have the option of a vehicle if their employer agrees. A vehicle is valued at 45% of the purchase price (including GST and on-road costs), with a maximum purchase price of $46,000 and based on a three year/60,000 kilometre replacement cycle. This value includes all fixed costs and Fringe Benefit Tax. It assumes full private use, but running costs incurred on holidays or extended travel are expected to be covered by the chief executive
- other components such as medical insurance are not common, but where agreed, they are valued into a chief executive's remuneration at the cost to the employer.
End of term payments
The amount and type of end of term payments made to each chief executive varies, depending on the chief executive's individual terms and conditions of employment. Not all chief executives are entitled to, or receive end of term payments. For those who are entitled to any payments, they may be comprised of one or more of the following:
- as for any employee, payments made to a chief executive on their last day of duty primarily relate to the payment of annual leave not taken
- if a chief executive is a member of a superannuation scheme, payments may include employer superannuation payments owing on end of term payments
- if it is not possible to give a chief executive the requisite amount of notice of termination provided for in their employment agreement they may be eligible for a payment of salary in lieu of the notice period.
Model Employment Agreements
The attached model agreements contain the standard terms and conditions for chief executives of Crown entities, tertiary institutions, and district health boards, which meet current government policy guidelines.
While use of these model agreements is not mandatory, their use - as a starting point - is recommended as they incorporate good legal practice, manage risk, and are likely to make the consultation process smoother.
As the model agreements are intended for use by a range of organisations they need to be made specific to the needs of the particular organisation.