Remuneration movements in 2014/15
Remuneration increases for the Public Service and Crown entity chief executives for the 2014/15 year were as follows:
Crown entity chief executives have their performance and remuneration reviewed annually by their Board/Chair, on a date specified in their employment agreement (usually their anniversary date).
District Health Board (DHB) and Tertiary Education Institution (TEI) chief executive remuneration requires the concurrence of the State Services Commissioner (the Commissioner). Chief executive remuneration for other statutory Crown entities requires consultation with the State Services Commission (SSC) and, in cases of disagreement with SSC, with Ministers.
The Commissioner provides all board chairs with guidance when considering increases to chief executive remuneration which is consistent with remuneration movements in the broader State sector workforce. This indicates the Commissioner’s expectations for reasonable increases, taking into account individual performance, and a chief executive’s position in a remuneration range. The guidance indicated increases for chief executives meeting expectations of between 2% and 3%.
- Overall actual remuneration movements were in line with the Commissioner’s guidance. The median percentage increase for all Crown entity chief executives in 2014/15 was 2.5%, which was similar to increases in 2013/14, and in line with the combined effect of salary progression and collective agreement settlements during the period.
- Chief executive remuneration is based on job sizing measured by independent consultants. As is the case every year, some chief executives receive additional increases to recognise job size increases. This was the case for eight chief executives during 2014/15. When these additional increases are excluded, the median increase overall is reduced to 2.2%. The increases for the different types of Crown entities are summarised in the table below.
By comparison, Strategic Pay Limited measured a 7% median increase in fixed remuneration for New Zealand private sector chief executives (same incumbents) in the 12 months to June 2015.
Under the State Sector Act 1988, the Commissioner is the employer of most Public Service chief executives and is responsible for their appointment and performance management, and the setting and reviewing of their terms and conditions of employment. This excludes those chief executives whose remuneration is set by the Remuneration Authority, which includes the chief executives of the State Services Commission, the Crown Law Office and the Government Communications Security Bureau.
The framework for remuneration for Public Service chief executives is also set with a view to the movements in the rest of the State sector workforce. This provided for increases of between 1% and 5%, depending on performance and position in range. Public Service chief executivess in general only have their remuneration reviewed once during a term of more than three years.
- In 2014/15, the median increase to Target Remuneration for Public Service chief executives (excluding those whose remuneration is set by the Remuneration Authority) was 2.0%, and the average was 1.7%. This is based on movements ranging from 0% to 4% for the 10 chief executives who received a remuneration review during the year, which translates to an average increase of 0.7% across all chief executives. This compares to an average increase in remuneration in the 2013/14 year of 2.8%.
- In addition, in 2014/15 chief executives received the following portion of their at risk components (based on performance in the 2013/14 year):
- 17 of the 23 eligible chief executives (74%) received their full 10% earn back component, and
- Only five chief executives received a portion of the 15% exceptional performance component, ranging from 3% to 5%.
The appropriation for Public Service chief executive remuneration is capped by the Government and the Commissioner allocates within this. Appropriation and actual spend are at around the same level as they were in 2008/09. In 2014/15 the spend was $12.189m, $1.413m below the cap.
As at 30 June 2015, the base salary of a Public Service chief executive was, on average, 5.7 times the average pay for staff of the department. This has remained relatively stable over the last four years.
Some chief executive roles will receive lower remuneration than second tier managers (often in larger departments) because remuneration is based on the size of the job and the individual’s overall level of responsibility.
State sector workforce
The Government has set expectations for pay and employment conditions in the State sector, which sets the framework for bargaining and remuneration decisions. The expectations can be viewed here.
- The Statistics NZ survey, the Labour Cost Index is a measure of wage inflation. The movements for the 2014/15 financial year show that the Public Service wage moved 0.9%, compared to 1.2% for the broader Public sector, and 1.8% for the private sector.
- Typically the combined effect of salary progression and Public Service collective agreement settlements in 2014/15 resulted in average remuneration increases of between 1.5% and 2.5%.
For more information about the remuneration paid in the Public Service, read the Remuneration chapter of the Human Resource Capability report here.