The State sector workforce: How much do we get paid?
- The Government expects that any remuneration changes across the State sector will be met within existing funding levels, demonstrate value for money and not lead the private sector.
- Ensuring we can attract and retain the people we need has to be carefully balanced against making sure there is good value for the taxpayer. This is especially true in today’s financially tight environment.
2014/15 State Sector Workforce Remuneration Movement
One of the Government’s priorities is to deliver better public services to the people of New Zealand, within the tight financial constraints the Government is operating under. All decisions about pay and employment conditions are expected to support this priority.
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.
2014/15 Chief Executive Remuneration Movement
The senior public servants that collectively lead the Public Service and run their departments have significant levels of responsibility. These are large and complex strategic leadership roles, often with large numbers of staff.
What we pay our Public Service leaders is generally less than what they would receive in the private sector for a job of a similar size in New Zealand. There is a careful balance to be struck as the State Services Commissioner has to make sure chief executive remuneration does not get too far out of step with similar private sector roles so we can attract and retain the people we need.
Public Service chief executive pay is largely set by the State Services Commissioner. As at 30 June 2015, the Commissioner sets remuneration for 26 Public Service CEs and advises on or approves remuneration for 108 Crown entity CEs. In general, the greater the Commissioner’s influence over the setting of remuneration, the lower the amount of remuneration paid for the job size.
- The framework for remuneration for Public Service CEs is set with a view to the movements in the rest of the State sector. This provided for increases of between 1% and 5%, depending on performance and position in range. Public Service CEs 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 CEs who received a remuneration review during the year, which translates to an average increase of 0.7% across all CEs. This compares to an average increase in remuneration in the 2013/14 year of 2.8%.
- Over this same period 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.
- As is the case every year, some Crown entity chief executives receive additional increases to recognise job size increases. This was the case for 8 CEs during 2014/15. When these additional increases are excluded, the median increase overall is reduced to 2.2%.
- By comparison, for the year to 30 June 2015, Strategic Pay Limited measured a 7% increase in median fixed remuneration for New Zealand private sector chief executives.
- The 2013 Fairfax annual survey of pay rates in listed companies in New Zealand identified that the average pay for chief executives was 26 times the average pay for employees in those companies. The average base salary of Public Service chief executives is 5.7 times the average pay of their employees. This ratio has been relatively stable over recent years indicating that Public Service chief executive pay is moving in line with the average for their sector.
How much we pay senior public servants is understandably an area of significant interest to the public. It is only fair that the public can be assured they are getting value for money from the public services, including remuneration paid to chief executives.
The State Services Commission discloses the total amount of remuneration paid to State sector senior executives annually. The 2014/15 report is available here.
Under the Performance Management and Remuneration Framework for Public Service Chief Executives, performance is reviewed annually against a common set of performance expectations. The bar for the performance of our Public Service chief executives and their senior teams has been set high. The performance and remuneration system sets clear expectations and remuneration is transparently linked to performance.
There are two ‘at risk’ components of a Public Service chief executive’s remuneration package, the earn back and exceptional performance payment, together totalling 25%. Specifically linking remuneration to individual performance is uncommon in the Public Service, particularly at this level, with only 3% of the workforce having any of their remuneration package ‘at risk’.
In addition to remuneration increases, in 2014/15 chief executives received the following portion of their at risk components (based on performance in the 2013/14 year):
- 17 of of 23 eligible CEs (74%) received full payment of the 10% earn back component, and the majority of the others received 8%.
- Only 5 CEs received a portion of the 15% exceptional performance component; ranging from 3% to 5%.
To find out more about the State sector workforce there are more detailed reports available for download:
- A summary of the State sector workforce information including remuneration as at 30 June 2015 (PDF)
- The State Services Commission's 2015 Human Resources Capability Survey as at 30 June 2015
- Update on the cap on Core Government Administration as at 30 June 2015
- The 2014/15 Report on remuneration received by State sector chief executives
The findings relate to different parts of the State sector. A definition of the government agencies that are included in the Public Service v State sector are available on our website.