Remuneration is a key element of the employment relationship between employers and employees. Employers set remuneration levels to attract and retain the people they need, while staying within their financial means. In the State sector, annual remuneration adjustments are made through a combination of collective bargaining and internal organisational remuneration processes. These are influenced by Government’s expectations for pay and conditions in the State sector, the organisation’s delivery needs, wider labour market conditions and the department’s budget.

Workforce costs

Personnel expenditure in Crown agencies

The Treasury publishes annual Financial Statements of the Government of New Zealand each year. These statements include personnel expenditure, which covers total remuneration paid to employees. It includes payments such as salaries, employer contributions to superannuation, long service leave entitlements, performance and severance. Personnel expenses for core government agencies increased by 5.2% to $7,249 million in the 2018 June year, while the total Crown personnel expenditure increased by 4.8% to $23,690 million as shown in the table below.

Personnel expenditure in core Crown and total Crown, June year 2013-2018
2013 2014 2015 2016 2017 2018
Core Crown* personnel expenditure ($m) $6,037 $6,232 $6,552 $6,666 $6,890 $7,249
Annual Change (%) 2.1% 3.2% 5.1% 1.7% 3.4% 5.2%
Total Crown**personnel expenditure ($m) $19,935 $20,484 $21,124 $21,952 $22,599 $23,690
Annual Change (%) 2.4% 2.8% 3.1% 3.9% 2.9% 4.8%

*Core Crown - includes Public Service departments, Offices of Parliament, the NZS Fund and the Reserve Bank of NZ.

**Total Crown - includes the core Crown plus Crown entities and State owned Enterprises.

Salary cost in the Public Service

Expenditure on base salaries is the single largest component of personnel expenditure (others include superannuation, performance payments, redundancy costs, etc).The total salary cost shown in the chart below is calculated by multiplying each employee’s annualised salary by the FTE employed for the year, and then summed over all employees in the Public Service.These are approximate annual salary costs and do not represent total personnel expenditure. The total base salary cost in the Public Service increased by 8.6% ($307 million) to $3,885 million in 2018, up from $3,578 million in 2017. This was driven by a 5.2% increase in FTE staff numbers and a 3.3% increase in average salary.

Salary cost by occupation

 

Total salary cost by occupation group is calculated by multiplying each employee’s annualised salary by the FTE employed for the year, and then summed over all employees in that occupation group. The Manager group had the largest cost at $781 million in the year to 30 June 2018. The second largest cost was for the Inspectors and Regulatory Officers group at $661 million, followed by the Social, Health and Education Workers at $585 million. These three groups accounted for over half of Public Service employee salary costs.

The largest increase in salary cost by occupation group was for Managers (up $78m or 11.0%), followed by Contact Centre Workers (up $44 million or 22.4%) and Social, Health and Education Workers (up $39 million or 7.2%). They accounted for over half of the increase in total base salary costs.

Performance pay

Performance payment is defined as a one-off payment to staff in recognition of exceptional effort and results in current job or additional effort beyond current job requirements. In the year to 30 June 2018, 2.7% or 1,398 Public Service employees (excluding chief executives) received a performance payment with the average value of $3,000 (refer to table below in tab 1). Senior staff are more likely to receive a performance pay and a larger amount.

Twenty departments (out of 32) made performance payments in 2018. Over half (55%) of employees who received performance pay were from three departments (MBIE, MFAT and DIA).

The large decrease in the number of performance payments in 2014 reflected a change in the remuneration system at the Ministry of Social Development.

The Government’s expectation is that performance pay will be removed over time. This will be reflected in future reporting.


Superannuation

As at 30 June 2018, 90.3% of Public Service employees were members of at least one employer-subsidised superannuation scheme (up from 88.8% in 2017). The majority of staff (74.7%) belonged to KiwiSaver, with 16.1% in the State Sector Retirement Savings Scheme (SSRSS). Membership of KiwiSaver has increased steadily as new employees join the Public Service and are auto-enrolled to the scheme. SSRSS and the Government Superannuation Fund (GSF) schemes were closed to new members in 2008 and 1992 respectively and the number of employees in those schemes is decreasing gradually as members leave the Public Service. The graph in tab 2 below shows the trend of Public Service participation in superannuation schemes over the last six years (2013-2018).

Redundancies

In the year to 30 June 2018, 380 employees in the Public Service were made redundant (down from 395 in 2017). The average redundancy payment was $79,000 (up from $49,000 in 2017).This increase is mainly due to the number of redundancies in Inland Revenue (164) resulting from their large transformation programme.

The total cost of redundancy increased by 55% to $30 million (from $19.4 million in 2017). Twenty three departments reported redundancies, with 67% occurring in four departments: Inland Revenue, Ministry of Business, Innovation and Employment, Ministry of Social Development and Ministry of Health.


Notes:

[1] The LCI is an official measure of wage inflation. It measures changes in salary and wage rates that employers pay for the same job done at the same standard. The LCI does not reflect compositional change in the workforce, service increments, merit promotions and increases relating to performance.

[2] Calculated using average total hourly earnings for the private sector from Stats NZ’s Quarterly Employment Survey.

[3]Data covers Public Service departments (29 in 2017 and 32 in 2018), as well as seven selected Crown entities whose chief executives are under Remuneration Authority jurisdiction, including the Audit Office, Office of the Clerk, Office of the Ombudsmen, Parliamentary Service, Parliamentary Counsel Office, and Parliamentary Commissioner for the Environment. Data also covers tertiary education institutions (28 in 2016 and 2017).

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