The Government has scrapped performance pay for public sector chief executives in a move that will save taxpayers’ $4 million by 2022.
Until now, these chief executives’ remuneration packages have included the potential to receive a discretionary payment of up to 15% for exceptional performance.
But State Services Minister Chris Hipkins says the Government will be “putting the breaks on the growth rate of chief executives' pay” by removing performance pay.
The Government will also be dialling back pay settings, including the appointment and re-appointment of chief executives at lower points in the remuneration range.
The moves will reduce the total potential forecast expenditure on chief executive remuneration by up to $4 million by 2021/2022, Hipkins says.
Speaking to reporters in Wellington, he said the Government set a “very clear” expectation when it was elected that it wanted to see the “significant pay increases” at the top levels of the public sector curtailed.
He says at senior levels of the public service he has a basic objection to performance pay.
The move follows Prime Minister Jacinda Ardern freezing MPs pay increases until a “fairer” way of determining politician’s salary increases is found.
Two months prior, Hipkins lifted a “cap” on core public servant numbers, introduced under the previous Government, to reduce the number of costly consultants contracted by the Government.
Tuesday’s announcement has nothing to do with industrial action happening across the country, Hipkins says.
“Counter-productive”
Hipkins says the Government believes that performance pay is “counter-productive” to achieving better outcomes for New Zealanders.
He does not think the pay changes will make it any harder for the Government to recruit top-class chief executives.
“I’m confident that the people that go into those senior roles [have] a spirit of public service… I don’t think they are expecting to be paid salaries that are significantly ahead of the market.”
He says all the chief executives of core public service agencies, whose remuneration is set by the Commissioner, agree with the new approach.
All 30 public sector chief executives have signed new individual employment agreements. Hipkins says there is a recognition that they want to “lead by example.”
But the moves do not mean no pay increases will be given.
“The chief executives will have salary reviews just like everyone else, but they won’t have the significant performance bonuses.”
Any pay increases will be a matter for negotiations with the State Services Commissioner, who will consider a “variety” of factors, Hipkins says.
13 Comments
Performance bonuses should be eliminated entirely. They only work for tasks that require rudimentary cognitive skill. Anything more complex and they deliver worse results - according to research conducted by that 'lefty' institution, the Federal Reserve Bank - and MIT ;-)
What works is to pay enough so the money issue is taken off the table. Give people an objective and allow the freedom to come up with the best ideas to achieve it. Interestingly the research replicated the same results in a variety of socio-economic and global settings.
One can only hope that this spells the beginning of the end of the unproductive managerial class that plagues us with their "targets" (to be gamed of course) and KPIs!
I worked for a govt agency that brought in bonus payments. The assumption behind it was that all staff were motivated by $. I wasn't, professional integrity is my driver. So it was an insult.
Of course base salary pay rises over the next few years were below CPI. So it was bad on multiple levels.
Regardless of the amount ( crumbs) it saves - but this is a good move from Labour.
It is about time to stop rewarding most of these high managers for doing an ordinary job and underperforming ...
Hopefully this will push some useless ones out of the public service and make way for new blood.
Perhaps better to find someone motivated by standards, integrity, ethics, & creating a net benefit for society than someone solely motivated by money. Plenty of volunteers in the former category managing millions & performing hard work with monetary efficiency (since they literally have a limited budget), not so many in the later group perhaps because money was their only motivation and the highest under the table payment wins.
I have twice in my working career been exposed to performance pay schemes when employed in the public service. My experience was that those working towards such bonuses were more adept as saying how good they were at doing their job than actually doing it. There was a significant brown nosing factor at play also.
I can imagine what sort of KPIs the public sector chief executives have....
Gender equality
Gender pay gap (whether it exists or not) to be reduced to 0.1%
Staff diversity
Transgender diversity
Gay tick
A young computer savvy workforce
A elder friendly workplace
A 4 day work week
An above average maternity leave policy
An above average paternity leave policy
A flexible work hour workplace
A pet friendly workplace
A child friendly workplace
An above 4+4% kiwisaver workplace
A post 65 kiwisaver workplace
A gender neutral language workplace
A ban on older man/ younger lady in man's office meeting workplace
A no after work drinks workplace
A non-open plan (women don't like being looked at) workplace
.......
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