Media statement Tuesday, February 27th, 2007

Government wage & salary costs face blow out

Contributions to Kiwisaver and four weeks holiday are expected to underpin a blow out in public sector wage and salary costs this year.

These two measures alone are likely to boost wage costs for central and local government in excess of five per cent, the Employers & Manufacturers Association (Northern) says.

"Public service employers hamstrung by government policy are a soft touch to pay out on additional wage costs," said Alasdair Thompson, EMA's chief executive.

"Councils and central government are likely to agree to an employer contribution to KiwiSaver funded by taxpayers of a minimum of two per cent.

"Introducing an extra week's leave from April 1st, another two per cent rise, will mean many people already on four weeks leave could go to five weeks because of how their employment agreements were written.

"However many public sector organizations are planning to give all their staff five weeks holidays after a qualifying period of employment.

"That's on top of many government departments agreeing a couple of years ago to pay staff union fees, the 10 per cent leap in minimum wages, and people being rewarded for taking sick leave on public holidays since the 2004 Holidays Act Amendment.

"Non-wage costs contribute substantially to inflation which is currently running at around three per cent and typically added to pay rises.

"Legislation under way now plans to close the small gap between pay rates for women and men.

"Meanwhile the huge gap between the average hourly earnings for employees in the public sector ($28.41) and private sector ($22.36) has widened to $6.05 an hour.

"Treasury's advice on the cost implications of its wage and employment policies is being ignored by Government.

"Overall, the government's call on funds from taxpayers has been growing over twice as fast as growth in the economy, and harming the competitiveness of exporters and other business."

Ends

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