MEDIA RELEASE
11 October 2012

State Sector Chief Executives’ Remuneration for 2011/12 Released

State Services Commissioner and Head of State Services Iain Rennie today released the annual report on the remuneration of Public Service and State sector senior staff for the 12 months ending June 2012.

For the most recent year, the average movement in base salary for chief executives in the State Services who have held the same position for at least the previous 12 months was 2.7 per cent. The movement in average base salary across all Public Service staff was 3.0%. Twenty one percent of chief executives across the wider public sector received no increase to remuneration during this period.

“This disclosure provides transparency around the level of remuneration received by chief executives,” Mr Rennie said.

“The report discloses the “total remuneration” actually received for the 12 months ending June 2012. However, movements between years do not always give a clear comparison,” said Mr Rennie

This is because some chief executives’ reported remuneration varies significantly between 2010/11 and 2011/12. This may be due to:

• the timing of pay periods during the year, which may result in a chief executive receiving, for example, 27 fortnightly pays during the year;
• the timing of performance reviews and performance payments resulting in a chief executive receiving two or no performance pays during the year;
• measured job size increases leading to an increase in remuneration (chief executive job sizing is undertaken by independent consultants);
• Government Superannuation Fund employer contribution increases; and,
• entitlements on the last day of duty, which may include retiring leave, annual leave not taken, employer superannuation payments owing on end of term entitlements and payment of salary in lieu of a notice period.
As State Services Commissioner, Mr Rennie appoints and employs Public Service chief executives, reviews their performance, and sets their remuneration (except for the State Services Commission, the Crown Law Office, and the Government Communications Security Bureau). The Commissioner also either advises on, or approves, the proposed terms and conditions of employment of 109 other crown entity and subsidiary chief executives.

“Our policy is that chief executive remuneration should be flexible, transparent, with modest increases that are performance-related, and take account of business issues such as recruitment, retention, and affordability,” Mr. Rennie said.

“We want to attract, retain, and motivate suitable, highly competent chief executives,” he said.

Mr Rennie said the Government expects any remuneration changes across the State sector will be met within existing funding levels, demonstrate value for money, and not lead the Private sector. A recent Hay Group survey reported that average increase to fixed remuneration packages for New Zealand chief executives and group heads in their “all organisations” database (which includes private sector and public sector) was 4%.

The growth in the number of staff in the Public Service and Tertiary Education Institutions (TEIs) earning over $100K has slowed since the previous year.

Ends.

The report can be found at http://www.ssc.govt.nz/rem-senior-state-sector-staff-to-30june12

CHIEF EXECUTIVE REMUNERATION

Questions and Answers

Why is the remuneration of chief executives reported?
Cabinet has agreed that remuneration paid to Public Service and State sector senior staff should be disclosed annually in one location. This provides transparency for the taxpaying public around the level of remuneration received by chief executives.

Does this disclosure include all chief executives in the public sector?

No. The report only covers remuneration of Public Service and State sector chief executives where the State Services Commissioner has an influence. It also includes remuneration received by some chief executives and other senior staff under the jurisdiction of the Remuneration Authority.

What’s the role of the State Services Commissioner in Chief Executive Remuneration?

The State Services Commissioner’s role includes setting and reviewing the remuneration of Public Service chief executives, and advising on or approving the proposed terms and conditions of employment of 109 Crown entity and subsidiary chief executives.

The Commissioner consents or concurs to the remuneration of chief executives of tertiary education institutions and district health boards, and is consulted on the remuneration of chief executives of majority of the Crown entities. Crown entity chief executive remuneration is set in consultation with Crown entity board chairs. The Commissioner has no influence on the remuneration of chief executives of local government bodies and public sector trading enterprises operating in a commercial environment.

How does the SSC set Chief Executive Remuneration?

The SSC uses an annual remuneration survey to gather remuneration data about Public Service and State sector chief executives’ remuneration. The survey informs the Commissioner’s decision on a remuneration “midpoint” for each chief executive role based on job size. The sizing of each chief executive role is carried out independently of the SSC by organisations with specialist expertise. The Commissioner also regularly monitors other markets to see the wider picture.

A government remuneration range is then established to allow reward and progression as the chief executive develops and performs in the position.

The midpoint is reviewed with effect from 1 July each year and provides context in which to consider a level of remuneration, but a chief executive’s actual remuneration will depend on the individual circumstances of each organisation.

What characterises government’s chief executive remuneration policy?
Government policy is that increases to chief executive remuneration are modest, performance-related, and consider business issues such as recruitment, retention, and affordability.

What are the features of the remuneration policy?
The main features of the policy are:
• it links chief executive remuneration to chief executive remuneration practice in the public sector ;
• it provides flexibility and discretion for the Commissioner to set remuneration policy within broad boundaries determined by the Government; and,
• it links chief executives’ remuneration to their performance, by including a performance related component in their remuneration packages.

What are the key principles of the remuneration policy?
The key principles of the remuneration policy are that it:
• provides the ability to attract, retain and motivate suitable highly competent chief executives
• is fair and equitable, flexible and transparent
• has integrity (is statistically sound)
• is efficient and manageable
• is legal
• is affordable
• meets the Government’s expectations for pay and employment conditions in the State sector
• supports the business of Government
• inspires public confidence.

By how much did chief executive salary increase this year?
For the most recent year, the average movement in base salary for chief executives in the State Services who have held the same position for at least the previous 12 months was 2.7 per cent. The movement in average base salary across all Public Service staff was 3.0%.
Twenty one percent of chief executives across the wider public sector received no increase to remuneration during this period.


How does the current operating environment of financial constraints affect the remuneration policy?
While the economy is recovering from the effects of the global recession, the Government expects that remuneration changes across the State sector will be met within existing funding levels, reflect high performance, be responsible, and demonstrate value for money.
The overall wage bill for Public Service chief executives is effectively capped by the budget allocated by the Government. In addition to remuneration, as is released in this report, the budget allocated also makes provision for smaller items linked to the employment of chief executives – such as relocation expenses and professional development.

What are the components of a chief executive remuneration package?
The State Services Commissioner takes a total remuneration approach to chief executive remuneration packages, which means that all benefits to a chief executive are valued as components of the package:
• base salary
• performance payments for Public service chief executives are set at 15% of base salary and paid at the discretion of the State Services Commissioner
• performance components for Crown entity chief executives are typically set at between 10 – 15% of base salary, but vary according to the needs of the organisation .
Other components that may be included are:
• employer contributions to superannuation, including KiwiSaver
• annual leave - any additional leave in excess of 20 days per annum and organisation leave days (usually the days between Christmas and New Year) is valued into a chief executive’s remuneration at 0.4% of total remuneration per day
• vehicles are no longer offered to newly appointed Public Service chief executives. Crown entity chief executives may have the option of a vehicle if their employer agrees. A vehicle is valued at 45% of the purchase price (including GST and on –road costs), with a maximum purchase price of $46,000 and based on a three year/60,000 kilometre replacement cycle. This value includes all fixed costs and Fringe Benefit Tax. It assumes full private use, but running costs incurred on holidays or extended travel are expected to be covered by the chief executive.
• Other components such as medical insurance are not common, and are valued into a chief executive’s remuneration at the cost to the employer.
The remuneration disclosure published by the SSC includes all components of a chief executive’s remuneration package.

What are chief executive end of term entitlements?

As for any employee, payments made to a chief executive on their last day of duty primarily relate to the payment of annual leave not taken.

If a chief executive is a member of a superannuation scheme, payments might also include employer superannuation payments owing on end of term entitlements.

If it is not possible to give a chief executive the requisite amount of notice of termination provided for in their employment agreement they may be eligible for a payment of salary in lieu of the notice period.

Some chief executives are also eligible for a ‘recognition of service’ entitlement. This entitlement was available to public servants prior to legislative change during the 1980’s. This entitlement is no longer offered to new chief executives. However, if a long serving public servant has been receiving the entitlement the Commissioner has continued to recognise the entitlement.
The amount and type of entitlements paid to each chief executive varies, depending on the chief executive’s individual terms and conditions of employment. Not all chief executives are entitled to or receive the payments listed above.

Who was the source of the remuneration figures in this report?
The State Services Commission (SSC), as employer, is the data source for Public Service chief executives. SSC collects the remuneration figures from the respective agencies of the other chief executives.

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