Public Agencies 'Finding It Unaffordable To Increase Pay Ranges'

Thursday, 20 February 2025, 8:46 pm
Article: RNZ

Jo Moir, Political Editor

Automatic pay rises are under threat in the public service, after chief executives were sent a warning the current remuneration structure was unaffordable.

The stark warning came in a directive from newly-installed Public Service Commissioner Sir Brian Roche, who has also taken the power off chief executives to enhance or further entrench the 'tenure-based pay scale'.

The progression pay scale has no employer discretion to limit who may or may not receive it, and Sir Brian noted in his 20 December letter to chief executives that the current fiscal environment has brought the unaffordability of existing remuneration structures into "sharp relief".

"Tenure-based pay progression is the most acute: even without Budget guidance, agencies are finding it is unaffordable to increase pay ranges in addition to the increases generated by existing tenure-based progression.

"This mismatch between union demands and agencies' ability to pay, is testing relationships and bargaining dynamics," Sir Brian wrote.

Could you be affected? Share your stories with us at: iwitness@rnz.co.nz

"As part of agencies' preparation for collective bargaining, I expect that agencies will be examining their remuneration system's design and operation, and whether it aligns with government expectations including affordability and supporting a high performing public service."

Responding to a series of questions from RNZ about the instructions, and any potential consequences for public servants, Public Service Commission deputy chief executive Alex Chadwick said Sir Brian is a "responsible employer entitled to place constraints on his bargaining delegation".

Chadwick denied any over-reach by the commissioner in removing powers from ministry heads, saying "it is well within the scope of his role, and the commissioner is acting as a responsible steward of public funds".

"The commissioner has responded to the minister's concerns regarding the growth of personnel costs by using one of the methods at his disposal. It is important to stress that the commissioner has not required the existing pay progression systems be removed."

But in his directive, Sir Brian noted agencies who rely on the system to reduce unjustified pay gaps would "need to consider how to mitigate the risk where discretion is applied in pay increases if tenure-based progression is being removed or replaced".

RNZ put that to Chadwick, who responded: "Tenure-based progression is one remuneration system, and if it were to be replaced in an agency's collective agreement, we expect that it would be done through bargaining with the union party.

"We expect that any system that replaced a tenure-based system would provide appropriate checks and balances to manage any risks regarding discretionary increases," she said.

In his December letter, Sir Brian told public service bosses that then-Minister for Public Service Nicola Willis had "expressed concerns about the growth in personnel costs arising from pay progression systems, which cannot be limited through employer discretion".

"I have taken this into account... and it is my expectation that agencies do not make further enhancements to tenure-based progression systems," Sir Brian wrote.

'Changes would lead to discrimination' - PSA

Public Service Association acting national secretary Fleur Fitzsimons said any changes would lead to discrimination against women, Māori and Pasifika.

"Any move away from a step based pay system to a performance pay or discretionary pay system will lead to discrimination against women, against Māori and Pacifika people, but also it will lead to a poor workplace culture."

Sir Brian acknowledged in his letter that tenure-based progression has been useful for "reducing unjustified pay gaps through removing discretion in remuneration decisions".

Fitzsimons also rejected Roche's suggested "mismatch" between union demands and agencies' ability to pay was testing relationships and bargaining dynamics.

"We make no apology for seeking fair cost of living pay increases for our members. Public servants have already been targeted by this government and will not tolerate pay going down in real terms, given the increased cost of living that we're all facing."

She disagreed with the Public Service Commissioner taking authority previously delegated to chief executives over changes to tenure-based pay progression.

"It's not very practical that the commissioner holds this sole power. We're in bargaining for thousands of workers and we need quick decisions that reflect the increased cost of living that public servants are facing and so that we can settle collective agreements and avoid strike action."

The affected parties

The new instructions affect core public service departments and ministries - it does not apply to police, schools, or nurses.

The directive from Sir Brian applies from 20 December and sets out for chief executives that the "growth of your department's personnel expense should not exceed forecast CPI, and there are no new introductions of, or extensions made to, tenure-based pay progression models".

This all comes as the public service heads into a concentrated period of bargaining and while cuts and reprioritisations within the public service are under the microscope.

Chadwick told RNZ the majority of public service collective employment agreements contain some progression steps, meaning guaranteed pay increases for the "vast majority of their staff".

"Rather than a pay freeze, public sector staff continue to enjoy pay increases at least until they reach a salary maximum. The impact of keeping the growth of personnel costs within forecast inflation will have different impacts in different employers."

She said the Commissioner was simply using "one of the methods at his disposal" to respond to the concerns raised by Willis.

Both Willis and the new Public Service Minister Judith Collins declined to answer RNZ's questions about the changes and any impacts it might have on public servants in the future.

Green MP Francisco Hernandez said the new directive would negatively impact pay equity, retaining staff and the delivery of quality advice and services.

"We think it's really important to have strong capacity in the public service, one that recognises the hard work that our public servants contribute to the country, from the nurses to the administrators to people who form the policy at the back office to support them. They're all valuable."

Hernandez said there had already been "an exodus" of people moving to Australia and the commissioner's directive would only exacerbate this.

"We have to acknowledge that this directive is leading to a wave of zero pay offers across the board. We anticipate that that exodus is just going to continue and we're going to keep losing people, not only in Wellington, but of course, Aotearoa."

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