Underachievers to fund state sector pay rises

The State Services Commissioner, Iain Rennie. Photo / Mark Mitchell

State sector bosses who do not perform well will face pay cuts this year to pay for raises for chief executives who do their jobs well.

State Services Commissioner Iain Rennie said yesterday that as part of the freeze on the overall wage bill for department chief executives, any increases to excellent bosses would have to be offset.

"That means, where there is strong performance some chief executives will get modest increases but there will be situations where a chief executive's take home pay goes down, so we can balance within the zero change."

Speaking to the government administration select committee about the State Service Commission's annual report, Mr Rennie said he was also shrinking the average amounts usually given out in performance pay. Until this year, CEOs who ticked off all their performance targets typically got 10 to 15 per cent as performance payments. The average would now be 7.5 per cent.

The State Services Commission came under fire last month when annual reports showed substantial pay rises for chief executives - the biggest of which was a 16 per cent increase for Inland Revenue boss Bob Russell, who got a $60,000 increase and earns about $430,000. At the time Mr Rennie said the increases were set the previous year by his predecessor Mark Prebble when money was set aside for average 5 per cent increases for the chief executives.

It would not be repeated under the current "freeze".

Mr Rennie said it was also important for the chief executives to lead by example after other public service workers were told to expect minimal increases of up to 2 per cent, following a decade of 4 per cent average increases each year.

It did not mean there would be no pay rises for all groups of civil servants: over the year to September, there was an average pay increase of 2 per cent over the public service.

Several groups of workers are taking industrial action over their negotiations - including Ministry of Justice court staff and Parliamentary Services staff. Mr Rennie said industrial action was always a concern.

Asked by Labour MP Grant Robertson if more leniency was given to those on low pay, he said restraint was expected across the board.

It was possible some departments would use lump sum increases, rather than percentage figures, to help ensure lower paid workers got equal pay rises to those on higher salaries.

MPs were not given a pay increase this year.