One government ministry has had to fork out more than $8 million in redundancy payments as cuts to the public sector take shape. Across just three agencies, redundancy costs have reached the double digits.
The costs come as several agencies continue to chase down savings, beyond the release of Budget 2024, which set targets for $1.5 billion worth of cost-savings, with estimates for $1b in further savings, through numerous financial years.
Agencies have put thousands of jobs on the line, with many redundancies and cuts already finalised, as at Budget Day, May 30 – a blueprint of government spending that confirmed which agencies have met their savings targets – of 6.5 and 7.5 per cent, based on employment growth.
It has been confirmed the total cost of staff redundancies for the Ministry of Business, Innovation, and Employment (MBIE) was $8,075,996.86 as of Budget Day, Economic Development Minister Melissa Lee revealed in answer to a written parliamentary question.
Two agencies alone bring redundancy costs associated with change proposals and confirmed cuts above $10 million.
The total cost of redundancies at the New Zealand Customs Service totals $2,696,571.81.
Customs has finalised its decisions and plans to conclude its change process next month, after being given the directive to find 6.5 per cent cost savings of baseline and future pressures. At the same time, the customs service has been urged to ensure it retains the ability to deliver border services and critical supporting functions.
In a statement, a Customs spokesperson said the disestablishment of 33 positions, confirmed through early retirement and voluntary redundancies, will achieve $3.5m in savings per year.
Customs’ redundancy cost is estimated to be around $2.9m in total, “once all the pay-outs have been completed”.
Several agencies’ cost savings will be reinvested to support frontline services, including those at the Department of Corrections, the Defence Force, police, Oranga Tamariki and the Ministries of Defence, Health and Education.
Customs savings will not be reinvested.
Customs Minister Casey Costello said it was looking at operating as efficiently as possible and planning on managing cost pressures “now and in the years ahead”.
Phase two of the Government’s savings directive has kicked off after the delivery of the Budget, something Costello said would focus on “driving greater value and results from public expenditure and securing a sustainable fiscal outlook”.
She confirmed 110 roles at Customs had been disestablished as part of the agency’s change process, with 31 new roles created. As of May 30, 33 staff have either accepted early retirement or opted for voluntary redundancy, and six had agreed to redundancy, according to numbers provided to the minister.
Customs’ change plans include disestablishing the role of deputy chief executive of people and capability, the highest-paid out of those being slashed. Documents show the role has a salary band between $238,272 and $320,462.
Budget 2024 confirmed a baseline reduction of $231.5m a year, on average, from MBIE. The agency was tasked with a higher savings target, of 7.5 per cent, equating to $233.9m. MBIE is signalling a further $254.2m a year average in future savings.
Richard Griffiths, MBIE’s deputy secretary of corporate services, finance and enablement, has confirmed the ministry has reduced its full-time equivalent positions since the start of the year by 346.4 roles – 159.8 of that equates to voluntary redundancies, 94.6 positions from closing vacancies, 87 roles slashed from government work programmes ending, and five roles transferred to the newly set up the Ministry for Regulation.
Griffiths confirmed the $8m figure includes payments made to 180 eligible staff, but “does not include the final regular fortnightly payment, annual leave on termination, time in lieu or any other payments that the individual employee may be entitled to”.
He said the total cost would be unknown until all change processes are complete. Several “have the potential to result in redundancy”, he confirmed.
Redundancy costs can also be revealed for the Ministry for the Environment (MoE).
Forty-five redundancies, agreed upon in the ministry’s first round of voluntary redundancies, are estimated to cost $1,540,000. Not all staff who opted for voluntary redundancy have left, as of May 30.
Other aspects of the MoE’s change proposal continue to be under consultation. Staff can give feedback until noon on June 26.
The change proposal, combined with the spending blueprint outlined in the Budget, shows a reduction in the ministry’s departmental baseline of 39 per cent by the 2027/28 financial year.
The Environment Ministry’s projected “peak” in employment was the 2023/24 financial year, with 1230 full-time equivalent roles; 200 of which were part of the previous Government’s resource management reforms and were never filled.
Current proposals would see the budgeted full-time equivalent staffing number reduced by 540 roles to 690 in the 2025/26 financial year. An interim reduction to 819 staff is flagged for the 2024/25 financial year.
The MoE has confirmed the proposal would result in 303 fewer full-time equivalent roles by July 2025.
The MoE’s $1.5m, noted in a written parliamentary question, is associated with the first voluntary redundancy process, before the release of the wider change proposal, meaning final redundancy payouts are on the way.
“We do expect further redundancy costs after decisions have been made on the proposal, following staff feedback from the consultation process,” a ministry spokesperson said.
Ministry chief executive James Palmer confirmed that in the previous year the ministry took steps to prepare for a decline in its budgeting over numerous years.
“Throughout 2023 we took steps to prepare for that decline, instituting a hiring freeze last year, and employing a number of people on fixed-term contracts. We also reviewed our operating model, finishing the year with a structure designed to make the ministry more effective and efficient, with a smaller number of senior management roles,” Palmer said.
Expressions of interest in voluntary redundancy will be open through to August 16 at the Environment Ministry.
Labour‘s public service spokeswoman, Ayesha Verrall, said redundancy payments will go a small way “to alleviating the hardship caused by Nicola Willis’ ruthless cuts to public service jobs”.
“Fiscal costs of these short-sighted cuts include redundancy payments, and the increased reliance on contractors that have already been signalled, for example at the Ministry of Education,” Verrall added.
“The social and environmental costs of cuts to border protection, child protection, and environmental protection will be with New Zealand for a long time.”
Public Service Association national secretary Kerry Davies believes the price New Zealanders will pay for what she sees as a “reckless approach” will continue to climb.
“Behind these figures are people who are suffering greatly as a result of the cuts. The impacts are devastating for individuals, many are suffering emotional harm, hurt and humiliation,” she said, adding public servants still employed “deeply worried” they’ll have to pick up more work, at a level that could be seen as unmanageable.
Davies is also sounding the alarm about a loss of skills across the economy “as some workers head to new jobs in Australia”.
Connor Molloy, campaigns manager at the New Zealand Taxpayers’ Union, believes the redundancies are worth it, considering the overall savings achieved across the public sector.
Molloy is pointing the finger at the previous Government, as employment growth skyrocketed around the pandemic, across various sectors.
He said the Government at the time had “recklessly” hired an additional 18,000 public servants in six years.
Azaria Howell is a Wellington-based multimedia reporter with an eye across the region. She joined NZME in 2022 and has a keen interest in city council decisions, public service agency reform, and transport.
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