21 Aug 2018

Public service performance bonuses scrapped

6:07 pm on 21 August 2018

Public service bosses have been stripped of their performance bonuses, the day after the government announced a freeze on MPs' pay.

State Services Minister Chris Hipkins speaks to media at the Auckland Museum about closing the gender pay gap.

State Services Minister Chris Hipkins speaks to media at the Auckland Museum about closing the gender pay gap. Photo: RNZ / Dan Cook

State Services Minister Chris Hipkins has announced he is putting "the brakes on the growth rate of chief executive pay" by scrapping the bonuses - of up to 15 percent - for public CEOs for "exceptional performance".

"We want a public service with an international reputation for excellence that is motivated by a spirit of service to the community," Mr Hipkins said.

The move, along with dialling back pay settings and appointing new CEOs on lower salaries, would reduce forecast spending by up to $4 million by 2021/2022, he said.

State Services Commissioner Peter Hughes is responsible for setting the pay of most public sector chief executives.

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Photo: RNZ / Rebekah Parsons-King

Mr Hipkins commended Mr Hughes for his leadership and said his actions had helped dull the rate of growth of pay levels at the top end.

"International research shows that individualised performance pay is not an effective incentive for higher performance for complex roles such as these.

"The government also believes that performance pay is counter-productive to achieving the collaborative team-based approach and collective leadership that is critical to achieving better outcomes for New Zealanders," he said.

Mr Hipkins said the government was committed to addressing pay levels right across the public service.

"We have a plan to close the gender pay gap, we have introduced a living wage for all low-paid public servants and now we're removing performance pay for chief executives."

The Public Service Association is applauding the end of performance bonuses for public sector bosses and hopes it will go further.

The association's spokesperson Glenn Barclay said he would like to see performance pay dumped for all public servants.

"The pay systems that apply to our members in the public service are confusing, they lack transparency, they don't support team work, they just have to go."

All chief executives of agencies for which Mr Hughes sets their pay had signed new employment contracts and agreed with the rationale, Mr Hipkins said.

Prime Minister Jacinda Ardern yesterday announced a freeze on all MPs' salaries and allowances for a year, while it reviewed the way their salaries are calculated.

Read more: Public service CEO pay packets in 2017