Average salary changes by seniority

In 2021, the average base salary for the Public Service workforce as a group increased by 3.7%.1 The increase for non-management staff was 4.3%, compared with 0.6% for management staff. By tier, salary movements included a 0.6% drop for tier 2 managers, a 1.2% increase for tier 3 managers and a 0.9% increase for other managers.

In response to COVID-19, all Public Service chief executives adopted a voluntary 20% reduction in pay, effective for six months from 11 May 2020. The reversal of this reduction in the latest year has resulted in incumbent chief executives seeing a 19% increase as of 30 June 2021.

The latest changes follow a 7.6% increase in 2019, which was due to a change introduced to chief executive remuneration packages (an adjustment rolled into base salary to account for the removal of performance, or at-risk payments which were outside of base salary). The chart below shows estimated average size of these at-risk payments that sit above the base salaries for the preceding years.

Average salaries for chief executives also tend to be volatile over time, because of the small number in the group and the effect of compositional changes due to arrivals and departures each year. The sections below has more detailed information on chief executive remuneration.

(1 Base salary is used because total remuneration is not collected in the Workforce data.)

Average salary ratios

The chart on the first tab of the visualisation below shows the ratios of average base salary for the four management levels compared to non-management staff. These ratios have been quite stable over the last six years, except for the chief executive group. As of 30 June 2021, the average base salary of incumbent chief executives in the Public Service was 5.4 times that of non-management staff.

This ratio had been trending downwards, once you take into account the change introduced to chief executive remuneration packages in 2019, with an adjustment rolled into base salary to account for the removal of performance or at-risk payments (which were outside of base salary). The effect of this is estimated in the chart below. The sharp drop in 2021 was due to Public Service chief executives adopting a voluntary 20% reduction in pay, effective for six months from 11 May 2020. The increase from 4.7 to 5.4 was due to the reversal of this reduction.

The ratios for other management levels were: tier 2 manager at 3.6, tier 3 manager at 2.5, and other managers at 1.6 times relative to non-management staff.

When comparing the average base salary of chief executives to the rest of the staff (including managers) the ratio was 4.9. This ratio has been trending downwards in recent years.

These Public Service chief executive and staff pay ratios are modest compared to the market ratios of publicly listed New Zealand firms. A 2021 Stuff survey of the largest 20 companies in the benchmark NZX50 found that chief executive pay was between 16 and 40 times worker pay.

Chief executive remuneration overview

Accountability for setting chief executive remuneration

The approach to setting chief executive remuneration balances two things – the need to maintain public trust and confidence in the public sector, and the need to attract and retain chief executives who are motivated by a spirit of service. There are a range of reasons why public sector remuneration – particularly at the senior executive level – is and needs to be lower than the private sector.

The Public Service Commissioner (the Commissioner) is the employer of chief executives of departments and departmental agencies. The Commissioner determines their remuneration, except for whose remuneration is set by the Remuneration Authority.

The Remuneration Authority is responsible for determining the remuneration of some chief executives and Officers of Parliament (including the Public Service Commissioner and Deputy Public Service Commissioner). The following analysis doesn’t include those whose remuneration has determined by the Remuneration Authority.

The Commissioner provides guidance to the boards of Crown agents, autonomous and independent Crown entities, and Tertiary Education Institutions (TEIs) on chief executive remuneration. This guidance is used by boards who employ chief executives and are therefore responsible for agreeing the terms and conditions with their chief executives. These are finalised after the Commissioner gives his consent.

Remuneration packages paid to secretaries of departments and departmental agencies

Total remuneration for secretaries of departments and chief executives of departmental agencies comprises base salary, an employer contribution to superannuation, and the value of any benefits (such as a week’s leave above the statutory 20 days).

Table 1: Average remuneration of chief executives of departments and departmental agencies*

Year

2020/21

2019/20

2018/19

2017/18

2016/17

Average remuneration

$485,000

$482,000

$478,000

$500,000

$504,000

*This excludes those whose remuneration is determined by the Remuneration Authority

The average remuneration package paid to secretaries of departments and chief executives of departmental agencies has increased by less than 1% in the year to 30 June 2021. The net result over the last five years is a 4% decrease in average remuneration. This decrease doesn’t include the six-month voluntary 20% pay cut taken by all chief executives of departments and departmental agencies.

We remain in a period of pay restraint for chief executives of departments and departmental agencies due to the consequences of the COVID-19 pandemic. Therefore, modest average increases (if any) are likely to continue in the next twelve months.

Remuneration increases by agency type

The following table sets out the median and average increases for increases implemented over the three years to 30 June 2021. This data excludes increases due to job size.

Table 2: Median and average percentage increases

Type of organisation

Year ending 2020/21

Year ending 2019/20

Year ending 2018/19

 

Median

Average

Median

Average

Median

Average

 

Departments and departmental agencies

Nil

Nil

1.0%

 

1.9%

1.0%

1.1%

 

All Crown entities

Nil

1.2%

2%

2%

2%

2.5%

 

Crown agents (incl. DHBs)

Nil

0.1%

2%

2%

2%

2.1%

 

Other Crown entities

Nil

0.2%

3%

2.6%

2%

3.1%

 

Tertiary Education Institutions

Nil

Nil

0.5%

1.4%

2%

2.0%

 

Market data – private sector*

-1.24%

-3.06%

1.44%

5.4%

7.06%

2.92%

 

*Korn Ferry – Chief executives / group heads – March 2021, March 2020, March 2019

The average and median increases for chief executives of departments and departmental agencies for the next year (2021/2022) are likely to remain low, as there will no remuneration reviews in the year to 30 June 2022. These had been due on 1 January 2022.

All increases in Crown entity chief executives’ remuneration over the 2020/21 year were within the guidance provided by Te Kawa Mataaho. Consent has only been given to increases since pay restraint commenced in April 2020 to address increases to job size and gender factors. Crown entities have been advised that our guidance for reviews of chief executive remuneration will be consistent with the Public Service Pay Guidance, which includes holding pay for higher earners and senior leaders. (link to ER webpage)

Comparison of levels of remuneration across sector

The graph below plots remuneration against job size for chief executives in different sectors.

These trend lines are based on data for the 2020/21 year. Remuneration lines are based on data from Te Kawa Mataaho (for departments and departmental agencies, DHBs and TEIs, and other Crown entities – year to 30 June 2021) and Korn Ferry New Zealand (for private sector and state-owned enterprises – year to 31 March 2021).

The graph shows a clear relationship between remuneration and job size – the ‘larger’ the job, the higher the pay.

The graph shows the varying degrees of influence the Commissioner has over senior pay. The Commissioner has no influence over private sector and state-owned enterprises. The greater his influence, the lower the levels of pay (for the same size of job). Accordingly, the lowest line is for chief executives of departments and departmental agencies whose pay is set by the Commissioner.

Chief executive disclosure report

At the request of Cabinet, Te Kawa Mataaho Public Service Commission has publicly reported on chief executive pay since 2010 to provide transparency for the public. This includes the secretaries of departments, chief executives of departmental agencies, Crown agents and other statutory Crown entities, Tertiary Education Institutions, Offices of Parliament and Non-Public Service departments.

Chief executive remuneration

The chief executive remuneration table below includes the remuneration of the secretaries, chief executives and acting chief executives for agencies across the public sector. As noted above, remuneration for chief executives is set differently depending on type of agency.

This table is updated at least every six months, and shows: 

  • remuneration that was earned between completed remuneration reviews
  • remuneration earned up to the end date of appointments which have been completed .  

Disclosure of pay reductions from April 2020

In mid-April 2020, the Prime Minister announced that Ministers and Public Service chief executives had volunteered to take 20 percent pay cuts for six months as pay restraint was the right thing to do at the time. 

Many Crown entity chief executives also voluntarily chose to take a pay reduction.  The pay reductions varied in size and how they were implemented.  Some chose to make charitable donations. 

To be consistent with the accrual remuneration approach, reduced remuneration has been disclosed where the chief executive took a voluntary pay reduction that affected what they earned in the reporting period.  To aid transparency a note has been added to each entry to record where that has happened.  Some reductions will span two disclosures.  Questions on decisions taken by Crown entity chief executives should be directed to individual Crown entities.

Temporary reductions applying to chief executives or officers whose remuneration is set by the Remuneration Authority were effective from 9 July 2020 for six months. Further information about the process for those covered by the Remuneration Authority can be found below.

The Detailed Disclosure Notes provide more information on how the data is compiled.

Pay restraint further information

The Remuneration Authority (the Authority) sets the remuneration for independent statutory officers which include the Commissioner, the Deputy Public Service Commissioner and the Solicitor General - all of whom lead Public Service departments - as well as the heads of non-Public Service departments and Offices of Parliament, such as the Commissioner of Police and the Parliamentary Commissioner for the Environment.  Authority decisions are called determinations. Once a determination has been made by the Authority that amount has to be paid. 

For the period from 1 July 2019 to the end of February 2020, the Authority’s determinations generally reflected New Zealand’s economic and public sector labour market conditions before the arrival of the COVID-19 pandemic on our shores.

Determinations issued after February 2020, for newly appointed statutory officers, were restrained by the prevailing adverse economic and fiscal environment caused by the pandemic.  Consequently, the remuneration for those statutory officers was set at a lower rate than would otherwise have been determined. 

During late April/early May 2020, the Authority received requests from a number of statutory officers who wanted to join their colleagues in the wider public sector to take a pay reduction or advised that they had chosen to make donations instead.  However, the Remuneration Authority Act 1977 (the Act) prevented the remuneration of existing statutory officers to be reduced, and therefore needed to be amended.

The Act was amended in May 2020 to allow the Authority to make temporary reductions, of up to 20 percent, to the determinations of existing statutory officers listed under schedule 4A of the Act for a period of up to 6 months. The temporary reduction determinations had to be issued on or before 30 June 2020.   After consultation with those statutory office holders in respect of whom temporary reduction determinations may be made, the Authority issued its temporary reduction determinations during June 2020, to be effective from 9 July 2020.

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