The annual disclosure report discloses the "total remuneration" actually received for the 12 months ending 30 June 2014, as well as the "total remuneration" actually received for the 12 months ending 30 June 2013. Movements between years can reflect a number of factors and not solely the increase in base remuneration.
Total remuneration includes base salary and any performance pay, as well as the value of any benefits received such as employer contributions to superannuation.
Some chief executives' reported remuneration varies significantly between 2012/13 and 2013/14 for a range of reasons. These could include:
- the timing of pay periods during the year, which may result in a chief executive receiving, for example, 27 fortnightly pays during the year
- the timing of performance reviews and performance related payments resulting in a chief executive receiving two, one or no performance pays during the year
- measured job size increases leading to an increase in remuneration (chief executive job sizing is undertaken by independent consultants)
- Government Superannuation Fund employer contribution increases
- KiwiSaver employer contribution increases in 2013
- entitlements on the last day of duty, which may include retiring leave, annual leave not taken, employer superannuation payments owing on end of term entitlements
- a transition payment to compensate for the loss of potential performance payments for Public Service chief executives moving to a standard performance review date from 1 January 2014.
Performance reviews for Public Service chief executives were previously held on the anniversary of a chief executive's start date. All Public Service chief executives' performance reviews are now held after the end of the standard government reporting year of 1 July to 30 June, in August and September, and relate to performance in that year.
For the 2013/14 financial year, most Public Service chief executives received a one-off transition payment to recognise the potential loss of a performance payment due to this change, for the period from the effective date of their last review to 1 January 2014. These payments were calculated on a pro rata basis and set at 8% depending on the length of time since an individual's last performance review (the average performance payment made to Public Service chief executives in the previous year was 9.25%). The percentage chosen was conservative. It was intended to strike a balance between being fair and reasonable to chief executives who had missed out on potential earnings, and being prudent with public money. The average transition payment was $10,907.
The State Services Commissioner sets remuneration for Public Service chief executives except for the heads of the Crown Law Office, Government Communications Security Bureau and the State Services Commission. Remuneration for these positions is set by the Remuneration Authority.
Remuneration for the chief executives of Crown entities, district health boards and tertiary education institutions are set by the agency's board. However, the State Services Commissioner must:
- be consulted on remuneration for Crown entity chief executives;
- give concurrence with remuneration for tertiary education institution chief executives; and
- give consent for district health board chief executives' remuneration.
The Government caps the total amount that can be spent on Public Service chief executive remuneration and the State Services Commissioner allocates from within this budget.
In 2013/14 the total amount spent on Public Service chief executive remuneration was $11.58 million, which was $1.74 million below the cap. This was $0.5 million less than in 2012/13 and the lowest total amount paid to Public Service chief executives since 2007/08. This reflects an ongoing control of chief executive remuneration, a reduction in Public Service chief executive positions over the past few years and, more recently, a long-standing vacancy and lower end-of-term payments in 2013/14.
State sector remuneration is lower than that for equivalent private sector roles. Public Service chief executive remuneration is lower than remuneration paid to chief executives in the wider State sector with similar sized roles.
For the year to 30 June 2014, Strategic Pay Limited measured an 8% increase in median fixed remuneration for New Zealand private sector chief executives.
The average increase in base salary for Public Service chief executives was 2.8% in the 2013/14 year. This compares to an indicative 1.7% as a result of the recently completed 2014/15 performance year. A lower outcome for chief executives remuneration is appropriate given the lower inflation outlook that has become increasingly apparent in recent months.
Recent collective bargaining outcomes (settlements plus progression) in the Public Service have ranged between 2.6% and 3%.
The average percentage increase in fixed remuneration for Public Service (Government Department) Chief Executives in the year to 30 June 2013 was 3.6%.
Pay ratios provide a helpful comparison. In 2013/14, the average pay (base salary) of a chief executive in New Zealand's Public Service was 4.9 times the average pay for staff in their department. In the 2013 Fairfax annual survey of pay rates in listed companies in New Zealand, the average pay for chief executives was 26 times the average pay for employees in those companies.