The Government has announced an end to the performance pay system for public service chief executives.
It means they can no longer receive discretionary bonuses of up to 15 percent for exceptional performance, a measure that was introduced in 2014.
There are around 30 public service chief executives, all of whom have signed up to new employment agreements.
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- Govt to freeze MPs' salaries, allowances for a year
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State Services Minister Chris Hipkins said: "There is a recognition by the chief executives themselves, bearing in mind that they have all signed up to this, that they want to lead by example."
He said scrapping the bonuses is set to save the Government up to $4 million over the next three to four years.
"International research shows that individualised performance pay is not an effective incentive for higher performance for complex roles such as these," Mr Hipkins said.
"We want to make sure that chief executives are operating in a collaborative way, and performance pay cuts against that."
Mr Hipkins said the Commissioner has been starting new chief executives at lower points in the salary band and the Government expects to see "downward pressure" at the top of the public service.
Prime Minister Jacinda Ardern announced yesterday that MPs salaries would be frozen for a year, despite the Remuneration Authority advising they were due for a pay rise of about three percent.
Ms Ardern said the Government will develop and implement a "fairer formula".
ACT leader David Seymour says the salaries of top Government bureaucrats should be frozen in the same way and they shouldn't be eligible for pay increases.
"The Prime Minister doesn't want high-earning MPs to get a pay rise at a time when poorly-paid teachers and nurses are bargaining with the Government. That's fair enough," he said.
"If she is to be consistent, though, she must also target the public sector."
Mr Seymour said there are around 16,000 public servants earning more than $100,000 a year and they "should be more than willing to show solidarity with nurses and teachers".
Mr Hipkins said: "By putting a cap on the very top end it will have an effect of suppressing the growth and salaries of those immediately below them."