Difficult to fairly judge appropriate pay for MPs - employment law expert

An employment law expert says it can be difficult to fairly judge what the pay for MPs should be.

On Tuesday, Workplace Relations and Safety Minister Iain Lees-Galloway announced that the Government had completed a review of how MPs' pay increases are calculated. Last year, Prime Minister Jacinda Ardern froze the salaries after the Remuneration Authority planned to give MPs a 3 percent increase.

Lees-Galloway said changes made in 2015 that tied MPs pay to average wage increases had been a "failure" with that formula "generating higher pay increases than the system used prior".

The minister said the Government plans to repeal the formula and restore the independence of the Remuneration Authority to calculate increases "in a fair and transparent manner". 

"This means MPs' pay will be calculated using the same process for reviewing the remuneration of other key public office holders."

Auckland University academic and employment law expert Bill Hodge welcomed the discussion, but said, despite public pressure, it is always difficult to find the right formula to set MPs' pay.

"It is a hard thing to do because there isn't technically an employer who can do an annual performance review and give them an increase based on performance, achievement, number of Bills passed. That mechanism can't exist, so it is in the too-hard basket," he told Newshub.

"Governments feel the heat from the public, who say 'wow, why are they getting a 10 percent increase' when nurses or teachers or themselves are only getting a 1 percent increase or less."

But Hodge also said that the salary for politicians is often also just the tip of the iceberg.

"The total salary that you and I might agree, $150,000 or $200,00, most MPs earn something like the same amount in allowances. Those sort of things aren't entirely transparent."

One of the reasons the previous formula was considered unfair was because MPs' pay is tied to the percentage increase of the average wage, so if it goes up 2 percent that means someone on a $60k salary gets a 2 percent rise, while an MP on $200k would get the same. 

A new Bill to be introduced on Wednesday would propose that future reviews of pay happen once every three years, following an election, and will set MPs' pay on a year-by-year basis over the term.

The Remuneration Authority would consider: 

  • The requirements of the job
  • The need to recruit and retain competition 
  • The need to give fair salaries compared with those received elsewhere
  • The current economic conditions