Pay freeze for public servants expected to ease soon

Phil Pennington for RNZ

The brakes on pay increases for thousands of public servants are expected to ease within days.

The Public Service Commission said it would issue its new guidance as early as next week.

The government applied the brakes in 2020, citing the threat of rising COVID-19.

The commission declined to comment on what was in the 2023 guidance: "Because it could impact current bargaining".

However, RNZ understood it would significantly thaw the so-called pay "freeze".

A draft of the guidance, while still calling for restraint, now encouraged more flexibility to attract staff amid shortages in key areas.

The draft endorsed: "Targeted increases to various parts of their workforces".

"We will support evidence-based and targeted increases, which exceed the indicative levels, to address identified equity/parity issues ... or to address acute retention or recruitment pressures where the agency is experiencing the loss of critical skills or talent," it said.

The draft drops references to COVID-19, and to strict limits on pay movements for those earning more than $60,000 a year and especially anyone on more than $100,000.

However, the brakes would by no means be off entirely: "In all cases, the expectation remains that agencies will fund any [pay] increases from within existing baselines."

The final guidance would supplant 2021 guidance that itself supplanted 2020's guidance. It was binding on many public agencies, and a major signpost for many others not bound by it.

If it followed the draft, the shift would be toward delivering reasonable, moderate pay rises for the bulk of workers (who earned an average of $90,000).

The two-page 2021 guidance document did not mention "flexibility", while the 2023 draft had a small section on it, in it's four pages.

'Restraint' not 'freeze'

The government has always rejected the assertion it imposed a "freeze" back in 2020, calling it "restraint".

It softened its 2020 approach in 2021, and suggested it might allow for cost-of-living rises and bringing forward a review of the whole approach to last year, instead of this year.

Pay rates in the core public sector of 35 agencies had risen since 2020, however, generally below the rate of the private sector - though last year's average rise of 3.7 percent came close.

Also, the government had claimed credit for its restraint directives helping to close pay gaps, as they did not apply to those on under $60,000 a year.

The draft stressed that the lower paid should still benefit the most from pay rises.

Both leaders of the major political parties, Chris Hipkins and Christopher Luxon, recently talked about increasing in-house core public sector capability to lessen reliance on expensive contractors, though National at the same time said it wants to cut the 60,000-strong core workforce.

In what could prove controversial, the draft gave a lot of weight to a new pay approach, the Public Sector Pay Adjustment (PSPA), which some unions were resisting.

The PSPA had been used so far to settle more than a dozen collective agreements, offering a $4000 pay rise in the first year and three percent, or $2000, in the second. It covered scores of agencies.

But some powerful unions, such as those representing teachers, nurses and senior doctors, had rejected it as putting worker pay behind inflation, and any attempt to set it up as some kind of default position for bargaining could provoke their opposition.

In the Public Service, about a fifth of collective agreements are settled or in a ratification process, while just under a third are in bargaining now or expected to start bargaining soon. Another fifth do not fit this approach.

The Council of Trade Unions declined to comment on the draft.

Public Service Association national secretary Kerry Davies said in a statement it looked forward to seeing the new guidance, as the previous guidance had "put many under pressure during this cost of living crisis".

The Public Sector Pay Adjustment Process had recognised this in some settlements, Davies said.

"It was also pleasing to hear the prime minister acknowledge earlier this month ... that public sector wage growth has lagged private sector wages.

"We know many departments are facing shortages because they can't recruit and retain staff and that has impacted" services.

The union would keep pushing for wage increases to close the gap and ease cost pressures, she said.

As Public Service Minister since 2017 till recently, Chris Hipkins pushed the restraint guidance of 2020 and 2021.

He also rejected a link between that and growing recruitment problems, though unions put those problems down in part to public servants having to change jobs to get any kind of pay rise.

"First of all there's not a pay freeze; within the wage restraint guidance there are specific provisions that allow for retention and recruitment issues ... I don't think the wage restraint guidelines have been a contributing factor to that," Hipkins said this month.

The "freeze" till now in fact allowed for those on over $60,000 to get "modest" progression within their pay band - but no rise in the whole band itself.

Even those on more than $100,000 could plead "exceptional" circumstances for a rise.

However, while Hipkins touted the 2021 guidance as applying a near-ban on rises for those on more than $100,000, in fact hundreds of them got rises, and last year a further 1300 workers rose up into the band above $100,000.

The overall salary bill at the 35 "core" agencies rose by 2.4 percent to $5.5b last year (the number of workers dropped a bit). Performance pay was phased out, from 13 percent getting it in 2013, to 0.2 percent last year.