A major restructure of the NZ Defence Force has seen 655 fewer roles in less than two years, staff morale at an all-time low and a major challenge to keep the quality staff they have left, Defence bosses say.
Vice Chief of the Defence Force Rear Admiral Jack Steer and Secretary of Defence John Mckinnon appeared before the foreign affairs, defence and trade select committee this morning.
And it has emerged that during the restructure the Defence Force paid $100,000 in redundancy pay-outs to two officers who were immediately rehired.
Rear Admiral Steer said the NZDF was on target to save $355 million by the 2014/15 financial year, and had saved $127 million in this financial year so far - though he insisted that the NZDF's military capacity was improving because the savings were in middle- and back-room functions.
The NZDF had gone through a round of "civilianisation", which saw about 300 uniformed staff made redundant because they were roles that could be filled by civilian staff.
But Rear Admiral Steer said the changes had been painful, and staff were suffering from "change fatigue".
Overall staff numbers have dropped from 14,577 in June 2010 to 13,922 on February 29.
The attrition rate was at an historically high 19 per cent - though about 3 per cent of that was due to the civilianisation process.
In the most recent NZDF survey, staff morale was at its lowest point since the survey began eight years ago.
"I'm not shying away from the fact that this has impacted on our people," Rear Admiral Steer told the committee.
"They have seen the pain. They need to see the reward as well."
Under questioning from Labour MP Phil Goff, Rear Admiral Steer admitted that two Navy officers had been made redundant and were immediately re-hired because their positions were considered essential - and they kept their redundancy pay-outs.
He did not know how much it had cost the NZDF, but conceded: "You could say we made a mistake."
Defence minster Jonathan Coleman has confirmed that each officer's redundancy pay-out was $50,000, but one of them was only re-hired for six weeks.
Other savings intiatives included looking at all military-owned land and property - with a focus on whether they enable military operations - restructring finance, and reducing the number of military bands from 10 to three.
Rear Admiral Steer said feedback on shedding the number of bands ranged from staff describing the move as a "dire step" to questions around why there were 10 bands in the first place.
"There's still a long way to go. Am I confident of making [savings of] $355 million [by 2014/15]? Yes. Is it going to be easy? No."
He said the "trauma" of the first round of civilianisation will be followed by a second round, affecting up to 130 positions. He did not see a further round after that because the first round had been so "damaging".
He said the aim was to improve the capability of the NZDF, and redundancies were "an unfortunate by-product of the civilianisation process".
NZDF staff had effectively had a wage freeze for almost four years, and Rear Admiral Steer said that could not continue if the NZDF wanted to retain its best staff.
"We are working on that problem. We are aware of that and will be discussing that with our minister."