State-sector pay is on the rise again. Herald image
Many of the country’s top state sector and public service bosses have seen their annual pay bounce back from Covid-era reductions, while the top earner has pushed above $1.4 million for the first time.
A Herald analysis of public sector chief executive remuneration over the past three years reveals pay rises are back on the agenda now the Government has loosened pay restrictions put in place during the pandemic.
Scroll down for tables and rankings
State sector chief executive remuneration had been declining since 2018 when Public Service Commissioner Peter Hughes overhauled the settings, including removing performance pay and taking a conservative approach to salary reviews.
This led to a 5.2 per cent decrease in annual average packages paid to chief executives over the five years to June 2022.
In addition, public service CEOs also took a six-month voluntary 20 per cent pay cut during Covid-19, which took the average pay reduction down to 10.3 per cent over that five-year period.
However, recent figures for the year to December 2022, and into the 2023 financial year, show the trend is reversing (See table below).
Different balance dates and pay periods, job resizing and CEOs changing roles make it difficult to compare year-on-year at any given point in time, but there is clear evidence that salaries have recovered and are starting to climb again.
According to the Public Service Commission, the average CEO pay increased just 0.05 per cent in the six months to December 31. But it is likely to increase further, now the three-year Covid pay restraint has been eased.
“We are now starting to see some increases come through, which is reasonable,” Hughes told the Herald.
“Overall, I expect to see very modest average increase across the Public Service, in line with pay guidance and substantially less than the rate of inflation.”
The Herald’s analysis of recent pay disclosures suggests this could be in the range of 2.5 to 3.5 per cent in the current financial year.
This is backed up by analysis from consultancy Strategic Pay, whose latest remuneration report showed central government CEO salaries are forecast to increase by around 3 per cent in the 12 months from March this year.
Matt Whineray, the outgoing head of the Guardians of New Zealand Superannuation, remains the country’s highest-paid public service CEO.
He took home $1,401,633 in the June 2022 financial year, a nearly 30 per cent increase on the previous corresponding period.
Whineray’s pay is an outlier among public sector heads because a large part of it is tied to the performance of the fund. (The Public Service Commission now treats the Super Fund as a state-owned enterprise and no longer includes it in its remuneration tables).
The Super Fund’s annual report shows Whineray’s total remuneration included a base salary of $730,982 and performance pay of $559,260 plus KiwiSaver.
While the value of the fund fell from $59 billion to $55.7b as at June 30, 2022, it outperformed a passively-invested reference portfolio benchmark by 7.25 per cent during that period.
The fund’s active management, therefore, “cushioned” the overall impact of the downturn in global markets, the Super Fund said in its annual review.
Ranking the next highest-paid CEOs is not completely straightforward because pay disclosure can include varying pay periods.
The Public Service Commission no longer releases an annual breakdown of remuneration and instead publishes tables on its website, updated every six months.
In some cases, figures shown for the 2021/22 financial year include annual pay plus a partial-year payment. This occurs when there is a transitioning CEO.
The full list of public sector CEO salaries can be found at the end of this article.
To rank the top 50 on a like-for-like basis, we have focused on full-year remuneration.
In past years, the head of ACC has taken the number two spot, but full-year figures are not yet available for Megan Main, who started the role in November 2021.
Data does show she received $414,000 for the period from November 15, 2021, through to June 30, 2022, indicating she will be in the number two spot when the next disclosures are made.
Andrew Mckenzie, at Kāinga Ora–Homes and Communities, is the next highest paid – collecting $693,000 in the 2021/22 financial year, rising to $721,000 in 2022/23.
He is followed by Stephen Town, CEO of Te Pūkenga (NZ Institute of Skills and Technology) at $689,000, and Auditor General John Ryan at $670,000.
Defence Force boss Air Marshall Kevin Short and Commissioner of Police Andy Coster also took home $670,000 in the 2022 financial year.
In some ways, this study bears similarities to the private sector survey produced by the Herald in March, with CEO pay recovering from the Covid-induced low and CEO turnover an increasing issue.
But the difference in the highest pay levels of private sector bosses compared to their public sector counterparts remains a deep chasm.
While there is a clear relationship between remuneration and job size, public sector pay remains far below that of the private sector for a range of reasons – one being that the Public Services Commissioner determines the pay, except those set by the remuneration Authority.
One emerging factor is the creation of new “super entities” in the public sector, which has spawned much bigger roles and competition among top civil servants.
Public information only reveals part-year payments to Te Whatu Ora (Health NZ) CEO Fepulea’i Margie Apa and Te Aka Whai Ora (Māori Health Authority) CEO Riana Manuel. They received $317,164 and $192,926 respectively for 136 days as interim CEOs of those entities which were set up in mid-2022. Full-year figures are likely to be revealed soon.
In late March, the Public Service Commission issued new remuneration guidance, lifting Covid-era pay restraints on high-earning public servants as it looks to retain and attract talent.
Agencies were advised to adopt an approach that “recognises the current environment is one of pressure on wages in all parts of the economy, and where the public service is facing shortages in key areas for staff”.
Cathy Hendry, managing director of Strategic Pay, said she wasn’t surprised CEO pay is on the rise again.
“It reflects a trend we’ve seen in our broader database as well across all sectors, but we did see it in the public sector as well. In the last 12 months, the CEO and senior exec roles have jumped again after a number of years of being quite static.
“Looking at it, most of the large increases seem to be due to the pay jumping back up after the covid pay cuts. We actually saw negative movement during the 2020-2021 period as a result of those cuts.
“The forecasts over the next 12 months are sitting at around 3 per cent in the central Government at the CEO level, which is quite a dramatic change after the last few years of pay restraint.”
While the Government put the brakes on public sector CEO pay, that did not apply to State Owned Enterprises whose bosses have enjoyed a more commercial approach to remuneration.
Latest publicly available information reveals some big winners among SOE chiefs, including a couple who received termination payments, otherwise known as Golden Parachutes.
Leading the 2022 financial year table is former TVNZ chief executive Kevin Kenrick, who pocketed nearly $2.087 million after his final eight months in the job, up from $897,628 during the 2021 financial year.
His 2022 pay packet included a base salary of $560,571 and a short-term incentive payment of $1.23m as well as holiday pay and superannuation pay. According to TVNZ’s annual report, Kenrick’s STI related to performance set for the previous financial year and for part of the 2022 year.
“This was agreed with the board as part of an agreement to extend his notice period until a replacement was appointed,” the annual report said while noting the former CEO was not paid an STI for the financial year 2020 in response to the economic impact of Covid-19 on the business.
Former KiwiRail chief executive Greg Miller was paid $1.8m in 2022, made up of $420,000 in performance pay relating to the previous financial year and more than $1.3m in salary and benefits, including six months’ salary in lieu of notice and unused annual leave.
Miller resigned on November 24, 2021, midway through a board-commissioned probe looking at workplace culture at KiwiRail, but was paid out for a further six-month notice period.
Miller previously served as chair of KiwiRail, a position he was appointed to with the support of NZ First.
Another to receive a big payout was former Ports of Auckland chief executive Tony Gibson, who resigned in May 2021 amid safety concerns at the port. Ports of Auckland is not technically an SOE but given its full council ownership, we have added it to our tables.
Gibson’s final pay for the 2021 financial year was a big jump on his $820,000 salary in the previous year and drew criticism from the Maritime Union and Auckland mayor Phil Goff, who wrote to the port’s chairman Bill Osborne asking for an explanation.
See below for the full public sector remuneration list.
Duncan Bridgeman is managing editor of NZME Business, including the Business Herald and BusinessDesk.
OPINION: This recovery is making us sweat, but that might be a good thing in the long run.