Redundancy totalling $339,000 paid in shuttering the Productivity Commission

Finance Minister Nicola Willis opted to pay redundancy to staff at the shuttered Productivity Commission, rather than seek to redeploy them. Photo / Mark Mitchell

All 21 employees of the Productivity Commission received redundancy payments upon the Crown entity’s disestablishment in February. The total cost was $339,300, the Treasury confirmed under the Official Information Act (OIA).

No termination payments were made to board members: the Independent Crown Entity’s three commissioners and chair.

The commission redundancies were among the first in a wave currently breaking across the public sector, particularly the core public service, brought about by the change in Government and its cost-saving measures.

The commission closed its doors on February 29 after a November National-Act Party coalition agreement to disestablish the agency and redirect its annual budget ($5.9m) to help float a new regulation ministry.

None of the old ProdCom staff were offered redeployment – either to the new ministry or elsewhere in the government – which could have avoided redundancy payments and retained skilled staff, largely economists and econometricians.

Under the Public Service Act, which also covers Crown entities, there is no redundancy entitlement where staff are offered comparable alternative positions in the public sector.

Both official documents and officials’ communications (released under the OIA) suggest the incoming Government favoured a fast closure of the commission, which relied on offering all staff redundancy. Offering redeployment would have been relatively more time-consuming, as it requires consultation with affected staff.

Commission chair Ganesh Nana voiced concern that the agency’s board was not able to consult staff in good faith about their employment options, given the Government’s tight time frame and decided course of dissolution. He also pushed hard and repeatedly with both officials and, largely through them, with ministers, to secure staff redeployment. He was unsuccessful.

The Cabinet paper which underpinned the agency’s disestablishment, dated December 13, was silent on the subject of redeployment. Under the subheading “staff” it noted only: “Disestablishment of the Commission will mean payment of whatever redundancy entitlements apply to staff under Employment Agreements. The proposed legislation would dissolve all remaining employment positions within the Commission.”

However, Treasury and Public Service Commission (PSC) analysts’ early work on the Cabinet paper shows discussion of offering alternative employment to affected staff. It appears the matter was dropped in the face of ministers’ emphasis on speed.

In an email titled: “Prod Comm Cab Paper” sent on December 5, the Treasury’s Hilary Devine wrote to the PSC’s Margaret Mabbett: “Sorry one further point. We have a placeholder in the advice on what support there is for staff on redeployment of staff, under the point where we say, where staff are offered suitable alternative positions in the State services (Public Service Act s88 by virtue of Schedule 8, clauses 8 and 9).”

Is there any further detail you can provide us from previous examples eg SuperU [the Social Policy and Research Evaluation Unit, disestablished in 2018] where the PSC facilitated redeployment of staff that we can add to the brief.”

Mabbett replied: “FYI Hannah’s thinking [referring to Hannah Cameron, deputy commissioner at the PSC] re staffing is that Ministers don’t want to hear about attempts to transfer/rehome so she thinks the key thing is to highlight the possibility that some staff made redundant will subsequently find employment in the State sector that could have been covered by the alternative positions provisions.”

Portions of the emails are redacted.

Ganesh Nana, chair of the now-closed Productivity Commission, pushed hard but ultimately unsuccessfully for staff redeployment. Photo / Mark Mitchell

Speed in closing the commission was needed to free up money to fund the set-up of the new Ministry of Regulation in a cost-neutral way.

The new ministry was established on March 1, immediately after the legal dissolution of the ProdCom, and Treasury advice to David Seymour, Minister for Regulation, noted repeatedly, as it did in a proactively released report of December 2023, the: “Productivity Commission [was] being disestablished as quickly as possible.”

However, Minister for the Public Service and Finance Minister Nicola Willis refuted this connection: “The establishment of the Ministry of Regulation was not dependent on savings being realised from the disestablishment of the Productivity Commission.”

She said it would be “quite wrong” to suggest Ministers hurried the disestablishment of the commission at the expense of staff. And that she, “explicitly instructed officials to ensure all employment obligations were fulfilled and that staff were treated decently.”

She also said Seymour was hopeful that some commission staff would be employed at the new Ministry of Regulation.

An email of December 3, from secretary of the Treasury Caralee McLiesh to then Public Service Commissioner Peter Hughes, noted that Seymour was “open to PC staff joining the new agency but through a standard application process not a ‘lift and shift’ of residuals.”

A Treasury spokesman said there was no legal obligation to explore redeployment as an option to avoid commission redundancies, as the agency was an Independent Crown Entity. He said by way of help, commission staff were provided with a list of central government agency job vacancies, and were sent a “workforce mobility hub talent availability form” to complete and send to the PSC: another avenue for seeking new work in the public sector.

The commission was created in 2011 to provide advice to the Government on improving the country’s low productivity.

Critics claim the agency was politicised by the last Labour Governments, particularly through the appointment of Nana as chair in 2020 – his co-owned consultancy BERL had a long association with the Labour Party as its favoured economics consultancy. (Nana sold his BERL shares in 2021).

In opposition, Seymour was scathing in his commentary on Nana’s appointment. However, since in Government he’s simply emphasised that the former agency’s funds can better boost New Zealand’s anaemic productivity through cutting red tape and cumbersome laws.

The Ministry for Regulation is expected to reach full staffing, roughly 60 fulltime jobs, and capacity by October. A permanent chief executive is to be hired and in place by July 1, and additional funding is expected in the upcoming Budget, though this is likely to be provided as a tagged contingency.