The Government is cracking down on public sector bosses' pay rises, but their pay rates are not expected to fall.

It follows revelations last year about pay rises for public sector chief executives of up to 24 per cent a year, which the Government described as out of hand.

Prime Minister Jacinda Ardern announced today the Government will introduce new legislation on Thursday to give greater powers to State Services Commissioner Peter Hughes.

It would effectively grant Hughes the power to set pay and conditions for the heads of all Crown entities, including those that had approved pay rises against Hughes' advice.


In December the Senior Pay Report covering pay rates in the year to June 2017 identified the Guardians of NZ Superannuation, ACC and Telarc as entities where the boards approved pay rises against Hughes' advice.

The former head of the Super Fund, Adrian Orr, who will become Reserve Bank Governor next month, was given a pay rise from between $950,000 and $959,999 to a reported $1.03 million.

ACC boss Scott Pickering had a pay rise from between $810,000 and $819,999 to between $830,000 and $839,999.

Telarc boss Philip Cryer had a rise from between $210,000 and $219,999 to between $250,000 and $259,999 - potentially a 24 per cent pay increase.

Ardern, who announced the new legislation alongside State Services Minister Chris Hipkins, said the new legislation will bolster public confidence in crown entities.

She said public sector pay rates had to be competitive to ensure the sector had the right calibre, but pay rises had been out of step with expectations.

Hipkins said he didn't want to predict what would happen with future pay rises, but he didn't expect current public sector bosses to receive pay cuts.

"The Commissioner for State Services certainly has a clear direction from the current Government of a reasonable level of pay increase at the top of the public sector."


Under the bill, the boards of Crown entities would need the Commissioner's consent for public sector chief executive pay, effectively enabling him to set the pay and conditions.

"At the moment Crown entities consult with the Commissioner, but then they can ignore what the Commissioner says. [Under this bill] they won't be able to ignore what he says," Hipkins said.

The Commissioner would also be able to set a code off conduct for Crown entity boards.

"By setting out a code of conduct, the Commissioner is able to deal with any transgressions more clearly," Hipkins said.

The bill would bring all Crown entities into line with the rules that already apply to DHBs and universities.

It would also make all the public sector boss appointments five-year terms.

The Commissioner would also have powers of inquiry, and would no longer need to seek those powers from ministers.

Last December the Government criticised the "rampant growth" in public sector bosses' pay following the release of the Senior Pay Report.

At the time, Hughes effectively warned the board members of the three entities that ignored his advice that the Government could end their tenure.

"While the board has the right to make these decisions, I do not believe increases of the magnitude given are warranted or justifiable in a public agency, especially where the increase follows previous increases over and above my advice," he said.

The report showed that the average remuneration increase for public service bosses for the year to June 2017 was 2 per cent - up from 1.3 per cent the previous year

It was 2.7 per cent for Tertiary Education Institution and DHB chief executives, and 4.1 per cent for Crown entity chief executives, which were 2.8 per cent and 3.8 per cent the previous year respectively.

Over the same period, the average pay increase across the public sector was 2.2 per cent.

Snapshot of chief executive remuneration for the year to June 2017:

• MBIE - Between $800,000 and $809,999
• University of Auckland - Between $710,000 and $719,999
• Police Commissioner - Between $690,000 and $699,999
• Treasury - Between $660,000 and $669,999
• Chief of Defence Force - Between $660,000 and $669,999
• Waitemata DHB - Between $620,000 and $629,999

The Senior Pay Report was based on total remuneration including base salary, performance-related payments, superannuation contributions and any other benefits received, such as additional leave.