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New Parameters For One-Off Payments

State Services Minister Trevor Mallard today announced new parameters and guidelines that will govern the use of one-off performance payments and other special payments in the State sector.

Trevor Mallard told the PSA conference today that the parameters, which were approved by Cabinet recently, were partly prompted by some cases of one-off payments to staff which came to light early this year.

“Those cases underlined the bigger questions we faced on this issue,” Trevor Mallard said.

"The Government's view is that salary should be the primary means of remuneration for officials and our system will gradually move away from the one-off payment approach.

"The Government does not propose to put a complete stop to performance-related payments. People will move up scales based on performance. To stop such payments would not assist in growing and maintaining high-quality public services and it would disadvantage the State sector as an employer. However, the circumstances in which performance payments are made, and the criteria to be applied, will be clarified. People will not get bonuses for doing their job.”

In summary, the parameters provide that departments should, as circumstances and resources allow, act to ensure that:

- Performance, which meets the normal expectations of the job, is recognised by salary, without recourse to one-off performance payments;

- Salary increases, rather than recurrent one-off payments, are made to employees who year after year exceed the normal expectations of the job;

- Decisions on any rewards for performance are determined by performance management systems with codified, transparent and fair processes and criteria; and

- Changes to remuneration systems are agreed with employees and/or their representatives.

The parameters also regulate the use of lump-sum payments in relation to the settlement of collective agreements.

Trevor Mallard said the arrangements come into effect immediately, but it would take time for changes to become apparent. “These are changes to an entire system, and it will take time and patience for changes to come through.”

The 39 departments in the core Public Service must comply. The parameters will also be included in advice, provided by the State Services Commission, to other State sector organisations - such as the Fire Service, Police, Defence Forces, CRIs, and many Crown entities - which are required to consult with the State Services Commission on terms and conditions of employment.

“Initially, only part of the State sector will be covered,” Trevor Mallard said.

“Eventually, however, I expect these parameters to spread out across large parts of the State sector.”

The new parameters and guidelines approved by Cabinet are attached.

Trevor Mallard said the parameters were one of the first questions dealt with in the new tripartite forum, of Ministers, departmental chief executives, and the PSA.

“This announcement underlines how the forum leads to co-ordinated approaches to management,” he said.

New parameters attached. (Underlined text indicates additions, strike through text indicates deletions)

Bargaining parameters and guidelines, including guidelines on use of one-off performance payments and other special payments, approved by government

1 The following parameters have been approved for Public Service departments which are planning strategies for the negotiation of collective agreements (CAs). Public Service departments must comply with these parameters and apply relevant components to individual employment agreements (IEAs) as the opportunity arises. The parameters will also form the basis of advice to the tertiary education sector, health sector, Police, Defence Force and other Crown entities required by statute to consult with the State Services Commission.

2 These parameters and guidelines replace Appendix 2 of each Public Service chief executive’s Delegation of Authority to negotiate and must be read in the context of that delegation.

3 Departments must consult with the State Services Commission:

- when a collective employment contract (CEC) or CA is about to expire, or when bargaining is initiated, whichever is the earlier; or

- annually on the anniversary of the expiry date of the CEC.

The consultation will cover the strategy for negotiating the CA or CAs, the relationship of the strategy to the overall departmental human resources and business strategies, together with an analysis of the risks involved. The parameters and guidelines below will apply to collective bargaining.

Parameters for the negotiation of CAs

4 Settlements must be fiscally neutral. Fiscal neutrality is extremely important for keeping expenditure in line with the Government’s plans and within Parliamentary appropriations. Fiscal neutrality also ensures that departments, by and large, negotiate on an equal basis and limits the extent to which departments are forced to bid against each other to recruit and retain staff.

5 Fiscal neutrality is defined as “from within the baseline of Vote: (department) and within current prices to third parties”. This means that organisations cannot extend their baseline by increasing the charge out rates to clients as a means of funding adjustments to terms and conditions of employment.

6 In formulating bargaining strategies, departments should have due regard to the desire of Government to improve the quality of the Public Service and ensure that career development and training requirements are adequately addressed.

7 It is recognised that departments should have an opportunity to raise, in the context of the budget planning process, issues around terms and conditions of employment and to make a case for provision, within future baselines, to address such issues. Departments may make a case for funding to be obtained either through an increase in baseline funding, or a reprioritisation of spending within current baselines, or some combination of these two options.

8 These arrangements will operate for the 2001/02 financial year and outyears. Over the remainder of the 2000/01 financial year departments will be able to submit a case to the Commission, and the Treasury, as a component of bargaining strategies for the 2001/02 year. The case will be assessed against the criteria outlined below, and the ability of the Government to fund the proposed case.

9 Departments will have to make a strong case which will be subject to scrutiny by both the Commission and Treasury. Departments will have to demonstrate that specific fiscal provision is needed in order to address serious recruitment and retention problems, or differences in pay line positions relative to comparable groups of employees, or to develop skills and competencies in line with the business needs of the organisation. Departments will also have to demonstrate how this fits into an overall plan for the development of their human resource capability. Departments will also have to make clear, for consideration by the responsible Minister, Minister of State Services, and Minister of Finance, any proposed tradeoffs in terms of output quantity and/or output price.

10 Adverse flow-on effects from settlements to other organisations must be avoided.

11 Collective agreements must:

- include a clause which adequately protects against technical redundancy, so that staff who are offered positions in a new agency where their jobs and conditions of employment remain basically unchanged will not be entitled to a redundancy payment; and

- comply with the Human Rights Act and remove or amend age-related clauses, including retirement provisions.

12 Proposals to relax current sick leave provisions through the introduction of an open ended or unlimited sick leave provision will require specific State Services Commission concurrence.

13 Backdating of settlements will occur only where a robust case is approved by the Commission.

13 Extensions of parental leave entitlements may be made where the Ministers of State Services and Finance approve a robust case.

14 Departments should, as circumstances and resources allow, act to bring about a situation where:

- performance which meets the normal expectations of the job is recognised by salary without recourse to one-off performance payments;

- salary increases, rather than recurrent one-off performance payments, are made to employees who year after year exceed the normal expectations of the job;

- decisions on any rewards for performance are determined by performance management systems with codified, transparent and fair processes and criteria; and

- changes to remuneration systems are agreed with employees and/or their representatives.

15 Departments must also ensure that:

- responsible Ministers are informed about the policy and operation of departmental remuneration systems (including the criteria for one-off performance payments) and about each department’s plans for implementing the principles set out in paragraph 14 of these parameters;

- responsible Ministers are advised at least annually of the number of employees who received one-off performance payments by the amount received (aggregated into bands so as to ensure the privacy of individual employees); and

- standard terminology, definitions, and principles approved from time to time by the Minister of State Services, are adopted over time and used.

The obligation to inform responsible Ministers also applies in respect of any proposal to make special payments as defined in paragraph 17 of these parameters.

16 Proposals to make special payments, or to backdate a settlement, must not form part of the bargaining strategies of departments. Proposals to make any special payment in connection with the conclusion or ratification of a collective agreement (including any backdating payment) will require a compelling justification and consideration by the reference group of Ministers on State sector industrial relations.

17 In these parameters:

- “one-off performance payments” are those made in addition to base salary as reward for, or in recognition of, some level or type of performance (individual or team). They include annualised “at risk” components of total remuneration. Contractually-based higher and extra duties allowances are not “one-off performance payments”;

- “special payments” are any other one-off payments, or other enhancements to conditions of employment, which are out of the ordinary and do not flow from the employer’s obligations under employment contracts/agreements.

Good Practice Guidelines for Bargaining Strategies

18 Bargaining strategies should be formulated taking into account the choices and views of employees regarding collective agreement coverage. Departments must also recognise the right of individual staff to choose an individual employment agreement.

19 Departments should ensure that all obligations and requirements of the Employment Relations Act 2000 are complied with. The provisions of any Code or Codes, promulgated under section 35 of the Employment Relations Act 2000, also need to be reflected in the process of bargaining.

20 The bargaining strategy is expected to be part of the total human resources strategy and support the overall strategic direction of the organisation and the Government’s objectives including the above parameters. The State Services Commission must be consulted in each case. A good bargaining strategy will include the following elements:

- objectives;

- analysis of the offer to be tabled including priorities and cost implications and agreement structure. This will also include accurate costing of the value of conditions of employment (including leave) so that the whole package is understood;

- strategy for managing relationships with the relevant union or unions;

- risk analysis, including risks of adverse flow-ons to other organisations and any potential risks around proposed coverage clauses for CAs;

- bargaining timetables and implications for other activity (eg other change programmes);

- communications strategy;

- resources to manage the bargaining round; and

- post-settlement evaluation arrangements.

Attachment to Annex 1

Application beyond Public Service departments.

The application of the bargaining parameters beyond Public Service Departments depends upon the legislative provisions applying in the individual statute establishing the organisation.

Generally this means the State Services Commission will use the bargaining parameter as a basis for its advice to agencies required to consult with the SSC. However the agencies are not legally required to “give effect” or “have regard” to the bargaining parameters.

The following organisations are required to consult the SSC on the terms and conditions for staff:

- Non Public Service Departments - Defence Force, Police, Clerk of the House;

- SOEs under section 8.(2) of the State Owned Enterprises Act 1986;

- Other organisations outside of the Crown, e.g., Historic Places Trust; and

- Crown entities such as Crown Research Institutes and other Crown entities, including:

Accident Compensation Corporation

Alcoholic Liquor Advisory Council

Arts Council of New Zealand (Creative New Zealand)

Broadcasting Commission (New Zealand On Air)

Broadcasting Standards Authority

Building Industry Authority

Careers Service

Casino Control Authority

Civil Aviation Authority of New Zealand

Commerce Commission

Early Childhood Development Unit

Earthquake Commission

Electoral Commission

Energy Efficiency and Conservation Authority

Environmental Risk Management Authority

Foundation for Research, Science and Technology

Health and Disability Commissioner

Health Research Council of New Zealand

Health Sponsorship Council

Hillary Commission for Sport, Fitness and Leisure

Housing Corporation of New Zealand

Human Rights Commission

Industry New Zealand

Land Transport Safety Authority of New Zealand

Law Commission

Learning Media Limited

Legal Services Board

Maritime Safety Authority of New Zealand

Mental Health Commission

Museum of New Zealand (Te Papa Tongarewa)

New Zealand Antarctic Institute

New Zealand Artificial Limb Board

New Zealand Film Commission

New Zealand Fire Service Commission

New Zealand Lotteries Commission

New Zealand Qualifications Authority

New Zealand Sports Drug Agency

New Zealand Tourism Board

Office of Film and Literature Classification

Police Complaints Authority

Privacy Commissioner

Race Relations Conciliator

Residual Health Management Unit

Retirement Commissioner

Securities Commission

Skill New Zealand

Special Education Service

Standards Council

Takeovers Panel

Te Reo Whakapuaki Irirangi (Te Mangai Paho)

Te Taura Whiri I Te Reo M~ori (M~ori Language Commission)

Teacher Registration Board

Testing Laboratory Registration Council

Transfund New Zealand

Transport Accident Investigation Commission


This is the list of entities as at 1/05/01 which the SSC is aware have a legal obligation to consult generally on collective terms and conditions or, in some cases, all staff terms and conditions. There may be other organisations added before or subsequently that the SSC is not aware of.

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