Federal public sector pay
09/07/2018
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Australia’s federal public servant pay appears to be managed well, both strategically and operationally.

Strategically, the APS (Australian Public Service) recruits the pick of university graduates with pay levels considerably higher than the private sector, and provides good conditions and training to hold on to them with low turnover for several years. By the time they become disenfranchised with the bureaucracy and politics, they find they have become too specialised to find equivalent employment outside of the APS (although there are some exceptions – ASIC comes to mind). They find themselves in a closed, rather than open market. From that point, the APS pay scales level out, such that their executive pay scales fall considerably below the private sector. By then it’s too late for the bright public servants. with not easily transferable skills and experience to jump ship. So Australia is relatively well served with a stable, intelligent public service executives. The major downside is the insularity of executives from within both the private and public sector, as they do not exchange jobs easily, and cannot readily appreciate the practical issues on the other side.

Operationally, the APS also appears to manage its pay well. This is revealed in the Australian Public Service Remuneration Report released on 13 June 2018. It reveals the increase in median base salary for 2016-2017 was roughly the same for both SES (Senior executive service) and non-SES employees in 2016-2017, at 2.5% and 2.6% respectively.

When other benefits such as superannuation, car allowances, parking and other benefits were considered, senior executives’ increases looked less rosy, at 1.9%, while non-SES employees’ increases were 2.3%. The increases in total remuneration (also including incentives and shift/overtime payments) were 2.3% for non-SES employees and 2.0% for SES employees.

In prior years, commentators have focussed on the fact that SES employees received higher increases than non-SES employees. In 2015-2016 the median base salary increase for non-SES employees was 0.3% and for SES employees was 2.3%. In 2014-2015 the median increase was 0.1% for non-SES employees and 1.4% for SES employees.

That this year the story has been different does not necessarily mean the public service has responded to criticisms of unequal treatment. Rather, the low wage growth followed by higher growth this year for non-SES employees likely reflects the end of a period of negotiation for enterprise bargaining agreements. The majority of employees in the non-SES classifications are employed under an enterprise agreement.

The ATO, the Department of Home Affairs and the Department of Defence make up around 57% for the APS workforce. The Australian Taxation Office and the Department of Defence held successful enterprise agreement ballots this year. The Workplace Bargaining Policy currently allows for general remuneration increase to be negotiated up to an average of 2% per annum, but many enterprise agreements had front loaded 3% increases.

Among the more finely defined classification levels, the classification with the largest increase during 2016-2017 were the graduates, who received a median increase of 4.2% in base salary. After the graduates, the next highest median increase of 3% was enjoyed by members of the APS 2 and 4 classifications as well as SES 3 employees.

Breaking data down into job families rather than classification levels, those in leadership received the highest remuneration, followed by those in science, strategic policy, research, legal and parliamentary, ICT, and Health.

Pay bands have widened across many classifications, meaning greater differentiation between employees within the same classification.

Incentives

Only 18,000 of 139,327 public service employees receive performance “bonuses”, as labelled by the APS (technically they are annual incentives, as incentives are payments for on a performance assessment that is not based on pre-established objectives). This has reduced 6% on the prior year. Even within the SES, only around 5% of employees received an incentive in 2017. This compared to closer to 15% in 2014.

Around 75% of all incentives were paid by one agency (unspecified. At this agency, one-off performance incentives are paid in lieu of salary advancement for staff at the top of their salary range.

The move away from incentives started in 2007 when Kevin Rudd stated that incentives focused department heads on saying what wanted to be heard rather than what needed to be said. Since then, the incentive numbers have fallen dramatically. In 2011, approximately 30% of SES employees received a bonus.

Gender Pay

The gender pay gap has reduced over the year from 9.6% to 8.4% (based on average salaries of $94,428 for men and $86,529 for women). This gap is mainly driven by differences in the proportion of women at each pay level. The APS comprises 59% female staff, however, most of those are at the APS 6 level or below. When comparing gender pay based on levels, the largest gender gap per level was only 2%. This gap occurred at the SES 1 level.

Superannuation

Those worrying about the sustainability of legacy government pension schemes will be pleased to hear that just under half of public servants are on the public service accumulation plan (i.e. not largely unfunded defined benefits).

The proportion in the most generous Commonwealth Superannuation Scheme (closed in 1990) has reduced to 2%. Those in less generous Public Sector Superannuation scheme (closed in 2005) has reduced to 41%. The remainder of employees have either nominated alternative superannuation funds, or are in the Public Sector Superannuation Accumulation Plan (PSSap), which is an accumulation rather than defined benefits fund.

As would be expected the percentages of senior executive service employees in the CSS and PSS schemes are much higher than the percentages of non-SES employees. Over 30% of SES 3 employees are in the CSS scheme and more than 40% are in the PSS scheme.

The full report can be found HERE.

© Guerdon Associates 2021
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