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Supporting Guidance: Part 3 - Remuneration and Productivity

3 Remuneration and Productivity

3.1 Agencies can only negotiate remuneration increases which are affordable, consistent with Australian Government policy, and offset by genuine productivity gains which satisfy the Australian Public Service Commissioner.

3.2 Agency Heads are accountable for ensuring that the annual remuneration increases for senior executive employees are consistent with Australian Government policy.

3.3 Remuneration increases should apply prospectively unless exceptional circumstances apply and have the approval of the Ministers.

3.4 Sign-on bonuses should not be offered during bargaining unless approved by the Ministers.

3.5 Existing pay scales should not be modified to provide for new top pay points, removal of existing pay points, or other mechanisms to accelerate salary advancement.

3.6 Changes to incremental salary arrangements may be counted as productivity improvements where they result in cashable savings. Such changes may include more rigorous rules covering advancement of employees to higher increments.

3.1 Agencies can only negotiate remuneration increases which are affordable, consistent with Australian Government policy, and offset by genuine productivity gains which satisfy the Australian Public Service Commissioner.

3.1.1 Where an agency is considering any remuneration increase, the Commissioner's view must be sought before any position is put or offer made in bargaining, and again if that is later varied. In forming a view, the Commissioner may seek the advice of the Department of Finance as appropriate. Where an increase is being considered, agencies should be mindful of the community's expectations with regards to public sector remuneration.

3.1.2 Agencies must not offer any proposed remuneration increases until the Australian Public Service Commissioner is satisfied that proposed remuneration increases are affordable within an agency's existing budget and offset by genuine productivity gains. This paragraph does not prevent agencies from bargaining in relation to other matters whilst approvals in relation to the agency's remuneration offer are sought.

3.1.3 Genuine productivity gains are demonstrable, permanent improvements in the efficiency, effectiveness and/or output of employees, based on reform of work practices or conditions, resulting in measurable savings. Arbitrary reductions in staffing are not considered genuine productivity gains.

3.1.4 As remuneration increases without productivity improvements increase costs, any wage increases for Australian Government employees must come from strong productivity gains through enterprise bargaining. Productivity improvement is important in the public sector context as:

  • the public sector is a large employer— its wage outcomes have a macroeconomic effect;
  • the public sector is a model employer—it should demonstrate best practice in a context where there is an identified need to improve national productivity;
  • the public sector is a provider of services in the economy—it should do so as efficiently and effectively as possible; and
  • the public sector spends taxpayer money—it must demonstrate responsible use of that money.

3.1.5 Agencies must provide information to the Commissioner on:

  • the total impact of any proposed changes on the agency's estimates of current remuneration expenditure in each year of the proposed agreement including, but not limited to, the impact of any remuneration increases, adjustments to increment structures, re-profiling of the payment schedule for remuneration increases (e.g. ‘front loading’ of remuneration increases in the first year of an agreement), changes to rates of, or eligibility for, allowance payments;
  • the financial impact of any proposed changes to other terms and conditions;
  • employee-related productivity and savings initiatives which will fund any remuneration increases; and
  • affordability of the agency's proposed arrangements, including an undertaking that there will be no redirection of programme funding.

3.1.6 Examples of productivity initiatives include, but are not limited to:

  • measures to improve workforce availability, such as reducing unscheduled absences or additional leave days;
  • initiatives to increase output per employee, including providing individuals with greater responsibilities or additional skills directly translating to improved outcomes;
  • initiatives to increase the span of control of employees (particularly at management levels);
  • restructuring delegations to improve efficiency and allow for decision making at lower levels where appropriate;
  • elimination of restrictive or inefficient work practices; and
  • improvements to the design, efficiency and effectiveness of agency procedures.

3.1.7 Productivity gains or savings made as a result of Government initiatives, including the annual efficiency dividend, will not be considered to be employee-related.

3.1.8 While productivity improvements must arise from agency (rather than Government) initiatives, agencies may include productivity initiatives which arise from cooperation or collaboration with other agencies, such as shared services or systems. Evidence of such shared initiatives must show appropriate apportionment of productivity gains or savings.

3.1.9 Agencies must also provide information to the Commissioner on their projected operating statement over the duration of the proposed agreement to help assess the affordability of proposed changes.

3.1.10 Agencies must also give consideration to the implications of the proposed remuneration changes and productivity offsets for the sustainability of the proposed arrangements beyond the duration of the proposed agreement.

3.1.11 Agencies should consider the broader labour market implications and relativities of their proposed remuneration arrangements, both in the APS context and with reference to other labour markets in which they operate (both geographic and occupational). If necessary, the APSC will seek information from agencies on the labour market impacts of proposed remuneration arrangements.

3.1.12 Attachment A provides a template for the provision of this information. As a minimum, agencies must provide the evidence outlined at Attachment A, including detailed information on employee costs, productivity offsets and the agency's operating statement. The APSC and/or the Department of Finance may seek additional information if required to assess the proposal.

3.1.13 To avoid doubt, this policy applies to all aspects of remuneration other than disability or expense-related allowances. In the case of these allowances increases should not exceed relevant economic indicators or statistical measures.

3.2 Agency Heads are accountable for ensuring that the annual remuneration increases for senior executive employees are consistent with Australian Government policy.

3.2.1 Agency Heads are to ensure that remuneration increases for SES employees are within the Government's policy parameters.

3.2.2 Agency Heads are to ensure that their SES remuneration principles and policies are consistent with Government policy including any other SES remuneration policy which may be separately issued. The APSC is to be consulted where an Agency Head believes that there is a business need for arrangements which are inconsistent with Government policy, in addition to ensuring that these are underpinned by productivity and are affordable. In forming a view, the APSC may consult with the Department of Finance as appropriate.

3.2.3 Agencies are required to provide the APSC with details of their SES remuneration policy or strategy if requested.

3.3 Remuneration increases should apply prospectively unless exceptional circumstances apply and have the approval of the Ministers.

3.3.1 Should an agency consider that exceptional circumstances exist such that it is necessary to include a remuneration clause in an enterprise agreement or collective arrangement which applies retrospectively, the agency is to consult with the APSC.

3.4 Sign-on bonuses should not be offered during bargaining unless approved by the Ministers.

3.4.1 Sign-on bonuses and other bonus payments during the life of an agreement which are increases in remuneration must be approved by the Ministers. For the avoidance of doubt, bonuses will be considered as part of an agency's remuneration increase and subject to the same costing rules and processes as other remuneration increases.

3.4.2 Agencies considering such bonuses must seek approval before undertaking any discussion with other bargaining representatives or agreeing to any proposal put by other bargaining representatives. As a sign-on bonus is a mechanism through which bargaining could be concluded following the exhaustion of other avenues, it is expected that the use of sign-on bonuses will be rare, and must not form part of any initial agency position in bargaining.

3.4.3 Consideration of sign-on bonuses will be subject to affordability, and the advice of the Department of Finance may be sought.

3.5 Existing pay scales should not be modified to provide for new top pay points, removal of existing pay points, or other mechanisms to accelerate salary advancement.

3.6 Changes to incremental salary arrangements may be counted as productivity improvements where they result in cashable savings. Such changes may include more rigorous rules covering advancement of employees to higher increments.

3.6.1 Agencies may consider reforming salary structures. Pay scale re-structuring is to be cost neutral, or create cost savings. Any pay structure adjustments which increase costs are remuneration increases and will be treated accordingly under the process described at Part 3.1. Any changes to salary structures which increase or decrease cost will be considered in relation to affordability.