Process for establishing local government remuneration

Recent work

The Authority uses a “rate for the job” approach to the remuneration of local government members. However, there is provision for meeting fees to be paid to elected members involved in resource consent hearings and district/regional RMA plan hearings.

In 2015, the Authority undertook a job-sizing exercise with a cross section of sample councils from which it developed an overall size index measuring the relative size and complexity of each council’s business.

The results of this review were never fully implemented. The Authority has just completed a further, more comprehensive, review which has resulted in the production of three new size indices – one each for Territorial Authorities, Unitary Authorities and Regional Authorities – and the consequent construction of a new local government pay scale. The full paper was sent to all local authority members on 30 June 2018.

Determining the Remuneration of Local Government Elected Members – Information Paper (PDF, 1MB)

It should be noted that the new size indices were developed specifically for use by the Authority in assessing remuneration and are not intended to meet the needs of any other users.

Sizing Councils

The previous size index (one index for all types of council) was based on the population served by each council and the expenditure of each council. The new size indices use the following factors:

 Territorial Authorities

  • Population (source: Stats NZ Estimated resident Population at 30 June each year)
  • Total operating expenditure (source: Stats NZ Local Authority financial Stats at 30 June each year)
  • Total assets (source: Stats NZ Local Authority financial Stats at 30 June each year)
  • Socioeconomic deprivation index (source: University of Otago Socioeconomic Deprivation Indices compiled at each census)

Regional Authorities

  • Population
  • Total operating expenditure
  • Total assets
  • Geographic size (source: Stats NZ geographic Areas)
  • Public passenger transport boardings (source: Ministry of Transport’s public transport passenger boardings at November each year)

Unitary Authorities

  • Population
  • Total operating expenditure
  • Total assets
  • Socioeconomic deprivation index
  • Geographic size
  • Public transport boardings

All factors we use will be retrospective but measured at “a point in time” as near as possible to the time of our decision. That means that, except for the deprivation index, no data sets should be more than three years old. The data sets are available either from the Stats NZ or from the annual reports of councils themselves.

With the exception of the Auckland Council and the Chatham Islands Council (which because of their respective sizes are considered as outliers), all Councils have been placed on the new size index as at 30 June 2018.

Local Government Pay Scale

After constructing a new size index, the Authority then also considered a local government pay scale that (as required by our legislation) would have regard in particular to the need to achieve and maintain fair relativity with remuneration received elsewhere. After exploring various occupational groups that might have some relativity with local government elected members, we concluded that the only similar occupation was that of a member of Parliament. We will therefore in future be using the parliamentary salary scale as a comparator, but based on the position of each council on the size index and the pro rata time required for an average local government member to undertake the role on a council of any particular size. No local government elected member, regardless of the size of their role, will be able to be paid more than a Cabinet Minister.

As part of its recent research into the roles of councillors, the Authority conducted a survey of all councillors across New Zealand and all Auckland Local Board members, with 659 councillors and 113 local board members responding. The information from this survey was used, together with previous work that the Authority had commissioned from the Hay Group, as a basis for assumptions about councillor time use in relation to council size and type. It was evident that in the large “metro” councils (Christchurch, Wellington, Hamilton, Tauranga and Dunedin) a councillor is likely to work up to full time – i.e. one full time equivalent (FTE).  There is a second group of councils where councillor workloads sit between full time and half time, with the workload of members of the remainder of councils generally varying around or below .5% of an FTE. It must be stressed, however, that the survey returns showed that both between and within councils the average work time differs, even allowing for different roles such as deputy mayor or committee chair.  However, the overall pattern was sufficient for us to use it as a basis for decisions.

The pay scale therefore takes into account three issues - the size of the council, the average time required by a councillor on a council of a particular size and a general comparison with parliamentary salaries. Local government elected members’ remuneration will in future reflect this pay scale, resulting in differential increases in remuneration in the next two years as relativities between councils are changed. 

We have used Christchurch (the largest council excluding Auckland) to anchor the top of our pay scale. We have anchored the bottom of the councillor pay scale in relation to a proportion of the average wage. However, we have concluded that there is a “basic job” for any councillor, no matter how small the council size. When the governance pool approach is fully implemented following the 2019 election, except for the Chathams we are intending to peg the lowest councillor remuneration to relate to a half time equivalent of about two thirds of the average wage. In the case of the smallest councils this will breach our “governance pool” approach and means that the resultant governance pool will need to reflect the current number of councillors, rather than the ranking of the council on the size index. Of the 13 councils that currently would be impacted, one has 14 councillors, but the average number of members of the remaining 12 councils is between eight and nine.

The impact of differing numbers of councillors on relative total governance pools will remain an issue for active consideration by the Authority in future years when setting local government remuneration.

Auckland and Chatham Island councillors

Because of their respective sizes, neither Auckland Council nor the Chatham Islands Council fit within our size index, so each year the Authority will make an informed judgement on the size of the pools for these two councils.

Auckland Local Board members

Although most Auckland local Boards have far greater populations than a considerable number of councils, they do not have the same breadth of legal responsibilities as councils (which have powers of general competence), so it is difficult to fit them into any of our three size indices. The Auckland governance arrangements have now been in existence for eight years and are being reviewed. When changes to delegations have been implemented we will be in a position to construct a size index for Local Boards. We will also decide a pool for each of them to allocate. We expect the new arrangements to be ready for full implementation following the 2019 election.