Criteria and timing for setting remuneration

Criteria

Sections 18 and 18A of the Remuneration Authority Act 1977 require the Authority to consider the following criteria when setting remuneration:

• Fair relativity with comparable positions
• The need to be fair to the individuals whose pay is being set, as well as to the taxpayer or ratepayer
• The requirements of the job
• The need to recruit and retain competent individuals
• The conditions of service enjoyed by the persons whose remuneration is being determined
• Any prevailing adverse economic conditions (which may lead the Authority to set remuneration at a rate lower than might otherwise have been the case)

For statutory officers, the Authority does this by undertaking annual reviews informed by job evaluation.

Remuneration Authority Act 1977 - NZ Legislation(external link) 

Performance

The Authority has no mandate to take account of performance in setting remuneration. The expectation is that the individuals appointed to the very senior roles where the Authority sets pay will perform at a high level.

Members of Parliament (MPs)

The Authority sets the remuneration of MPs based on the above criteria, using a total package approach. It takes into account benefits such as superannuation, and any personal benefit element in work-related expenses such as travel.

The remuneration for members with additional responsibilities, such as the Prime Minister, Ministers and Leader of the Opposition recognises the extra duties attached to those roles. The remuneration for those positions of additional responsibility does not match either public or private sector remuneration for “similarly responsible” positions.  MPs’ salaries are paid under Permanent Legislative Authority. That arrangement allows the salary, allowance and other payments to be paid on a permanent basis, rather than being voted annually by Parliament. 

Local government elected members

In addition to the above criteria, clause 7 of schedule 7 of the Local Government Act 2002 sets a further requirement on the Authority in setting pay for local government elected members - that is the requirement to minimise the potential for certain types of remuneration to distort behaviour.

Local Government Act 2002 - NZ Legislation(external link)

Timing of reviews

The Authority reviews the remuneration of all positions every year, apart from Members of Parliament, whose remuneration is required to be set in advance at the beginning of each Parliamentary term. The Authority is able to change MPs’ remuneration during the term if circumstances change sufficiently to warrant reconsideration.

In its annual reviews, the Authority considers information from a wide range of sources, including:

• Data collected by the Public Service Commission through its annual survey of chief executive remuneration in the public service and wider State sector
• Trends and developments in remuneration in sectors relevant to those where the Authority sets remuneration. For example, movement in remuneration in the legal profession or the wider public sector.
• Economic and labour market statistics produced by Statistics New Zealand and other authoritative sources.
• Major changes, including legislative changes, in the role(s) concerned.
• The views of the individuals or groups concerned.

Determinations remain in force until superseded

The Authority normally sets remuneration for a year. Remuneration continues at that level until a new determination is made.

The determinations for work-related expenses for Members of Parliament and former Prime Ministers, such as travel, are reviewed once during each term of Parliament. 

The Authority sets remuneration against the most recent remuneration survey information and publicly available economic and labour market data which means that the Authority is a follower rather than a setter of salary trends. On certain occasions the Authority may need to draw on information that is available only after the expiry of a determination. For this reason, any change in remuneration is often backdated to the day after the expiry date of the previous determination.