Criteria for setting remuneration

The Remuneration Authority is required to consider certain criteria when setting remuneration.

Criteria for setting remuneration

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, and 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.

Criteria used by the Authority in setting remuneration for 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.

Criteria used by the Authority in setting remuneration for 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.

Annual reviews

The Authority reviews the remuneration of all positions every year.

In these 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.

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.

More information

For more information on the setting of the annual remuneration for specific roles such as the Governor-General, Members of Parliament, Judicial Officers, and Local Government Elected Members, refer to the explanatory memorandum attached to their current determinations. See: Clients' remuneration