Fixing APS remuneration will be a long journeyFeb 16, 2023
Katy Gallagher’s recent rejection of an ATO supported pay increase was entirely justified if the Government is to move away from agency-based remuneration to an APS-wide approach.
The problem is that achieving an APS-wide approach which delivers the remuneration necessary to attract, develop and retain the skills the APS needs will not be easy and will take time.
Unfortunately the Thodey Report’s advocacy of greater consistency of remuneration across the APS did not come with any clear strategy. And last year’s APS Review of Classification and Hierarchy was even less helpful, proposing a major change to classification without having done the hard yards of clarifying today’s APS occupations and career paths.
Sadly for many APS employees, any reversal of the relative decline in APS pay identified recently by Doug Dingwall will not come soon either.
The case for an APS-wide approach
The case for an APS-wide approach is not based on a rejection of the wider labour market reforms of the 1980s and 1990s aimed to enhance productivity, but that attempting to apply those reforms in the public sector exactly as they operate in the private sector was a serious mistake.
Public service agencies are not the same as private sector enterprises which must survive in the market place; their income comes from government budget allocations compulsorily drawn from taxpayers. While achieving productivity improvements is important in the public sector, tying pay increases to ‘productivity gains’ within each agency has increasingly involved artificial measures and accounting tricks and leaving pay varying according to the generosity of the budget incomes agencies receive, and unrelated to actual labour markets.
We do need a market-related approach, but one that is based on the labour markets of the various occupations that exist across the APS, and we also need to continue to promote productivity.
Nature of the APS-wide approach needed
Paddy Gourley recently wrote about the 1951-53 Priestley Royal Commission in the UK and the principles it set out for setting civil service pay, principles I agree remain apposite for the APS. The first principle is a market-based one, involving a fair comparison with remuneration of outside staff employed on broadly similar work. The second concerns internal relativities which support the promotion system and reflect increasing responsibilities and the expertise and experience required. The third principle involves making judgments where no satisfactory comparisons can be made.
To apply these principles, we need first to clarify today’s main occupations. The APS does not, and never has had, just one occupation. The current APS/EL/SES classification works for many, but there is also a range of specialist and professional occupations, and these are continually evolving. Apart from the traditional professions such as medicine, law, engineering and accounting, there are emerging professions such as digital, data and HRM, ones now being nurtured through the APSC’s ‘professions streams’. It is important also to recognise that careers may mix and merge these occupations.
Once the occupations have been clarified, market comparisons need to be conducted, particularly at the main entry levels into the APS, to ensure the APS attracts quality young people with the requisite qualifications and skills.
The next step is to examine career progressions in different occupations and professions and how these relate to organisational requirements and position roles and responsibilities. This is where Priestley’s internal relativities come in, distinguishing the levels within each occupation and appropriately rewarding employees for increased responsibilities and for the increased expertise and experience these demand. These also must have regard for broader market practice to ensure the APS retains the skills it needs, though matching the external market at more senior levels may not always be required given other incentives for people to continue their public service careers.
Market comparisons conducted in decades past revealed increasing gaps with private sector remuneration at more senior levels. Such evidence led the Remuneration Tribunal a decade ago to recommend hefty increases in Secretaries’ remuneration. I remain unconvinced of the case for those increases in the absence of evidence of a genuine attraction and retention problem. More important in my view are comparisons with other public sector remuneration and the issue of internal relativities.
The most obvious challenge is how to move from the current regime to this more sensible one. But before addressing that, the APSC has to face the challenge of developing the expertise and conducting the analysis and market comparisons required to define the new regime. This will itself take some time.
In the meantime, APS-wide pay adjustments will need to be modest, supplemented by selective adjustments for identified occupations and skill groups such as IT where there is strong evidence of the need to increase pay to attract and retain the skills the APS needs and to reduce reliance on contractors.
The APS will also need to continue to attract high quality graduates across the full range of disciplines it draws upon. This may justify extra pay increases for new graduates, but I suspect there is also room to wind back the classification creep that has occurred over recent years.
As a clearer picture emerges of what the new regime will look like and how remuneration under it compares to current remuneration, there will be evidence of some APS employees being paid too little and others probably too much. A transition to the new regime will be needed. It is also entirely likely that the overall cost of the new regime will exceed current budget allocations. That will need to be carefully addressed, slowing the shift to the new regime and requiring new effort to find offsetting savings including through broader productivity-enhancing measures. But getting remuneration right is itself part of the solution to achieving productivity gains.
It won’t be easy, but there are hopeful signs that the Government and Senator Gallagher are taking the issue seriously.
First published in The Canberra Times February 13, 2023