Government ties public servants' pay to private sector, bonuses to be reviewed

Mr Morton said the new policy ensured that Commonwealth public sector wage rises could no longer exceed wage rises in the private sector but would allow them to follow private sector wage growth when it eventually exceeds 2 per cent.

“The Government will remove the existing 2 per cent wages cap and cap future wage adjustments for Commonwealth public servants to wage adjustments in the private sector. This will ensure that wage increases for Commonwealth public sector employees will be in step with their fellow Australians,” Mr Morton said.

The new Public Sector Workplace Relations Policy 2020 will supersede the Workplace Bargaining Policy 2018, with increases tied to the private sector’s wage rise index.

The changes will be made as current arrangements by departments and agencies finish and need to be renegotiated. Existing arrangements, agreed with employees in good faith, will run their course, and not be impacted.

“By removing the existing 2 per cent cap, the wages of Australian Government employees can grow as private sector wages grow – even when private sector wages growth exceeds 2 per cent, but importantly, it won’t be able to exceed it, even when it dips below 2 per cent,” Mr Morton said.

Assistant Minister Morton commended the Australian Public Service for their hard work during the COVID-19 pandemic and their understanding of the wage increase deferral announced in April, but said the previous wages policy was simply not sustainable in the medium and long term, nor was it in line with community expectations.

“This new policy means Commonwealth public sector employees will directly benefit from ensuring the Government’s plan to strengthen the economy, create jobs and deliver private sector wages growth succeeds,” Mr Morton said.

“Unions, businesses and the wider community have long argued that public sector wages should reflect wage movement in the private sector.”

He said the Government setting a cap on Commonwealth public sector wage growth could send the wrong signal to the private sector.

”Commonwealth wages policy should not be used as an excuse or signal to restrain private sector wages growth. This policy will address that,” Mr Morton said.

The Australian Public Service Commission will work with agency heads to implement the new policy, with legacy agreements to run their course and the new policy to be implemented as new agreements are negotiated or determinations made.

The Government will continue to implement its six-month wage increase deferral decision, announced on 9 April 2020, and will ensure agencies unable to implement it by 13 April 2021 do so at the earliest possible date.

Mr Morton also announced a review of performance bonus arrangements for Senior Executive Service and equivalent employees in the Commonwealth public sector, to be conducted by the Secretary of the Department of Prime Minister and Cabinet, the Australian Public Service Commissioner and the Secretary of the Department of Finance.

“The Government considers it appropriate to carefully consider the payment of bonuses to these employees,” Mr Morton said.

The review will consider existing performance bonus arrangements and inform the development of a consistent principles-based approach to the payment of bonuses across all Commonwealth agencies.

“It is the expectation of the Government that where agencies have access to bonus arrangements they should exercise restraint to the furthest extent possible in keeping with community expectations,” Mr Morton said.

Mr Morton confirmed that the review is in addition to the ongoing freeze on senior executive remuneration, which is in place in recognition of the current economic circumstances caused by the COVID-19 pandemic.