The Federal Government is cracking down on the size and number of performance bonuses being handed out in the public service, with new directions to agencies saying they should only be used in limited circumstances that can be justified to the public and the Parliament.
The new guidance issued through the Australian Public Service Commission applies to all Commonwealth entities and companies, except Defence, or where it conflicts with legislative and regulatory obligations.
They should exercise rigour and restraint in using performance bonus payments and act in line with community expectations regarding remuneration, regardless of their level of independence from the government.
“Commonwealth entities and companies exist to deliver outcomes for the public,” the guidance says.
“Any performance bonuses must be carefully designed to clearly align with delivering a public benefit over and above expected outcomes.”
The sensitivity about performance bonuses comes in the wake of the Australia Post Cartier watch controversy that cost former CEO Christina Holgate her job and the government a $1 million settlement.
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The government also faced heat earlier in the year over $77 million in bonuses paid to NBN Co executives and staff in the second half of 2020.
It appears there is also concern about bonuses being used to top up salaries during periods of low wage growth and freezes. The new rules specifically state they should not be used for that purpose.
The latest APS Remuneration Report for the 2020 financial year says most non-SES bonuses were payments made in lieu of salary increases.
In 2019-20, almost 10 per cent of APS employees received performance bonuses, similar to the previous financial year.
The Report says 12,852 employees (9.4%) received performance bonuses, slightly down from 13,205 employees (9.9% of employees) in 2019.
The number of SES employees paid performance bonuses remained steady at 114 (or 4.2% of SES employees) between 2019 and 2020, but has declined overall since 2016.
The new rules say Commonwealth entities and companies should avoid the broad use of performance bonuses, that most staff should not be eligible, and that they should be carefully targeted.
Most policy, service delivery, regulatory or corporate roles should not be eligible, nor should staff involved in areas such as tax revenue-raising, cost-neutral programs, cost-recovery programs or regulatory activities.
But positions that involve significant at-risk investment outcomes, or where they are required to meet significant public milestones, would be eligible.
Bonuses should only be paid for high levels of performance and achievements greater than that expected from the position.
They should also be based on measurable outcomes and be able to be transparently justified.
Commonwealth entities and companies must have their own bonus policies and rules, list any payments in their annual reports and report them to the Remuneration Tribunal.
The pay report also showed that median APS salaries have hardly moved, rising only 0.8 per cent. This reflects the Federal Government deferring non-SES general wage increases by six months and requesting that agency heads suspend all SES remuneration increases until further notice due to the COVID-19 pandemic.
As a result, more than 60 per cent of APS employees did not receive a general wage increase during 2020.