Public sector redundancy bill sails past $1 billion

The redundancy bill for departing public servants and other government workers will be more than $1.1 billion in just three years, the latest government data shows.

But the real cost of Commonwealth golden handshakes under Labor and Liberal governments since 2012 might be much higher, with the Treasury unable to shake its habit of vastly underestimating the cost of taxpayer-funded redundancy payouts.

The government denies there has been a blowout, saying departments have dipped into the contingency reserve to pay for golden handshakes if their funds proved insufficient.

Monday's Mid-Year Economic Forecast and Outlook projects $280 million will be paid in redundancies and separations to workers in the federal public sector, a blowout of nearly 170 per cent from the $105 million predicted in the May budget.

Last year, $580 million was paid to departing Commonwealth workers, after $273 million was predicted by Treasury, and in 2012-13 under the previous Labor government, workers pocketed $261 million on their way out the door, after just $126 million had been budgeted.


In some good news for the government, MYEFO predicts the Commonwealth's wages bill will be trimmed by more than $1 billion by 2016-17 on the projections from Labor's last budget, in a sign the present round of deep cuts and the years of efficiency dividends that preceded them are beginning to bite.

In Wayne Swan's last budget last year, Treasury predicted the Commonwealth's wage bill would have surged past $21 billion by 2016-17.

However, the MYEFO papers published on Monday predicted the government would pay less than $20 billion in salaries that year.

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Labor was on the attack on Tuesday, with its public service spokesman Brendan O'Connor demanding the government come clean on any other hidden costs from its mass-redundancy program.

"Beyond the underestimation of redundancy expenses, the government needs to outline whether there are other hidden costs, including productivity decline due to the sacking of experienced staff, expensive outsourcing of functions, and the need to rehire staff down the track," Mr O'Connor said.

But despite the huge gaps of hundreds of millions of dollars between the figures in the budget projections and final budget outcomes, Finance Minister Mathias Cormann insisted redundancy spending was in line with expectations.

"There is no blowout," Senator Cormann said. "Arrangements to fund redundancies are in line with expectations.

 "A full allocation to fund any required redundancies has been made by the government through a combination of existing departmental resources and the centrally held contingency reserve."

Senator Cormann conceded the figures in the MYEFO papers were likely to change through the rest of the financial year.

"The amount for 2014-15 reflects the current known expectations by departments and agencies about the level of separations and redundancy expenses," he said.

"These change throughout the year, as departments and agencies refine their processes.

"Such changes do not mean that costs have blown out.

"Where uncertainty remains about the level of separations and related redundancy payments, provisions are made against wages and salaries or ultimately drawn from funding allocated for this purpose in the contingency reserve, rather than separations and redundancies.

"The first call is always on the relevant department or agency to fund any redundancy from within existing resources."


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