'Bonus pay needed' to motivate and retain best public servants: remuneration expert John Egan
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'Bonus pay needed' to motivate and retain best public servants: remuneration expert John Egan

At least three federal public servants each received bonuses of more than half a million dollars last year.

But a shrinking number of executives – fewer than one in 14 – won any performance payment, despite a stalled Coalition pledge to make all senior staff eligible.

The latest government pay data shows a small increase in the number of low and mid-level public servants receiving bonuses, though the rewards continue to be phased out at senior-executive levels.

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It also reveals extreme diversity in salary and other benefits given to staff at nominally the same level – and some bizarre pay practices.

In one case, a relatively junior bureaucrat – an APS level 5 officer – was given an "insulting" $3 to recognise their annual performance, while an APS6 employee received just $16.

At the other end of the scale, almost all staff at the Future Fund Management Agency won bonuses; a top senior investment analyst received an extra $661,844.

Remuneration specialist John Egan, whose research was used to set department heads' pay packages, said the data showed some government agencies didn't know how to use financial incentives.

"Three dollars is an insult. It's better to give that to the Salvation Army."

He said bonuses should be worth at least 5 per cent of salary, "otherwise it would appear you're just distributing what's available to you across your staff".

"If you haven't bothered to differentiate on performance, it's not really a bonus."

Senior executives are not only less likely to get bonuses – about 70 per cent received them in the last year of the Howard government, compared with 7 per cent last year – they are also losing other perks.

Only two in three had a work vehicle or cash in lieu of a car in 2015, a benefit that was once universal.

Government agencies also use other means to reward staff.

The pay data shows an EL2 received a $117,106 allowance on top of their base salary to recognise the officer's special qualifications. Meanwhile, an EL1 got a mere $2 top-up for his or her "skills".

And a very junior officer, an APS2, received an extra $16,135 "health and lifestyle allowance" – far exceeding the typical $300 payment.

Bonus pay for public servants has become an increasingly politicised issue in recent years.

Coalition governments, federally and in the states, have introduced the incentive payments to get the best out of executive staff.

Labor has tended to scrap them upon winning office; last year, Queensland Labor Premier Annastacia Palaszczuk said senior public servants were "paid well enough that they don't need generous bonuses on top of their salary".

However, Mr Egan urged the bureaucracy to experiment more widely with bonuses, saying performance pay could improve the public service's productivity even while it was cutting staff and spending.

He said it was sometimes difficult to attract top staff to government-dominated labour markets, such as Canberra's, but the best performers might stay if rewarded.

"I'd be more than happy to pay more to keep those first-class people – the top 30 per cent or so – firing on all cylinders," he said.

But he warned it required skilled management.

"It's extraordinarily difficult when you have 150,000 people in many different locations; it's a hell of a management challenge.

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"But you need to start the journey and you need committed leadership. It's better than doing nothing."

See the next Public Sector Informant, out on September 6, for more on performance pay.

Markus Mannheim edits The Public Sector Informant and writes regularly about government.

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