The salaries of public service bosses appear safe after an inquiry told the Senate to reject changes capping executive pay and possibly halving the wages of the top paid agency leaders.
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A push from Greens senator Peter Whish-Wilson to limit pay for senior executives in the Australian Public Service would have capped their salaries at about $420,000 per annum, the inquiry found, a significant reduction for many of the highest-ranking public servants.
The Senate committee reviewing the bill rejected the cap on Wednesday last week, telling senators not to pass the legislation and warning it would be a "blunt mechanism" hurting the bureaucracy.
In response, the Greens said it was an "unashamedly blunt instrument" changing a remuneration system at odds with public service values.
Senator Whish-Wilson said the changes would curb a growing pay gap between top mandarins and the rank-and-file, set an example for the private sector and "directly challenge the idea that excessive executive pay is inevitable" - although the bill met scepticism from the main public sector union and former public service commissioner Andrew Podger.
Department heads receive remuneration packages worth between $692,500 and $878,940, but the Greens wanted to cap their pay at five times the average earnings of full-time adult workers.
Current levels are between nine and 10 times average earnings, Professor Podger told the inquiry.
A pay cap could have halved the salary of the top paid public servant, Department of the Prime Minister and Cabinet chief Martin Parkinson, whose total remuneration including salary, superannuation and other benefits is $878,940.
Treasury boss John Fraser on $857,630, and the heads of Defence, Finance, Foreign Affairs and Trade, Health, Human Services, Industry and Social Services are among the other highest-paid public servants who would face a pay cut.
The bill would also have forced federal agencies to report annually on their executives' pay, and to compare it to both the average and minimum wage in a bid to make sure "there is a constant reminder of the level of disparity that exists with the wage structure", Senator Whish-Wilson said.
"There is little evidence that, beyond a certain point, increased remuneration provides an incentive for executives to perform better. Senior executives are rarely as uniquely skilled or as valuable as excessive salaries would suggest," he said.
The bill hit firm resistance from the parliamentary committee, dominated by Liberal and Labor party senators.
"Such a blunt mechanism will have a negative effect on the Australian Public Service and the economy more generally," it said.
"Furthermore, the use of a cap will impact on the ability of the Commonwealth to attract and retain executives with the skills and expertise necessary to further the government's needs."
In a dissenting report, Senator Whish-Wilson and Greens senator Sarah Hanson-Young said the party would continue pushing for the reform and that opponents had failed to address the widening gap between executive pay and lower-ranking workers.
"A cap on executive pay is an unashamedly blunt instrument that responds to the fact that the current market led approach is both inconsistent with the values of the public sector and is implicated in societal wide growth in income inequality," they said.
The Community and Public Sector Union told the inquiry that pay freezes damaged the economy and proposed that instead of capping executive salaries, pay parity could be improved by changing the government's strict workplace bargaining policy.
Professor Podger previously told Fairfax Media some top public servants were possibly overpaid because too much weight was given to parity with private sector wages over other areas of the public service, such as at state or territory level.
He told the inquiry a cap would politicise the remuneration of public servants.
