12 July 2009

Transparency of public sector remuneration

We are constantly being told that transparency is a virtue in the public sector, and generally this is true. It is particularly true in relation to remuneration of the holders of public office. We are entitled to know what public office holders are costing us, and those who draw the Queen’s shilling are not entitled to expect the sort of privacy that might be considered normal in the private sector.

Generally this admirable principle is observed. If you go to this website you will find a Prime Ministerial determination under Section 61 of the Public Service Act 1999, made on 1 July 2008, which sets out in detail what all Secretaries of Commonwealth Departments are to be paid, and their other conditions of service. You can find out, for example, that the base salary of the Secretary, Department of Defence is $390, 940 per annum and the total value of the remuneration is $488,560 per annum.

If you go to the Remuneration Tribunal website you can ascertain the terms and conditions for a vast range of public office holders – full time offices, Principal Executive offices (CEOs of Government Business Enterprises), judicial and related offices, part time offices and parliamentarians.

If you go to the annual reports of Departments, while you cannot find out the salaries of particular individuals, you can find out the salary range for all individuals at any particular level.

There is one striking exception to this admirable transparency, and that is the remuneration of the person who is reportedly the highest paid person in the Commonwealth Public Service – the Head of the Defence Materiel Organisation. This person is appointed under the Public Service Act on a salary determined by the Secretary, Department of Defence. If you wish to find out what that salary is at any given time, you will be in a certain amount of difficulty. If you download from here the relevant appendix for the DMO section of the Defence Annual Report 2007-08, you will be told that “the SES Band 3 salary has not been included, as it would enable the identification of an individual’s employee package”.

Defence is prepared to argue that the remuneration arrangements for Head, DMO are a matter of public record. If you go to the Defence Materiel Organisation’s Correcting the Record web page, you will find an entry for 27 February 2008 responding to Crikey commentary about the issue. This response states, inter alia, that “[Head, DMO’s] salary ...[is] a matter of public record]” and provides a link that does not appear to work – it returns an error message.

If you take the trouble to find that the information on the public record is in the Hansard for the Senate Foreign Affairs, Defence and Trade Legislation Committee for 18 February 2004, you will discover that the starting salary for Head DMO on appointment in February 2004 was $488,800 per annum, plus a car valued at $21,500 per annum and a parking space valued at $1,569 per annum, plus employer superannuation contribution at nine per cent, based on the $488,800. There is in addition a performance bonus of up to 15 per cent, determined by the Secretary, Department of Defence, on the basis of criteria that the Secretary was not prepared to make available to the Parliament.

This information might represent an acceptable level of transparency as far as the Department of Defence is concerned, but the information is five years out of date and it is hard to see why the taxpayer should not be able to look up the annual report and get a good idea of what this very senior public official is paid.

There is another aspect of this which reinforces the case for transparency. Head DMO was initially appointed for a fixed term of five years, expiring in February 2009, and one can assume that the salary level reflected in part the fixed term nature of the appointment. In May 2008, however, almost a year ahead of time, his employment status “was moved from a fixed term to ongoing Australian Public Service (APS) employment status”.

This is a pretty fundamental change, and we are entitled to ask whether this change of status was reflected in any way in reduced remuneration for the position; when the Keating Government introduced the opportunity for higher remuneration for Department Secretaries, in order to receive the higher salary level they were required to give up tenure.

We are entitled to better than this. On the face of it, this is the highest paid person in the Commonwealth Public Service: an SES Band 3 officer who on appointment in February 2004 had a base salary equal to the 2008-09 salary package (total remuneration) of the three most senior Department Secretaries (Defence, Prime Minister and Cabinet, and Treasury). We really ought to have ready access to information on what the deal is.

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