Senator Jacqui Lambie is incandescent about the salaries of secretaries of Commonwealth departments and she wants to “slash” them from their million dollar levels (approx) to no more than $438000, the current pay for the Commonwealth Treasurer.
Senator Lambie has been immediately assailed in The Mandarin by Dr Huw McKay from the Crawford School at the ANU. On the Crawford website McKay is modestly described, perhaps by himself, as “a visionary, influential and inspiring executive leader…delivering extraordinary results within complex global operating environments.” Unfortunately, his riposte to Jacqui doesn’t quite match the Crawford boostering for what he’s delivered in his Mandarin note is a load of waffling piffle.
McKay reckons that writing down the private sector CEO salary market makes “no sense” and it bespeaks a “lack of business acumen in Canberra”.
McKay wants secretary and senior-level public service remuneration to be ”well calibrated to the correct private sector analogues” and worries that if it’s not, the SES “talent pool” in the public service will be thinned out. He cites the cases of former Treasury officials Ted Evans, Ken Henry and David Morgan, all of whom moved into the banking world, as harbingers of his concerns. But he doesn’t mention that Evans moved after he’d retired at the age of 61 and Henry after 10 years hard slog as Treasury Secretary. And he doesn’t seem to occur to him that Morgan just might have remained if he’d been offered the position of Treasury Secretary.
And, so far as the SES is concerned, McKay doesn’t take the trouble to consider its turnover rate which, at around 8% including age retirements, doesn’t suggest a retention problem and may well be unhealthily low.
It’s not clear how much serious private sector experience McKay has had, but he doesn’t appear adequately to appreciate how recruitment works there. That is to say, if a private firm wants a public servant, it will simply pay what’s necessary to get her, a tactic with which the public service cannot compete.
So in preparing legislation to reduce secretary remuneration, Senator Lambie can put the weightless objections of the visionary Dr McKay to one side.
The Senator says that current secretary salaries “don’t pass the pub test”. Yet this test, even in the pubs in her Tasmanian electorate of which this writer has a reasonable working appreciation, might not be the soundest basis on which to move.
First, a little history.
The present levels of secretary pay are the consequence of an idiotic decision of the Remuneration Tribunal 10 to 15 years ago that benchmarked these salaries to private sector rates two or three levels below CEOs in a range of significant companies. This was sheer madness that showed no regard for proper remuneration policy for these officers.
The fact is that secretary positions are overwhelmingly filled from within the public sector, usually from within the Australian Public Service. Those appointed typically serve on until they retire or, these days, are sacked. That is to say, they are not a part of the private sector CEO market and their pay should not be related to it.
Secretary pay should primarily be set on the basis of appropriate intervals with rates paid to their subordinates. Before the Remuneration Tribunal stuffed it, that’s what was done. And it worked.
There’s more bad news.
The Remuneration Tribunal decision many years ago created a large interval between secretary and SES. That vacuum was abhorred and SES remuneration has been pulled up to fill it. Thus, in some instances, the maximum total remuneration for staff at the SES 3 and SES 2 levels, as reported last year by the Public Service Commission is $ 1,477,729 and $1,399,669. In one instance, an SES3 officer got a performance bonus of $700,012. That is to say, some subordinate staff are now getting paid more than their secretaries, although the great majority do not appear to be.
Thus, if secretary salaries are to be based on an extrapolation of subordinate pay, SES remuneration needs significant evening up. How on earth can it be sensible in any terms, for example, for an SES1 to have a total remuneration of $527,851 when another officer at the SES3 level is getting $390,672, as is now the case?
But fixing up the remuneration for the SES would be a long and painful labour, so in the meantime Senator Lambie might consider proposing secretary pay on the basis of a reasonable gap between them and the average of that for SES3s.
As it happens, the median base salary for an SES3 in 2023 was $394,784. If a $70,000 premium on that for secretaries would be reasonable, then bingo. Senator Lambie’s proposals to put them around the salary of the Treasurer is close to the mark.
Who said the Tasmanian north west coast pub test might be unreliable? Remember that Jacqui and Sir Roland Wilson, one of the greatest Commonwealth public servants, both are from Ulverstone (Tas).
Paddy Gourley is a superannuated Commonwealth public servant.