The Finance and Expenditure Committee released its report on the State Sector and Public Finance Reform Bill on 23 May 2013. The bill is substantial. It contains proposed amendments to three Acts and addresses a range of matters in order to implement aspects of the government's Better Public Services programme, including in relation to employment. Those amendments were discussed in our newsletter entitled "Proposed Amendments to Law Governing Employment in the State Sector" dated September 2012.

Having reviewed the bill and considered the 1,349 submissions from interested groups and individuals, the Select Committee has issued a detailed report in which it recommends that a number of changes be made to the bill. Many of these changes relate to the proposed amendments affecting employment in the state sector. This newsletter outlines some of the Committee's key recommendations in this area.


The bill includes some changes to the provisions which address redundancy payments for employees who are made redundant but are offered another position in the sector. The Select Committee report states that it is generally accepted that public servants should not be entitled to compensation in cases of technical redundancy.

The State Sector Act 1988 deals with restructuring in two parts of the Act (sections 30A to 30L which deal with reorganisation in the public service, and sections 61A and 61B which deal with the power to transfer employees); however, the bill addresses all restructuring issues in one place. In relation to these proposed changes, the Select Committee report states: "This aspect of the bill provoked most concern and we have examined it at length".

The Committee has recommended some changes to this part of the bill:

  • The Committee has recommended the inclusion of a transitional provision so that the existing law regarding the entitlement to redundancy payments will continue to apply for three years after the legislation is enacted. This is on the basis that it will avoid any retrospective application of the new provisions to individual or collective agreements which have already been negotiated. It will also allow for current agreements to be renewed or renegotiated during that period.

  • Section 61A as amended by the bill provides that a public service employee who has received a notice of redundancy is not entitled to a redundancy payment if, before the employee's employment has ended, the employee either:

    • is offered and accepts another position in the State services (either in the employee's current department or elsewhere in the State services); or

    • is offered an alternative position in the State services (either in the employee's current department or elsewhere in the State services).

  • The State Sector Act uses the test of "equivalent employment" rather than "alternative position" for determining whether any redundancy payment should be made in the case of sector reorganisations. The Select Committee report states that the Committee has examined the implications of this new "alternative position" test carefully, and has explored other ways in which the test could be formulated. Having done this, the Committee has recommended two changes to the test, namely:

    • removal of the word "overall" from the phrase "terms and conditions ... that are no less favourable overall" on the basis that it adds nothing; and

    • inclusion of a requirement that the new position "begins before, on, or immediately after the date on which the employee's current employment ends".

  • In addition to these specific changes to the test, the Committee has recommended that the bill set out the full requirements in relation to both employees who are offered and accept another position in the State services, and employees who are offered an alternative position. Most of the requirements are the same for both but the "alternative position" test also includes:

    • is a position with comparable duties and responsibilities to those of the employee's current position; and

    • is in substantially the same general locality or a locality within reasonable commuting distance.

In relation to these changes the report states:

We note that ultimately, as in all employment matters, the interpretation of an alternative position would be one for employers and employees to discuss in good faith, case by case, taking into account the circumstances of the individual employee, and employing mechanisms under the Employment Relations Act 2000 to manage any dispute.

Accordingly, the Committee acknowledges that while the intent of the amendments is clear, the extent to which these provisions, if and when enacted, have a practical impact remains to be seen.

Both the Labour and Green members of the Committee have addressed this aspect of the bill in minority view statements included in the Select Committee's report. The New Zealand Labour Party minority view states that while they will be supporting the bill overall, they do so with significant reservations. In particular, they express concern that restricting redundancy payments where employees are offered an alternative position would remove existing rights contained in collective agreements "and would ignore the fact that the State Sector Act established agencies as separate organisations".

The Green Party of Aotearoa/New Zealand minority view states that they cannot support the bill in the absence of provisions which retain and strengthen transfer mechanisms for staff. They consider that changing the test for technical redundancies from "equivalent employment" to the offer of a job that has "terms and conditions no less favourable" removes 25 years of legal interpretation and that the new provisions relating to redundancy "will have a chilling effect on career progress throughout the public sector".

This aspect of the bill therefore remains contentious.

Government workforce policy

Another aspect of the bill which has received attention from the Committee is the introduction of Government workforce policy. The Committee has recommended a number of changes in this area:

  • The bill as introduced provided for Government Workforce Policy Orders to be approved by Order in Council. The Committee has recommended that these be renamed "Government Workforce Policy Statements" and that they be published on an internet site maintained by or on behalf of the State Services Commissioner, rather than having the force of Orders in Council, so that they are disseminated without implying that they have the force of regulations.

  • The legislation should contain a clear statement of the purpose of Government workforce policy. The Committee considered whether this should include a reference to "fairness" but decided against that on the basis that the terms were intended to be impartial objectives. The Committee has therefore recommended the following wording:

Government workforce policy must relate to workforce (including employment and workplace) matters for the purpose of fostering a consistent, efficient and effective approach to such matters across the State sector.

Workforce matters may, without limitation, address (in relation to the affected agency or agencies) –

  1. the Government's expectations about the negotiation of collective agreements and individual employment agreements in the State Services (being expectations that do not determine pay or conditions); and
  2. the development of workforce strategy.
  • The Committee has also recommended that, in addition to consulting with affected agencies regarding the draft Government workforce policy, the State Services Commissioner should consult with "any other parties that the Commissioner considers appropriate".

  • The bill as introduced lacked clarity regarding the interplay between the duty of chief executives to act independently and the application of a

    Government Workforce Policy Order. The Committee has recommended that the references to the independence of chief executives be removed on the basis that they are unnecessary; Government Workforce Policy Statements will concern the Government's overarching policy position regarding the State services and individual employment decisions will remain the responsibility of chief executives.

Next steps

As outlined in our September 2012 newsletter, the amendments contained in the bill are part of the Government's response to the Better Public Services Advisory Group's recommendations. The Government is continuing to demonstrate its clear intention to make sector wide changes. Significantly, the Labour Party has confirmed that it supports "the general policy intent to reduce or remove barriers to closer co-operation and alignment of agencies within the State sector". Change in this area is, therefore, inevitable.

However, the changes impacting on employees in the sector have received close attention from the full Select Committee and the recommendation to delay any amendment to the redundancy provisions for three years from enactment is a significant change from the bill as introduced.

The bill is now awaiting its second reading.