On 30 August 2012 the State Sector and Public Finance Reform Bill was introduced into the House. The Bill has a number of significant implications for employees in the state sector, some of which are outlined in this newsletter.

The changes discussed here relate to:

  • facilitating the role of Ministerial advisors;
  • providing greater control over appointments to key positions in the sector;
  • setting Government workforce policies to apply to the sector as a whole;
  • limiting the payment of redundancy where an employee is offered an alternative position; and
  • facilitating the transfer of chief executives within the sector where there is a vacancy.

Why make changes?

The Government established the Better Public Services Advisory Group in May 2011 to provide advice on state sector reform. In its report, the Advisory Group stated that change was needed to:

  • manage state agencies so that they function as a system that is focused on results that will have the biggest impact on New Zealanders' lives, rather than operating as individual agencies in pursuit of their own singular objectives;
  • clarify and strengthen leadership and reduce "the clutter of decision points"; and
  • move to a culture where leaders and workers are motivated to "continuously innovate and improve".

The amendments contained in the Bill are part of the Government's response to the Advisory Group's recommendations around state sector reforms. They include proposed amendments to the State Sector Act 1988, the Public Finance Act 1989 and the Crown Entities Act 2004 and demonstrate this Government's intention to make changes to the sector as a whole.

What are the major changes?

The proposed amendments to the State Sector Act 1988 include a number of changes relating to employment in the state sector. Some of the key changes are:

Introduction of some new concepts

The Bill includes a new defined term: "ministerial staff". This is defined to mean employees of a department who are employed on events based employment agreements to work directly for a Minister rather than in that department. If a particular event occurs, these employees can then be terminated. The Bill states that a Minister no longer holding a Ministerial portfolio is an example of the kind of event that might give rise to termination.

In relation to this special class of fixed term employment, the Bill provides that:

  • Various sections of the Act do not apply to ministerial staff. These include the obligations to appoint on merit (section 60), notify vacancies (section 61) and to notify and review appointments (sections 64 and 65).
  • When taking any steps in relation to a Ministerial employee, the Chief Executive of the relevant department must have regard to the wishes of the relevant Minister.
  • The duty of a chief executive to act independently in relation to decisions on individual employees is expressly subject to the requirement to have regard to the wishes of the Minister in relation to ministerial staff.

The Bill also introduces the concept of a "key position". The State Services Commissioner (the Commissioner) can designate a position in a department or departmental agency (also a new concept introduced in the Bill) as a key position on the basis that the position is critical to the public service or because of its potential to develop senior leaders. A list of such positions is to be maintained by the Commissioner and available online.

Once a position has been designated as a "key position" employees can only be appointed to it with the Commissioner's agreement. This concept replaces the general provisions in the current Act regarding the development of senior leaders and managers in the Public Service.

Introduction of Government workforce policy

The Bill also includes a whole subpart regarding "Government workforce policy" and the Commissioner is given new functions regarding the drafting and application of this policy.

In summary:

  • Government workforce policy is to relate to workforce matters "from a State sector system perspective". "Workforce matters" is defined to include both employment and workplace matters. The policy can address issues such as principles relating to pay and conditions, and the development of workforce strategy. The policy does not, however, override existing employment and other legal obligations.
  • The Commissioner is to draft the policy and, after consultation with affected agencies, it is to be submitted to the Minister for consideration.
  • On the recommendation of the Minister, the policy can be approved by Order in Council as a Government Workforce Policy Order.
  • Government Workforce Policy Orders can apply to any or all of Government departments, Crown agencies and autonomous Crown entities and must be given effect to (in the case of departments and Crown agents) or had regard to (in the case of autonomous Crown entities).

The Bill as currently drafted is unclear regarding the interplay between the duty of chief executives to act independently and the application of a Government Workforce Policy Order; the proposed section 33(3) states that the independence provided in subsection (1) does not prevent a chief executive from giving effect to a Government Workforce Policy Order, and the proposed section 55(1) states that a Government Workforce Policy Order does not override the independence provided in section 33. This is a matter to which some further thought should be given before any legislation is enacted.

Changes to the provisions relating to restructuring in the state sector

The existing provisions regarding restructuring in the sector are also the subject of proposed amendments. The current provisions are discussed in our newsletter regarding restructuring in the public sector dated 16 February 2012.

The key changes are as follows:

  • Under the current Act there are several provisions which apply only if there is an Order in Council to that effect. The proposed amendments remove the need for an Order in Council and the relevant provisions will apply to all employees who are affected by a transfer of functions between Departments.
  • The Bill also makes changes to the provisions regarding redundancy payments where an employee is offered another position within the sector. In particular, an employee will not be entitled to a redundancy payment where, before his or her employment has ended, he or she:
    • is offered and accepts another position in the State services, which is widely defined to include departments, Crown entities and Crown companies; or
    • is offered an alternative position in the State services that has comparable duties and responsibilities to the current position, is in substantially the same general locality or a locality within reasonable commuting distance, is on terms and conditions of employment that are no less favourable overall, and is treated as if it were continuous service.

These proposed amendments contain more explicit directions than the current Act on how it will be determined whether an alternative position is sufficiently similar to the previous one such that there is no technical redundancy and therefore no requirement to pay redundancy compensation.

As is the case in the current Act, the obligations to appoint on merit (section 60), notify the vacancy (section 61) and review the appointment if there is a complaint from another employee (section 65) do not apply to the offer of an alternative position.

Transfer of chief executives

Finally, in an indication of the sector wide approach that these proposed amendments encapsulate, chief executives of departments or departmental agencies can be transferred into a chief executive role in another department or departmental agency where there is a vacancy or an impending vacancy, if the Commissioner believes that such a transfer would be in the public interest. This requires the chief executive's agreement and the appropriate Minister must be consulted. Where this applies, the vacancy does not need to be notified and no other applicants need to be considered for the position.

Impact of the proposed changes

Although the proposed changes are made in the context of sector wide reforms, each one is fairly discrete and they appear to be targeted at specific issues which have arisen under the current legislation.

The one exception to this is the proposal to introduce Government workforce policy. This is related to work which the State Services Commission has done around workforce strategy in order to meet Cabinet's expectation that all agencies will produce an "organisational development plan" to accompany and support Four Year Budget Plans. The Commission issued guidance on workforce strategies in October 2011 and noted that if agencies were to deliver their business strategies within decreasing baselines: "incremental change to 'business as usual' is not likely to be sufficient – transformational change is needed."

The introduction of Government workforce policy does emphasise this Government's desire to make sector wide changes, although whether this, together with the other proposed amendments in the Bill, will amount to transformational change remains to be seen.

Where to from here?

The Bill was introduced into the House on 30 August 2012 and is currently awaiting its first reading. At this stage it is a fairly long way down the Order Paper. Following its first reading, it will be sent to a Select Committee.