Government faces $3m payout to dumped secretaries

As work begins on implementing the biggest shake up to the public service in more than three decades, one of the immediate costs of the exercise will be to compensate the five axed public service leaders.

Four of the department secretaries - Kerri Hartland, Renee Leon, Mike Mrdak and Heather Smith - were just over two years into their five-year appointments when Mr Morrison announced their dismissal.

The fifth, Daryl Quinlivan, had been Agriculture Department secretary for more than four years, having been appointed to the position in June 2015.

In announcing their removal, Mr Morrison paid tribute to the departing secretaries.

"Each of these senior officials have served their country with dedication, commitment and a deep sense of public service over many years," the prime minister said.

"Their advice, achievements and leadership have been valued by governments past and present."

Remuneration Tribunal documents show that Ms Leon and Dr Smith were classified as Level 1 department secretaries, entitling them to remuneration packages worth between $775,910 and $864,580 a year.

Mr Mrdak, Ms Hartland and Mr Quinlivan were classified as Level 2, and were paid somewhere between $720,480 and $775,910 a year.

Under Remuneration Tribunal rules, secretaries put out of a job because of the abolition of their department or the decision of the prime minster are entitled to a payout.

Those who have more than 12 months yet to run on their appointment, like Dr Smith, Ms Hartland, Mr Mrdak and Ms Leon, are due termination pay equivalent to 12 months' income.

Because Mr Quinlivan had less than a year to run on his position his payout will be the equivalent of six months' salary.

The total bill for the government, not including any superannuation entitlements the secretaries have accumulated over their long public service careers, is likely to be more than $3.3 million, and could reach close to $3.7 million.

Executive remuneration consultant Terry McGuirk said the termination entitlements of the department secretaries were broadly in line with those in the private sector.

Mr McGuirk, who is director of McGuirk Management Consultants, said tenured executives who lost their position as a result of factors beyond their control were usually entitled to a week's pay for every year of service, up to a limit of 12 months.

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Conditions for executives on contracts were more variable, but generally termination payment for those on a five-year contract would be 12 months' salary, he said.

The five department secretaries lost their positions as part of the government's move to cut the number of departments from 18 to 14.

The consolidation, to take effect on February 1 next year, will lead to the creation of four mega-ministries - Education, Skills and Employment; Agriculture, Water and the Environment; Industry, Science, Energy and Resources; and Infrastructure, Transport, Regional Development and Communications. Services Australia will become an agency within the Social Services Department.

Despite the shake up, there will be no change to ministerial portfolios, meaning some departments will be serving up to four ministers.

Mr Morrison said the changes would "break down the silos" and were not driven by cost-cutting.

"This has not been done as a savings measure. This is about getting better services on the ground," he said.