Paddy Gourley | Public Sector Informant: APS pay reform will be long and difficult, but worthwhile

In the history of Australian public services it's hard to recall anything so crazy, even in the pits of the "Mad Tom" Davey regime in Tasmania (1813-1817) or the so-called Rum Corps administration in NSW (circa 1793-1810).

The policy has debauched service-wide classification, damaged the promotion and transfer system, made machinery of government changes more fraught and divorced remuneration fixing from the labour market so making recruitment more problematic.

It has caused gross inefficiencies and, while the evidence is difficult to assess, it has almost certainly reduced productivity. It's no wonder some departments are now griping about not being able to obtain sufficient staff.

The Keating government started the rot introducing departmental/agency bargaining based, in theory, on internal productivity gains. To its credit after a couple of rounds it ditched it.

Then the Howard government brought it back and for 30 years it has stuck to the boot of personnel management like a dreadful dog dropping. No government has had the wit or the will to do anything about it and there's no evidence the unaccountable Secretaries Board, with its legal responsibilities for "stewardship" and hog-tied by its built-in ineptitude, has given the policy excrescence any consideration.

But at last, the Public Service Minister, Katy Gallagher, has grasped the nettle, as it were, saying in October last year that she wants to "reduce fragmentation" in pay and conditions and get on with "genuine service wide negotiations on pay and common conditions."

How can that be done?

To begin, the variations on policy of the past 30 years must be anathematised and never permitted to return. Linking improvements in remuneration to internal productivity is nonsense. It creates incentives for the preservation and manufacture of restrictive work practices and causes agonies of negotiation because productivity in departments can't be measured.

And linking public service pay to movements in a private sector wage index, as the Morrison government did in its dying days, is ridiculous. Public service pay should be based on levels of remuneration in outside labour markets for comparable work not generalised movements in indexes that do not reflect the structural composition of departments.

To assist Senator Gallagher those advising her must now turn to the Bible on public service remuneration policy, the report of the 1951-53 Priestley royal commission in the UK. As it is now three months since the Minister indicated her intentions, no doubt the PM&C Secretary, Glyn Davis, the Public Service Reform "Secretary", Gordon de Brouwer and the Public Service Commissioner, Peter Woolcott, have made themselves intimately familiar with this document.

Dr Davis especially as Sir Raymond Priestley, apart from having trudged the Antarctic with Scott, Mawson and Edgeworth David and being awarded a Military Cross for heroics on the Hindenburg Line in WWI, was, like Davis, a former vice-chancellor of Melbourne University.

Having, it is to be hoped, conscientiously looked to their stewardship duties, Davis, de Brouwer and Woolcott will have seen that Priestley says "the primary principle of civil service pay is fair comparison with current remuneration of outside staffs employed on broadly comparable work, taking into account differences in other conditions of service."

The three amigos will further have seen that Priestley also recommended internal relativities as a secondary pay principle, that is to say, while pay comparisons concentrate on outside rates at recruitment levels upper pay grades should be developed to match work levels and meet the requirements of the promotion system.

Where there are no satisfactory outside comparisons, Priestley says pay should be fixed on the basis of comparisons with "grades or classes within the service whose work, although not truly comparable, is conventionally regarded as being of roughly similar status".

Acceptance of the fundamental principle of market comparisons as a basis for pay fixing implies, of course, centralised bargaining for the public service as a whole as it would be absurd for the separate 100 agencies all to be measuring outside markets and negotiating for what should be identical results. As Senator Gallagher has said, the government wants "fragmentation" reduced via "genuine service-wide negotiations".

An important first step will be to ensure that occupational categories in the APS are clearly defined for pay comparisons. This may require adjustments to existing classification structures, work which will not be helped by last year's classification review, a useless relic of the Morrison era.

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The real fun will begin with negotiations on the market comparisons. While these will have the advantage of being based on observable facts, outcomes will need to take into account the present dispersion in pay rates across departments. So the reduction in fragmentation will require those on lower levels of pay to get bigger pay increases than those on higher ones. While those on higher rates will have the comfort of the advantage they've enjoyed, they may be edgy about losing it and seeing those on lower levels closing the gaps.

Here the New Testament yarn about the labourers in the vineyard getting paid at the same daily rate regardless of when they began their work may be a useful balm, its industrial relations unorthodoxy notwithstanding.

Of all the things Senator Gallagher wants to do to make the public service better, fixing up its pay and conditions will likely be the most difficult, time-consuming and attenuated. It will require fortitude, patience and understanding from all parties, especially staff and their unions, and a clear-eyed concentration of the Priestley policy. The consolation is that the effort will be worth it as it is overwhelmingly in the public interest and the interests of governments, departments and their staff. It's the unavoidable price of 30 years of policy madness.

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