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Cabinet Office Circulars

CO (06) 08

6 November 2006

Enquiries:

E/mail: fees@ssc.govt.nz

Felicity Caird, SSC, ph 495 6645

Maryanne Hansen, IRD, ph 890 3024

Fleur Gaston, Cabinet Office, ph 471 9637

All Ministers
All Chief Executives

Copies to:
All Senior Private Secretaries
All Private Secretaries


Fees Framework for Members of Statutory and Other Bodies Appointed by the Crown


  1. Cabinet has recently approved a modified framework for determining or reassessing the fees paid to members of statutory and other bodies in which the Crown has an interest [APH Min (06) 12/3 and CAB Min (06) 38/2].

  2. This circular, and the attached framework, replaces Cabinet Office Circular CO (03) 4. The modified framework covers all statutory bodies, non-statutory bodies and committees in which the Crown has an interest, that are outside the Remuneration Authority’s or other fee setting bodies’ jurisdiction. Such bodies comprise most Crown entities (including Crown Agents, Autonomous Crown Entities [ACEs] and tertiary education institutions), trust boards, advisory bodies and committees, Royal Commissions and Commissions of Inquiry, statutory tribunals, individuals appointed as statutory bodies that are not covered by the Remuneration Authority and some subsidiary bodies. [See paragraphs 10-16 of the attached summary for details on coverage and exclusions].

  3. The purpose of the framework is to provide a basis for judgement in setting fees that will:

    • ensure a consistent approach to remuneration across all statutory and other Crown bodies;

    • contain expenditure of public funds within reasonable limits; and

    • provide flexibility within clear criteria.

  4. This circular describes the main features of the modified framework and the roles of the key parties in implementing it. Advice about classifying bodies, the fee scales and some administrative guidance is contained in the annexes.

  5. The main changes to the previous framework are:

    • confirmation that the review of the framework is not of itself a reason to increase actual fees, but that actual fees should be reviewed at regular, reasonable intervals (e.g. after a review of the framework, or when appointments/reappointments are pending). There is no obligation to automatically increase the fee as a result of the review;

    • confirmation that increases to actual fees need to be justified in terms of the framework requirements that recruitment and retention problems exist, or the current fee levels do not adequately reflect levels of responsibility;

    • confirmation that fees increases for existing bodies need to be modest;

    • greater scope to recognise the management of very large investments on behalf of the Crown;

    • updating amendments to reflect the Crown Entities Act 2004;

    • a clearer recognition of the range of bodies covered under Group 2 "Statutory Tribunals" (now "Statutory Tribunals and Authorities");

    • reference to Cabinet Office Circular CO (02) 5 Appointment of Public Servants to Statutory Boards;

    • the addition of rates published by a reputable independent New Zealand source (e.g. the New Zealand Automobile Association Inc mileage rates) as an option for the reimbursement of motor vehicle expenses where the rates of the servicing departments do not apply;

    • recognition that consultation should take place on a case-by-case basis about fees when Trans-Tasman bodies are established;

    • further clarification from the Inland Revenue Department about taxation;

    • technical refinements to enhance interpretation and application.

  6. Ministers and chief executives are asked to ensure that all staff involved in appointments to bodies covered by the framework are familiar with the requirements of this circular. It should be read in conjunction with Chapter 6 of the Cabinet Office Step By Step Guide: Cabinet and Cabinet Committee Processes, the State Services Commission Board Appointment and Induction Guidelines, and with Cabinet Office Circular CO (99) 12 "Guidance for Members of Statutory, Commercial and other Bodies Appointed by the Crown".

  7. The framework provides guidance on the classification and remuneration of statutory and other Crown bodies. Since the framework covers a vast and varied array of bodies, it is not intended to be prescriptive and judgement will be required to determine best fit.

  8. For advice on the interpretation and application of the framework, please contact the State Services Commission (State Sector Remuneration and Fees Team) at phone (04) 495 6740, fax (04) 495 6691 or email to: fees@ssc.govt.nz.

Secretary of the Cabinet

Contents

Annexes

Website reference

This circular can be found on the Internet at: www.dpmc.govt.nz/cabinet/circulars/index.html and also at www.ssc.govt.nz.

FEES FRAMEWORK FOR MEMBERS OF STATUTORY AND OTHER BODIES APPOINTED BY THE CROWN

Summary

  1. The significant changes to the previous framework are:

    • confirmation that the review of the framework is not of itself a reason to increase actual fees, but that actual fees should be reviewed at regular, reasonable intervals (e.g. after a review of the framework, or when appointments/reappointments are pending). There is no obligation to automatically increase the fee as a result of the review;

    • confirmation that increases to actual fees need to be justified in terms of the framework requirements that recruitment and retention problems exist, or the current fee levels do not adequately reflect levels of responsibility;

    • confirmation that fees increases for existing bodies need to be modest;

    • greater scope to recognise the management of very large investments on behalf of the Crown;

    • updating amendments to reflect the Crown Entities Act 2004;

    • a clearer recognition of the range of bodies covered under Group 2 "Statutory Tribunals" (now "Statutory Tribunals and Authorities");

    • reference to Cabinet Office Circular CO (02) 5 Appointment of Public Servants to Statutory Boards;

    • the addition of rates published by a reputable independent New Zealand source (e.g. the New Zealand Automobile Association Inc mileage rates) as an option for the reimbursement of motor vehicle expenses where the rates of the servicing departments do not apply;

    • recognition that consultation should take place on a case-by-case basis about fees when Trans-Tasman bodies are established;

    • further clarification from the Inland Revenue Department about taxation;

    • technical refinements to enhance interpretation and application.

  2. The implementation of this modified framework does not justify increases to existing fees. Changes to existing fee levels should be made by the fee-setting authority only if it is necessary to address recruitment and retention problems, or where the current fee levels do not adequately reflect levels of responsibility. Existing fees should be reviewed at regular, reasonable intervals (e.g. after a review of the framework, or when appointments/reappointments are pending). There is no obligation to automatically increase the fee as a result of the review. Changes also need to reflect the government’s expectation that increases in State sector remuneration will be modest.

  3. The framework is primarily used:

    • before an appointment is submitted to APH; or

    • when a new body or committee is being established; or

    • if there is a proposed significant change in board duties.

  4. The framework enables fees to be determined by Ministers and fee-setting authorities who are most familiar with the work of particular bodies.

  5. The purpose of the framework is to provide a basis for judgement in setting fees that will:

    • ensure a consistent approach to remuneration across all statutory and other Crown bodies;

    • contain expenditure of public funds within reasonable limits; and

    • provide flexibility within clear criteria.

  6. A summary of bodies covered and not covered by the framework is outlined below:

    Type of Bodies Covered by the Framework Type of Bodies Not Covered by the Framework
    All statutory bodies, non-statutory bodies and committees in which the Crown has an interest:
    • Those Crown entities whose fees and allowances are specifically exempted through legislation;

    • Crown bodies with fees set by the Remuneration Authority;

    • School Boards of Trustees;

    • Individual consultancies;

    • Local authorities (where fees are set using a separate mechanism);

    • Crown entity companies (including Crown Research Institutes) and their subsidiaries;

    • State Owned Enterprises and their subsidiaries.
    • Most Crown entities including Crown Agents, ACEs and Tertiary Education Institutions;

    • Trust boards;

    • Bodies and committees set up to advise Ministers, departments (including Ministerial inquiries and taskforces and some Crown entities);

    • Royal Commissions and Commissions of Inquiry;

    • Statutory Tribunals and Authorities;

    • Individuals appointed as statutory bodies that are not covered by Remuneration Authority;

    • Subsidiary bodies of statutory entities.


  7. The process (see diagram at Annex 1) for the classification and remuneration of bodies covered by the framework includes:

    Step 1 Determine whether the body is covered by the framework (refer to section on "Coverage" paragraphs 10-16).
    Step 2 Determine the classification of the body (refer to Annex 2).
    Step 3 Determine the appropriate level of fees that apply to the classification with regard to factors outlined in the section "Factors to be Considered in Setting Fees" (paragraphs 26-30) and Annex 3.
    Step 4 The fee-setting authority approves the fees within the framework unless an exception is sought.
    Step 5 If an exception to the framework is sought, prior consultation with the Minister of State Services by the fee-setting authority (usually the Responsible Minister), is required. Where a proposed exception is minor, or technical, the Responsible Minister and Minister of State Services may agree upon it. Where an exception is more substantial, the Responsible Minister and Minister of State Services will refer the proposal for consideration by APH and Cabinet. For exceptions for departmental bodies or committees the department consults the Responsible Minister and the Minister of State Services. For exceptions for subsidiary bodies of statutory entities, the parent entity consults the Responsible Minister and the Minister of State Services (with advice from the State Services Commission). Refer to section on "Operating Outside the Parameters" (paragraphs 47-52) and the process for setting fees outlined in Annex 1.


The Structure of the Fees Framework

  1. The fees framework enables fees to be determined by Ministers and fee-setting authorities who are most familiar with the work of particular bodies. It provides for:

    • responsibility for setting fees for statutory and other Crown bodies, within clearly defined parameters, to rest with Responsible Ministers or another fee-setting authority;

    • a system for the classification of bodies for fee-setting purposes (Annex 2);

    • a range of fee levels for each category of body (Annex 3);

    • an outline of administrative principles to be followed in applying the framework (Annex 4); and

    • monitoring of fee levels for consistency of decision-making both within and between departments, and for ensuring the collective interest is being upheld.

  2. The following diagram outlines the structure of the fees framework:

    Structure of the fees framework

Coverage by the Framework

Bodies Covered by the Framework

  1. The framework should be used for setting fees for all statutory or other bodies and committees in which the Crown has an interest, and in particular for bodies with Responsible Ministers, that are outside the Remuneration Authority’s or other fee setting bodies’ jurisdiction (subject to paragraph 15 and 16). That includes Crown Agents, ACEs, Tertiary Education Institutions and some subsidiary bodies, trust boards, statutory tribunals and authorities, advisory bodies and committees set up to advise Ministers and departments. It also applies to appointments of individuals as statutory bodies or to other advisory posts, including tribunals and lay members of courts. Consultation with the Minister of State Services should take place on a case-by-case basis about fees when Trans-Tasman bodies are established.

  2. Establishment by statute is not the only criterion for coverage by the framework, nor is it a necessary requirement that there be a Responsible Minister. It should also be noted that the framework covers bodies which are self-funded where a Responsible Minister appoints the members. The Minister should apply the framework in circumstances where the board has the responsibility for setting fees and the Minister approves them.

Exclusions

Consultancies
  1. The framework does not cover individual consultancies that would fall outside any of the categories listed in Annex 2. Individual consultancies involve contractors employed by a government department or Minister under a contract for services for a specific project within a specified timeframe. A consultant is not a member of a statutory body that engages him or her, and has no ownership or governance role.

  2. In general, the distinction between a consultancy and a body covered by the Fees Framework will be clear. It is possible, however, that in some cases there may be a judgement involved between using a consultancy on the one hand, or using a body referred to under Annex 2, Group 4 (All Other Committees and Bodies), notably an advisory committee.

  3. Where departments are unclear about whether an advisory committee or other Group 4 body would be more appropriate than a consultancy, particularly in cases of high public profile, they are advised to refer the issue to the Responsible Minister and Minister of State Services. Where a Group 4 body is appointed, its remuneration would be set under the fees framework.

Other Exclusions
  1. The framework is not used for bodies where the fees are set by the Remuneration Authority; or for School Boards of Trustees, or local authorities, where the fees are set using a separate mechanism.

  2. Fees for directors of Crown entity companies and State Owned Enterprises, are subject to separate guidance from the Crown Company Monitoring Advisory Unit.

Who Sets the Fees

  1. Responsible Ministers, operating in the collective context of APH and Cabinet, set fees within the framework. They also approve exceptions (see "Operating Outside the Parameters of the Framework"), subject to prior consultation with the Minister of State Services and consideration in some cases by APH and Cabinet. The process for consultation on exceptions is outlined in Annex 1.

  2. For Tertiary Education Institutions, the Responsible Minister sets the maximum fee for each institution or group of institutions within the range that applies to the classification. The individual institutions then set the fees for their Council members up to the Minister’s prescribed limit.

  3. For members of subsidiary bodies of statutory entities, (i.e. of Crown Agents, ACEs, Independent Crown Entities [ICEs]) the board of the parent entity sets the fees within the framework. Exceptions to the framework for subsidiary bodies require prior consultation with the parent entity’s Responsible Minister, and the Minister of State Services (with advice from the State Services Commission).

  4. The default process for bodies for which there is no Responsible Minister under legislation (e.g. some trusts or bodies where departments set fees) is that the fee-setting authority should apply the framework in order to determine the fee. If the proposed fee is outside the parameters of the framework, the authority needs to obtain the agreement of the Minister of State Services.

  5. For those bodies covered by the Fees and Travelling Allowances Act 1951, the Minister of State Services has delegated responsibility for setting fees within this framework to Ministers responsible for the particular appointments. If the proposed fee is outside the parameters of the framework, the agreement of the Minister of State Services is required, and the matter may need to be considered by APH and Cabinet.

Classification of Bodies

  1. The system provides for the classification of bodies (see Annex 2) into one of the following groups:

    • Royal Commissions and Commissions of Inquiry (Group 1);

    • Statutory Tribunals and 2Authorities (Group 2);

    • Management Boards (Group 3):

      • General Management Boards (Group 3a)

      • District Health Boards (Group 3b)

      • Tertiary Education Institution Councils (Group 3c)

      • Subsidiary bodies of statutory entities (i.e. of Crown Agents, ACEs, ICEs) (Group 3d)

    • All other committees and other bodies (Group 4);

  2. The process for classifying and remunerating bodies covered by the framework includes:

    Step 1 Determine whether the body is covered by the framework (refer to section on "Coverage by the Framework").
    Step 2 Determine the classification of the body (refer to Annex 2).
    Step 3 Determine the appropriate level of fees that apply to the classification with regard to factors outlined in the section "Factors to be Considered in Setting Fees" and Annex 3.
    Step 4 The fee setting authority approves the fees within the framework unless an exception is sought.
    Step 5 If an exception to the framework is sought, prior consultation with the Minister of State Services by the fee-setting authority (usually the Responsible Minister) is required. Where a proposed exception is minor, or technical, the Responsible Minister and Minister of State Services may agree upon it. Where an exception is more substantial, the Responsible Minister and Minister of State Services will refer the proposal for consideration by APH and Cabinet. For exceptions for departmental bodies or committees the department consults with the Responsible Minister and the Minister of State Services. For exceptions for subsidiary bodies of statutory entities, the parent entity consults the Responsible Minister and the Minister of State Services (with advice from the State Services Commission). Refer to section on "Operating Outside the Parameters of the Framework" and the process for setting fees outlined in Annex 1.


Fee Scales

  1. Cabinet has agreed to a schedule of fees for all categories that reflects the nature of their business environment and the factors noted below.

  2. Once a decision has been made on which category (and level) the organisation best fits into, a decision is required on what amount, within the ranges provided, is most appropriate. The Annexes provide information on how to make these decisions.

Factors to be Considered in Setting Fees

  1. Ministers, departments or other fee setting authorities should ensure that fees reflect:

    • the complexity of the functions and the expertise required;

    • recruitment and retention issues;

    • the extent to which an individual member needs to insure against personal liability;

    • the potential risk to reputation;

    • the degree to which the role is in the public eye;

    • affordability;

    balanced by an element of public service and community commitment, the personal contribution and recognition of the intangible benefits to the member.

  2. Fees will continue to be set on a fair but conservative basis to reflect a discount for the element of public service involved.

  3. Where the fee is paid as an annual rate, it should also reflect the time involved.

  4. Members occupying identical positions on the same body should be paid the same fee rate. The fee rate is varied only to reflect additional responsibility such as chairpersons (and deputies and the chair of a substantial sub-committee where appropriate) who may receive an extra margin for additional responsibilities that go with the role.

  5. To secure people with scarce specialist skills a higher fee may be necessary. Such a situation is treated as an exception to the framework that requires prior consultation with the Minister of State Services by the fee-setting authority (usually the Responsible Minister) and may require consideration by APH and Cabinet. An exception for a departmental body or committee requires prior consultation with the Responsible Minister and the Minister of State Services. An exception for a subsidiary body of a statutory entity requires prior consultation with the parent entity’s Responsible Minister and the Minister of State Services (with advice from the State Services Commission). Refer to Annex 1 on the process for seeking exceptions.

Reviewing Existing Fee Levels

  1. Fee setting authorities should review fees at regular, reasonable intervals, such as after a review of the framework or when an appointment or reappointment is pending. There is not obligation to automatically increase the fee as a result of the review.

  2. The implementation of this modified framework does not of itself justify increases to existing fee levels.

  3. Changes to existing fee levels should be made only if it is necessary to address recruitment and retention problems, or where the current fee levels do not adequately reflect levels of responsibility. Increases in fee levels for existing bodies should be justified in terms of the fees framework. Ministers’ general expectation is that such increases should be modest. This may mean, for example, that increases to reflect levels of responsibility are done incrementally (rather than in one step). Where a proposed increase is substantial, it should be referred to the Responsible Minister and Minister of State Services for consideration as an exception.

  4. Backdating of increases should also be avoided. For guidance in particular cases please consult the State Services Commission. Refer also to the section on "Grandparenting of Existing Fees", provided the circumstances for such fees are still valid.

Payment Basis: Annual or Daily Rate

  1. There are two approaches to expressing fee levels - annual rates, and daily rates. Any other variations are regarded as exceptions to the framework and require prior consultation at Ministerial level (refer to section on "Operating Outside the Parameters of the Framework").

Annual Rates

  1. For management boards, the fee is usually expressed as an annual rate. This is consistent with the approach taken in the private sector and is most appropriate where the workload is predictable and/or substantial.

  2. The annual fee is set on the following assumptions:

    • the work is such that the chair and members are required on a part-time basis1 ;

    • for General Management Boards, the time required to undertake all the work required is:

      • a member works around 30 days a year, which is in line with the amount of time spent by board directors in private sector companies; and
      • chairs have a higher workload than members, with the assumption that a chair works around 50 days per year. Therefore the fee for chairs is set at twice the rate of the members to take account of both the differences in responsibility and in workload.

    • for District Health Boards, the workload is around 60 days a year for members and 100 days a year for chairs;

    • for Tertiary Education Institutions, the workload is around 50 days a year for chairs (the time input for members varies considerably and a daily rate is therefore most appropriate);

    • the workload expectation covers all authorised work undertaken by members including subcommittee work. Further detail is provided in Annex 4. This excludes work for the three District Health Board statutory advisory committees established under Sections 34, 35, and 36 of the New Zealand Public Health and Disability Act 2000 (see Annex 3 for fees that apply to these three committees).

  1. For subsidiary bodies of statutory entities (i.e. of Crown Agents, ACEs, and ICEs), there is no time specified in the above list of assumptions for the work that is undertaken by members. Time is one of the factors to be considered by the parent entity when setting the fees.

  2. Where it is possible to predict the workload of bodies other than management boards, the annual fee should be calculated by multiplying the daily rate by the number of days that will be worked during the year. Proposals for an annual fee for a group 1, 2 or 4 body should be treated as a technical exception, and referred to the Responsible Minister and Minister of State Services. In making submissions to Ministers or reporting to the State Services Commission, it will be necessary to specify the annual fee if this has been agreed, and provide the daily rate on which the proposal is based, and the number of days that will be worked per annum.

Daily Rate

  1. For other bodies, fee levels are generally expressed as a daily rate, as this works best for those bodies that have an unpredictable workload. The daily rate is paid for all work undertaken by the members.

  2. For management boards that pay a daily rate due to an unpredictable workload, the maximum annual rate provided in the range that applies to the classification should not be exceeded unless an exception to the framework is sought.

  3. Further detail on the daily rates is covered in Annex 4.

Other Fee Payment Methods

  1. Other fee payment methods such as a base honorarium plus a fee for additional services, or Crown bodies setting their own fees from a total pool are regarded as exceptions to the framework. If such fee payment methods are proposed, refer to the section on "Operating Outside the Parameters of the Framework" and Annex 1.

Rates for Subcommittees

  1. A board may set up a sub-committee or sub-committees to carry out part of the board’s business.

  2. Board members who receive an annual fee for board membership do not receive any additional payment for membership of sub-committees. The only exception is that members of the three District Health Board statutory advisory committees established under Sections 34, 35, and 36 of the New Zealand Public Health and Disability Act 2000 receive an additional fee as provided for in Annex 3. Refer to paragraph 11 of Annex 4 for information about payment for sub-committee chairs.

  3. Board members who receive a daily fee for board activities can receive payment for additional days spent on sub-committee work. If the sub-committee has been set up to consider an issue and report to the board, then a lesser daily fee may be appropriate. Sub-committees must be properly constituted under the authorising legislation or terms of reference for the board before an attendance fee is paid.

Operating Outside the Parameters of the Framework

  1. Where Ministers, departments or other fee-setting authorities believe there is a case to operate outside the parameters of the framework set out in this circular, they should consult with the Minister of State Services (with advice from the State Services Commission). Where the Responsible Minister and the Minister of State Services agree that a proposed exception is:

    • minor, e.g. where an additional payment is indicated for specified additional work, or where the additional cost involved in an exception is small;

    or

    • technical, e.g. where a change from a daily payment to an annual fee is proposed because of predictability of workload;

    then the Responsible Minister and Minister may decide between them. Otherwise APH and Cabinet should consider proposed exceptions, after consultation with the Minister of State Services by the Responsible Minister.

  2. If the fee-setting authority is a statutory entity (i.e. Crown Agent, ACE or ICE) then it should consult its Responsible Minister and the Minister of State Services (with advice from the State Services Commission).

  3. Department or parent statutory entity advisers will benefit by contacting the State Services Commission prior to preparing papers for Ministers for advice on the consultation process and the necessary information required for a proposed exception.

  4. Operating outside the parameters of the framework includes situations where it is proposed to pay fees above the levels set in the fee scales, alternative methods for paying or setting fees are used (see paragraph 43), payments are sought for work in excess of the ordinary demands on body members, or it is proposed that additional payments be made to chairs of sub-committees (see paragraph 11, Annex 4).

  5. The details required in justifying an exception to the framework include the classification of the body, the existing fee levels (if applicable), the fee setting authority, and the reason for seeking an exception.

  6. The process for consultation on exceptions is outlined at Annex 1.

Fees Outside the Fee Scales

  1. A compelling case is required to support the payment of fees above the levels set in the fee scales. Justification should include evidence of an adequate selection process and consideration of potential candidates, difficulty in recruitment or retention, or particular skills and expertise that are required for a specific task. Further advice is available from the State Services Commission.

Grandparenting of Existing Fees

  1. Fees approved at a higher level than the fee scale of this framework may remain at current levels provided the basis for justifying the exception is still valid. A time limit should be set wherever possible when grandparenting occurs (e.g. a specified period or when positions are vacated). Departments or Ministers’ offices need to notify the State Services Commission about changes (e.g. extensions) to existing arrangements. If this situation occurs, departments or Ministers’ offices need to notify the State Services Commission, which is responsible for monitoring the level of fees for bodies covered by this framework.

Fees Below the Range

  1. It is also possible to pay fees which are below the range, provided they reflect the factors noted in the section on "Factors to be Considered".

Additional Work

  1. The framework assumes that boards will have the normal workload for General Management Boards of their size (30 days per annum for members and 50 days for the chair) and District Health Boards (60 days per annum for members and 100 days for the chair). Where significant additional work is required, it may be appropriate to negotiate additional payments.

  2. Payment for additional work should be agreed by the fee-setting authority before the work is undertaken. The key objectives for the additional work must be clearly specified, and evaluated on completion. A higher annual rate for a fixed period, and based on set goals, may also be appropriate where chairs are required to undertake significant additional work (for example, where they are required to guide the reorientation or restructuring of a Crown entity, or where the situation of a Crown entity requires the chair to act more in the nature of an executive director). However, such additional work should otherwise relate to the governance role of the board, and should not cover activities that are more properly within the role of management.

  3. The fee-setting authority is required to consult with the Minister of State Services before committing to payments for additional work and is responsible for monitoring progress against the negotiated objectives.

Payment for Consulting

  1. The practice of members or other appointees receiving payments as consultants from organisations to which they are appointed should not take place. If, however, the Responsible Minister agrees that there are overriding reasons for board members and other appointees to carry out consulting assignments, any proposal to do so should be submitted to APH and Cabinet for consideration. Where the arrangement results in the risk of a conflict of interest, the Minister should identify the conflict in the submission to APH, and propose a suitable regime for managing the conflict. (See the State Services Commission Board Appointment and Induction Guidelines, ss 31 and 62 of the Crown Entities Act 2004, and Chapter 6 of the Step by Step Guide for further guidance on conflicts of interest).

Other Types of Payments

  1. Members of boards of statutory bodies, subsidiary bodies of statutory entities (i.e. of Crown Agents, ACEs, ICEs) , statutory tribunals, authorities or other bodies appointed by the Crown are not employees. Payment of compensation or any benefit for loss of office should not take place.

  2. Ex gratia payments and other benefits or rewards, in addition to fees should not be paid to members of statutory boards, subsidiary bodies of statutory entities, statutory tribunals, authorities other Crown bodies or committees.

Disclosure

  1. Any statutory requirements for the disclosure of fees and other benefits must be met. Crown entities, other than Tertiary Education Institutions or schools, must meet the disclosure requirements of section 152 of the Crown Entities Act 2004. Where there are no statutory or other specified requirements, a level of disclosure consistent with public accountability should apply.

Fiscal Implications

  1. Any increases in fees within the framework are to be met within existing baselines or appropriations.

Monitoring of the Framework

  1. The State Services Commission monitors the framework, including fee levels, through regular surveys (currently every two years) and through ongoing contact with departments. The Commission reports to the Minister of State Services about the results of this monitoring.

  2. Departments are advised of detailed information requirements at the time surveys are carried out.

  3. Servicing departments and parent statutory entities of subsidiary bodies are also requested to notify the State Services Commission of fee changes at the time of approval.

Cabinet Committee Submissions

  1. In general all but the most minor appointments made by Ministers or by the Governor-General on the recommendation of Ministers should first be considered by APH. Even where an appointment is the responsibility of a particular Minister, it is important that it is raised with colleagues to ensure the widest possible input into the appointment process [Step by Step Guide, Chapter 6].

  2. Paragraphs 47-52 "Operating outside the Parameters of the Framework" refer to the circumstances in which exceptions to this framework are referred to APH and Cabinet before final decisions are made. In those cases:

    • where the Responsible Minister is responsible for setting fees, and where the proposed fee is outside the parameters of the framework, the submission should note that consultation with the Minister of State Services has taken place, and should outline the basis for going outside the parameters of the framework.

  3. If there is a difference of view between the Responsible Minister and the Minister of State Services about the appropriate fee levels, the options should be presented to APH.

  4. In these cases, appointments should not be made until fee levels have been agreed. See also Step by Step Guide, Chapter 6.

Checklist for the Classification and Remuneration of Bodies



Step 1 Is the body covered by this framework? (Refer to the section on "Coverage by the Framework").
Step 2 What is the classification of the body? (Refer to Annex 2).
Step 3 Identify the appropriate level of fees which apply to the classification with regard to factors outlined in the section "Factors to be Considered in Setting Fees" and Annex 3.
Step 4 If an exception to the framework is sought, consult the Minister of State Services. In some cases, a submission to APH and Cabinet will be required, before a final decision is made. For minor or technical exceptions, the Responsible Minister and Minister of State Services may agree the exception without the need for a submission to APH and Cabinet. (Refer to section on "Operating Outside the Parameters of the Framework" and the process for exceptions outlined in Annex 1).

If the fee-setting authority is a statutory entity, prior consultation with the parent entity’s Responsible Minister and the Minister of State Services (with advice from the State Services Commission) is required.
Step 5 Advise the State Services Commission about any changes made to fees at the time of approval.


Further Information

  1. For advice on the application and interpretation of the fees framework, contact the State Sector Remuneration and Fees team at the State Services Commission, phone (04) 495 6740, fax (04) 495 6691 or email: fees@ssc.govt.nz.

Annexes

Annex 1: Process for Setting Fees



Process for Setting Fees

Annex 2: Framework for Classifying Bodies for Fees Purposes



Steps

  1. Decide which of the following four groups the body fits into.

  2. Decide which level within the group is most appropriate.

  3. Decide on the appropriate fee level, using Annex 3.

Group 1: Royal Commissions and Commissions of Inquiry

  1. Royal Commissions and Commissions of Inquiry have separate ranges of fee levels. Using the following information, decide which one best describes the body you are setting the fees for.

  2. These are time-limited bodies established to inquire into and report on specific matters. They are generally chaired by a judge or a retired judge.

  3. The key distinction between a Royal Commission and other Commissions of Inquiry lies in the form of the instrument of appointment and the nature of the authority under which it is issued:

    • Royal Commissions are appointed by the Governor-General, in the name of the Sovereign, pursuant to the Letters Patent 1983. Royal Commissions are, therefore, generally regarded as having a greater prestige and standing than Commissions of Inquiry appointed under the Commissions of Inquiry Act 1908 alone. A Royal Commission is generally appointed when the subject matter to be investigated is one of outstanding public importance.

    • Commissions of Inquiry are appointed by the Governor-General in Council pursuant to the Commissions of Inquiry Act 1908.

See the ranges of fees payable for Group 1 bodies in Annex 3.

Group 2: Statutory Tribunals and Authorities

  1. There are two levels in this group. Decide which level best describes the body you are setting the fees for.

Higher Level Tribunal or Authority
  1. The top level includes those which:

    • operate effectively as a court and will be chaired by an ex-judge, QC or a barrister or solicitor of at least seven years standing;

    • have a prime function as an appellate body and/or have power to make decisions;

    • deal generally with issues relating to groups of people rather than an individual;

    • deal with issues that are more likely to be highly visible in the public eye and have an influence on the way society operates.

Lower Level Tribunal or Authority
  1. The lower level includes those which:

    • operate relatively informally and may make decisions from written submissions;

    • deal generally with issues relating to individuals;

    • may be chaired by competent lay people;

    • may only have recommendatory powers.

See the ranges of fees payable for Group 2 bodies in Annex 3.

Group 3 Management Boards

  1. These are boards that are primarily responsible for the governance of a Crown body or organisation.

  2. Management Boards have responsibility for the strategic direction of the organisation, the determination of business objectives and formulation of policies to achieve these, funding policy and seeing that management does its job. Where the board is overseeing an interest owned by the Crown, the board is usually the link between the shareholder/owner (the Crown) and management, and its members are either appointed by a Minister/the Government or the Governor-General. In some cases, bodies have elected members, or members appointed by stakeholders other than the Minister. The organisation it is overseeing may or may not be a company.

  3. A number of trusts also fit into this category.

Level of Management Board
  1. There are four distinct categories within this group:

    1. General Management Boards

    2. District Health Boards

    3. Tertiary Education Institution Councils

    4. Subsidiary bodies of statutory entities (ie of Crown Agents, ACE’s, ICEs)

  2. When you have determined the category that is appropriate to the organisation concerned, assess and score it against each of the relevant criteria set out under each category.

General Management Boards (Group 3a)
  1. The first two criteria come from an independently developed and tested protocol for determining the size of company directorships, with an additional layer to recognise the somewhat smaller size of some of the bodies that are not Crown entity companies or State Owned Enterprises. The third criterion (complexity) recognises the functions of the various types of body.

Criterion 1: Level of annual operating budget or annual turnover (GST inclusive)
  1. For Crown entities which disburse funds or purchase goods and services on behalf of the Crown, the budget figure used for criterion 1 should be the annual operating budget for the organisation that the board governs. For all other entities, the figure used should be the annual turnover/revenue.

    Budget/Turnover Score
    $500m+ 5
    $50m - $500m 4
    $15m - $50m 3
    $5m - $15m 2
    $5m and below 1


Criterion 2: Value of total assets managed

Total assets = leased and owned, fixed and current.

  1. Where a Crown entity is a devolved purchaser or funding disburser, and carries a considerable "float" of cash in the bank or in investments, this may result in its level of total assets being artificially inflated. The asset value should be discounted in situations where the governing task in relation to those assets is significantly less than normal.

    Total Assets Score
    $500m+ 4
    $50m - $500m 3
    $15m - $50m 2
    $5m - $15m 1
    $5m and below 0


Criterion 3: Complexity of the Business
  1. Choose one of the following options that best describes the prime function of the organisation:

    Option Prime Function
    Devolved Purchaser An entity that specialises in making purchase decisions on behalf of the Crown. There will almost certainly be a contractual relationship between the entity and the provider of services.
    Funding Disbursement An entity established to distribute grants or funding.
    Investment and Management of Funds An entity involved in the investment and management of funds on behalf of the Crown or for beneficiaries.
    Advisory to Crown An entity advisory to the Crown at a significant level.
    Regulatory The entity will exercise regulatory and/or quasi-judicial power in an independent and objective manner.
    Provider of Services and Environment An entity established to provide services. The level of competition for the services will vary, and there may be limits on competition prescribed by statute or otherwise.
    Holder of Ownership Interest The holder of the Crown’s ownership interest.
    Social Influence The entity is established to improve a social outcome or outcomes through encouraging behaviour change (e.g. healthy lifestyle choices) by promotion of activities and increasing public awareness.


  2. Consider and assess the complexity of the prime function in accordance with the following tables:

    Devolved Purchaser
    Prime Function Score
    Devolved purchaser of goods and services ($100m+) 3
    Devolved purchaser ($20m - $100m) 2
    Devolved purchaser (under $20m) 1


    A devolved purchaser is where the Crown has created an entity to specialise in making purchase decisions on behalf of the Crown. There will almost certainly be a contractual relationship between the entity and the provider of services.

    OR:

    Funding Disbursement
    Prime Function Score
    Funding disbursement (over $20m) 2
    Funding disbursement (under $20m) 1


    An entity involved in funding disbursement will have been established to distribute grants or funding.

    OR:

    Investment and Management of Funds
    Prime Function Score
    Investment management of funds (over $2b) 5
    Investment management of funds (over $800m) 4
    Investment management of funds (over $20m) 2
    Investment management of funds (under $20m) 1


    An entity involved in the investment and management of funds either on behalf of the Crown or for beneficiaries.

    OR:

    Advisory to Crown
    Prime Function Score
    Advisory to Crown - significant level with pervasive impact across major/all aspects of government activity 4
    Advisory to Crown - with more generalised impact across several sectors 2
    Advisory to Crown - with impact in local/single sector 1


    An entity, which is advisory to the Crown at a significant level, would be involved in a major area of economic activity or a policy area of high strategic importance to the Government.

    OR:

    Regulatory
    Prime Function Score
    National safety regulatory of a commercial trading environment 4
    Regulatory 2


    The entity will exercise regulatory and/or quasi-judicial power in an independent and objective manner.

    OR:

    Provider of Services & Environment
    Prime Function Score
    Provider of services in a commercial trading environment 5
    Provider of services where there is limited competition 3
    Provider of services (not in a competitive environment) 1


    Points to consider: what is the level of competition for the services; are there any limits on competition that may be prescribed by statute or otherwise?

    OR:

    Holder of Ownership Interest
    Prime Function Score
    The holder of the Crown’s ownership interest 1


    OR:

    Social Influence
    Prime Function Score
    Promote behaviour change and increase public awareness for all or most of the population, or have a significant influence on a more limited but still substantial segment of the population 4
    Promote behaviour change and increase public awareness in a substantial segment of the population 2
    Promote behaviour change and increase public awareness in a limited segment of the population 1


Process of Classification
  1. To ascertain what level the management board falls into for the purposes of selecting the appropriate fee range, add up the scores given for each of the above three criteria.

  2. See which of the six levels below the score fits into. The levels relate to the ranges of fees set out in Annex 3. Levels have been developed to give a fair differentiation, for fees purposes, between different sizes of management boards. These are:

    Score Level
    13+ 1
    11 – 12 2
    9 – 10 3
    7 – 8 4
    5 – 6 5
    4 and below 6


See the ranges of fees payable for Group 3a bodies in Annex 3.

District Health Boards (Group 3b)
  1. The District Health Boards are classified into four levels to give a fair differentiation for fees purposes taking into account the overall factors relevant to the size of the board members’ responsibility:

    Level One Auckland
    Canterbury
    Capital and Coast
    Counties Manukau
    Waikato
    Waitemata
    Level Two Bay of Plenty
    MidCentral
    Otago
    Level Three Hawke’s Bay
    Hutt
    Lakes
    Nelson Marlborough
    Northland
    Southland
    Taranaki
    Level Four South Canterbury
    Tairawhiti
    Wairarapa
    Whanganui
    West Coast


See the ranges of fees payable for Group 3b bodies in Annex 3.

Tertiary Education Institutions (Group 3c)
  1. Tertiary Education Institutions (TEIs) are NOT strictly categorised on the basis of turnover, assets etc. Rather, TEIs require a similar consistent type of skills, have similar recruitment and retention issues and have similar complexity not necessarily related to "size".

  2. Nevertheless, the various factors affecting governance of TEIs indicate that income (as noted in the institution’s annual report) can be used to determine two separate groups:

    • those TEIs having income of $60 million or more per annum; and

    • those TEIs having income less than $60 million per annum.

See the ranges of fees payable for Group 3c bodies in Annex 3.

Subsidiary Bodies of Statutory Entities (Group 3d)
  1. The boards of statutory entities (i.e. the parent boards) set the fees for their subsidiary board members. The statutory entities are Crown Agents, ACEs and ICEs listed in Schedule 1 of the Crown Entities Act 2004.

  2. The following two criteria are consistent with the same protocol for General Management Boards (Group 3a) above.

Criterion 1: Level of Annual Operating Budget or Annual Turnover (GST inclusive)
  1. For subsidiaries of statutory entities that disburse funds or purchase goods and services on behalf of the Crown, the budget figure used for criterion 1 should be the annual operating budget for the organisation that the board governs. For all other entities, the figure used should be the annual turnover/revenue.

    Budget/Turnover Score
    $50m - $500m 4
    $15m - $50m 3
    $5m - $15m 2
    $5m and below 1


Criterion 2: Value of Total Assets Managed

Total assets = leased and owned, fixed and current.

  1. Where a subsidiary of a statutory entity is a devolved purchaser or funding disburser, and carries a considerable "float" of cash in the bank or in investments, this may result in its level of total assets being artificially inflated. The asset value should be discounted in situations where the governing task in relation to those assets is significantly less than normal.

    Total Assets Score
    $50m - $500m 3
    $15m - $50m 2
    $5m - $15m 1
    $5m and below 0


Process of Classification
  1. To ascertain what level the subsidiary body falls into for the purposes of selecting the appropriate fee range, add up the scores given for each of the above two criteria.

  2. See which of the three levels below the score fits into. The levels relate to the range of fees set out in Annex 3. The levels are:

    Score Level
    5 - 7 1
    3 - 4 2
    1 - 2 3


See the ranges of fees payable for Group 3d bodies in Annex 3.

Group 4: All Other Committees and Other Bodies
  1. This category covers a vast array of bodies from advisory committees, to technical review committees to professional regulatory bodies. These bodies may have their functions described in statute, or alternatively have been established by a Minister under a general statutory power to establish advisory committees or by the Cabinet. In other cases, the bodies will have been established by chief executives of departments to provide advice on the department's functions and responsibilities on a general basis or on specific areas or issues.

  2. In all of these bodies, the main emphasis is on judgement, rather than the management of assets.

  3. The levels within this category are determined by:

    • function and responsibilities;

    • skills, knowledge and experience required for members;

    • nature and consequences of decision making powers;

    • level of autonomy and or accountability of members; and

    • relationship of functions and responsibilities to the Government’s overarching goals and strategic priorities.

Classification Process
  1. This classification group contains a diverse range of bodies. For this reason, you are asked to determine the best description for the body against the factors noted below rather than decide an exact fit against the criteria.

    Step 1

  2. Assign a score between 5 (high) and 1 (low) for each of the four factors (see below) that best describes the organisation that you are setting the fees for:

    Factor   Score
    Function and Level of Authority
    • Policy making powers/technical advisory/disciplinary bodies which are professional regulatory with low to high quasi-judicial powers.
    • Working party/taskforce established by Government that is not a ministerial inquiry.
    		 High level of autonomy and accountability eg sets policy; exercises substantive regulatory powers, or high quasi-judicial powers (with powers to impose fines and/or prohibit professional practice by an individual). 5
      4
    Provide advice on technical matters that have overarching implications. 3
      2
    Low level: advisory to a department or Minister on minor matters. 1
         
    Concentration of Effort High level of intensity and high level of effort required within a short term (less than 1 year) timeframe. 5
      4
    Longer-term function with regular meetings that requires a steady application of effort. 3
      2
    Long-term function with occasional meetings and low application of effort required. 1
         
    Skills, Knowledge and Experience Required Members who are recognised as being at the top of their professional field. 5
      4
    High level tertiary qualification or 10+ years experience is essential. 3
      2
    High level tertiary qualification not required.
    5+ years experience. Members are predominantly lay or represent interests of professional group or body of opinion.    		 1
         
    Scope of Influence

    Influence on the nation and relationship to Government’s goals and strategic priorities    		 High level of influence on major area of economic activity or policy area of high strategic importance to Government’s strategic priorities.
    Significant public importance.    		 5
      4
    Broad focus on output or direct input on Government’s strategic priorities. Likely to attract some public interest involvement. 3
      2
    Generally limited focus at output or sub-output level. Operational. 1


    Step 2

  3. To ascertain what level the body falls into for the purposes of selecting the appropriate fee range, add up the scores given for each of the above factors. Determine which of the five levels below the score fits into. The following levels relate to the range of fees set out in Annex 3.

    Total Score Level
    19 - 20 1
    16 - 18 2
    12 - 15 3
    8 - 11 4
    4 - 7 5


See the ranges of fees payable for Group 4 bodies in Annex 3.

Annex 3: Fee Scales

  1. The following fees were reviewed in October 2006. The implementation of this modified framework does not automatically justify increases to existing fees. Changes to existing fee levels should be made by the fee-setting authority only if it is necessary to address recruitment and retention problems, or where the current fee levels do not adequately reflect levels of responsibility (refer to section on "Factors to be Considered in Setting Fees". Changes also need to reflect the Government’s expectation that increases in State sector remuneration will be modest.

  2. After deciding the group, and level within the group, the organisation best fits into (refer Annex 2), find the fee range for that level in the appropriate table below.

  3. A maximum and minimum fee is listed for all levels. A fee below or within the ranges can now be chosen, bearing in mind the factors outlined in the section on "Factors to be Considered in Setting Fees".

Group 1: Royal Commissions and Commissions of Inquiry: Daily Rates

Royal Commissions
Position Fee Range
Chair $570 to $ 920
Member $430 to $ 690


Commissions of Inquiry
Position Fee Range
Chair $430 to $ 720
Member $320 to $ 540


Group 2: Statutory Tribunals and Authorities: Daily Rates

Position Lower Level Higher Level
Chair $430 to $ 610 $540 to $ 800
Member $270 to $ 385 $340 to $ 510


Group 3: Management Boards

General (Group 3a): Annual Fees
Level Chair Member
1 $34,000 - $ 68,000 $17,000 - $ 34,000
2 $29,000 - $ 56,000 $14,500 - $ 28,000
3 $26,000 - $ 48,000 $13,000 - $ 24,000
4 $24,000 - $ 40,000 $12,000 - $ 20,000
5 $19,000 - $ 32,000 $9,500 - $ 16,000
6 $12,000 - $ 24,000 $6,000 - $ 12,000


District Health Boards (Group 3b): Annual Fees
Level Chair Member
1 $39,000 - $ 54,500 $19,500 - $ 27,200
2 $33,000 - $ 50,000 $16,500 - $25,000
3 $32,000 - $ 43,000 $16,000 - $ 21,600
4 $30,000 - $ 37,400 $15,000 - $ 18,700


District Health Boards Statutory Committees

An additional $2,500 a year is paid to each member of the three statutory DHB committees: Community and Public Health Advisory Committee, Hospital Advisory Committee and Disability Support Advisory Committee. If a member attends less than 10 meetings per annum, the fee is pro-rated.

The fee for the chair of each of these committees is $3,125 a year.

Tertiary Education Institutions (Group 3c)

Tertiary Education Institution Councils set the fees for the chair and members up to the maximum levels approved by the Responsible Minister. As with other bodies, the Responsible Minister sets the fee within the range for each institution or group of institutions.

Level Chair Member
1 $18,000 - $ 31,700 per annum $240 per day to $410 per day (with maximum limit of 45 days per annum)
2 $15,000 - $ 27,200 per annum $210 per day to $320 per day (with maximum limit of 45 days per annum)


Subsidiary Bodies of Statutory Entities (Group 3d): Annual Fees

The board of the parent statutory entity sets fees for the chair and members of its subsidiary bodies. The following fee scales apply to each level of subsidiary body that has been classified according to the criteria listed in Annex 2:

Level Chair Member
1 up to $ 45,400 up to $ 22,700
2 up to $ 33,800 up to $ 16,900
3 up to $ 22,600 up to $ 11,300


Group 4: All Other Committees and Other Bodies : Daily Rates

Level Chair Members
1 $600 - $970 $450 - $730
2 $430 - $655 $270 - $415
3 $330 - $435 $250 - $325
4 $250 - $320 $190 - $240
5 $190 - $240 $140 - $180


Annex 4: Guidance for the Administration of Fees and Allowances

  1. This Annex outlines the principles which underlie the fees and allowances payable under the framework.

Definition of a Day

  1. A working day is generally 7.5 - 8 hours, and unless otherwise stipulated, the daily fee is calculated on this basis. Work for longer than 8 hours in one day does not attract an extra payment.

  2. For the purposes of paying daily fees, the day is defined as at least 6 hours. Payment may be made for periods of less than 6 hours on a pro-rata basis (e.g. payment for a period of at least 3 hours at half the daily rate).

Definition of Fee Coverage

  1. The daily fee applies to all work that is required for the body to carry out its role. All work that is required to be performed for the body by the member should be paid at the approved daily rate.

  2. This covers work performed outside of meetings (e.g. preparation, representing the board at other forums, or administrative work) as well as attendance at meetings.

  3. For example, a member could spend three hours one evening preparing for a meeting the next day. If the preparation and meeting time combined were between 6 and 8 hours, then the daily fee would be paid for the combined preparation and meeting time.

  4. To ensure that accountability considerations are met, work other than preparation for meetings/sittings should be approved and minuted by the body before it is undertaken. Individual members should not be in a position where they could be considered to be setting their own work programmes without the endorsement of the body.

Rates for Deputy Chairs and Sub-Committee Chairs

  1. Where the legislation provides for the appointment of a deputy chair and/or where the work of the board is such that the appointment of a deputy chair is required due to the complex nature or size of the responsibilities, then a fee additional to the member’s rate may be paid to the deputy chair.

  2. The fee for the responsibilities of a deputy chair is an additional 25% of the member’s daily rate. This is consistent with the rates paid to deputy chairs in Crown companies and in the private sector.

  3. Where there is no deputy appointed, and a member is required to chair a meeting, then the member should be paid the daily rate equivalent of the chair.

  4. It is usual practice for the chair, and the deputy chair, where one is appointed, to have responsibility for chairing one or more sub-committees. No additional fee is payable to the chair and deputy chair for chairing sub-committees. Where there are substantial sub-committees that are not chaired by either the chair or deputy chair, then an additional 10% of the member’s rate may be paid to one other member with responsibility for chairing a sub-committee. This does not apply to the three District Health Board statutory advisory committees because additional fees are paid to members of those committees (paragraph 37 of the Circular and Annex 3 refer) Any case for further additional payments for chairing sub-committees should be treated as an exception to the parameters of the framework (paragraphs 47-52 of the Circular "Operating outside the Parameters of the Framework" refer).

One Person Committees

  1. Where an individual member constitutes a committee and there are decision-making or recommendatory powers, that member should receive the rate applicable to the chair of a body at that level.

Payments to Public Servants/State Servants/Employees of Crown Bodies Appointed to Boards

  1. Public servants are not generally appointed to statutory boards and other public bodies, although Cabinet has recognised that there may be circumstances in which such appointments, properly managed, can be justified. Cabinet has agreed that as a general policy, officials from the monitoring department will not serve on a Crown entity board, and that public servants will not serve ex officio as members of Crown entity boards. Cabinet Office Circular CO (02) 5 provides advice about the appointment of Public Servants to statutory boards.

  2. The following paragraphs provide a framework for the payment of fees to public servants, state servants and employees of Crown bodies in the special circumstances where they are appointed to a Crown body. They may be appointed in their own right, they may be ex officio or they may be otherwise appointed as representatives of their department.

  3. An underlying principle of the fees framework for public and state servants and employees of Crown bodies is that they are able to do their primary job unhindered and without detriment to the public interest. They should also not be double-paid for their job and their appointment to a Crown body.

Public Servants/State Servants as Ex officio Members of Bodies
  1. As stated above Cabinet has agreed that as a general policy public servants will no longer be appointed as ex officio members of Crown entity boards.

  2. Where any such exceptional appointments are permitted by a body’s enabling Act, the representative continues to be paid normal salary (or may represent the department or Crown body on a voluntary basis), and is not paid a daily or annualised fee for their participation. Where there are out of pocket expenses such as airfares or accommodation, these should be reimbursed on the same basis as for other members of the board. The general rule is that public and state servants should not profit financially from their involvement as an ex officio member of a board.

Public Servant/State Servants/Employees of Crown Bodies Appointed in their Own Right
  1. If a person is an employee of a government department or Crown body, and is to be appointed to a body in their own right, they must obtain the agreement of their employer before accepting the appointment. Such appointments are treated like secondary employment under Public Service Code of Conduct, Principle One. This is to ensure there is no conflict of interest and that financial and leave arrangements can be considered. Reference should also be made to the employment agreement of the individual and any specific provisions in this covering such appointments and the payment arrangements.

  2. If agreement is given by the employer, it will be necessary to decide whether the person will undertake the involvement in their own time (for example taking annual leave or leave without pay) or in the employer’s time. A public servant/state servant/employee of a Crown body should not retain both the fee and their ordinary pay where the duties of the outside organisation are undertaken during ordinary department or Crown body hours.

  3. Any reimbursement of expenses incurred in participation in a body is the responsibility of the body and should be paid to the member.

Payment for Time Spent in Travel to Meetings/Sittings or on Board Business (Daily Fees Only)

  1. Members are not paid for time spent in travel to and from meetings or on board business, except in instances where a daily fee is paid and the member has to travel for more than three hours in the course of a normal business day. The purpose of paying for travel time that is greater than three hours is to compensate for lost income during the business day. For example a member may spend several hours at a meeting but in doing so spends all day away from normal business activity due to time spent in travel.

  2. In extreme circumstances where considerable time is involved in travel, this can be recognised by the chair, with the agreement of the servicing/accountable department. In these cases (and particularly where air or train travel is involved) the preparation and travelling time need to be considered together for payment purposes.

  3. In considering payments for travelling time, the chair and servicing department need to consider issues of equity, the Government’s intention for geographical representation, and ensure that attendance at meetings does not result in undue personal hardship.

Payment for Locum, Business Overheads

  1. Where a member is a self-employed professional, the issue often arises of whether the board should be paying for the cost of a locum to continue the business of the member while on board business.

  2. Locum fees are not to be paid under any circumstances. The self-employed professional receives payment for board business only and reimbursement of travel expenses where relevant to board business. Additional payments are not provided to pay for the use of a locum or the business overheads since the board is not responsible for funding members’ own business costs. Issues such as the potential loss of income and maintenance of a professional practice (including business overheads) need to be considered by the individual prior to accepting appointment to a body.

Childcare Expenses

  1. Under exceptional circumstances a contribution may be made to childcare expenses by the chair (or another member if the chair is claiming expenses) with the agreement of the servicing department. However it is generally expected that the daily fee paid is adequate to meet out of pocket expenses of individual members as well as reimbursing them for their time spent. An example where a contribution to childcare expenses may be made is where an additional meeting is called at short notice (e.g. less than 48 hours). In determining whether payment is warranted, consideration should be given to issues of equity and ensuring that attendance at meetings does not result in undue personal hardship.

Payment of a Fee for a Cancelled Meeting/Sitting

  1. Where a meeting or other activity of a statutory or other body is cancelled or takes fewer days than planned, the body may in exceptional cases consider approving payment of the fee to certain members.

  2. This should only occur where:

    • the cancellation was unforeseeable; and

    • the member was unable to reschedule other work to take advantage of the time made available; and

    • the member suffered real loss of income as a result of the cancellation.

  3. The body would need to consider each case on its merits - and therefore consider each case after it has occurred.

  4. An affected member would need to make a case to the body on each separate occasion. The body should not approve payment if it is believed the member had not tried to reschedule other work. Partial payment might be appropriate if rescheduled appointment fees do not fully compensate a member for the lost fee from the meeting.

  5. If the body did, on application from a member for a specific instance, resolve to pay the fee for part or all of the time a meeting was cancelled by, that resolution would need to be noted in the minutes.

Absence

  1. Where an individual receives an annual fee and is absent from board business for a period of greater than two months, then the annualised fee should be pro-rated to take account of this absence (e.g. 10/12 of their annual fee). Where there are frequent absences over the period of a year, the annual fee should also be pro-rated to take account of those absences.

  2. Where a member fails to attend a significant number of meetings, or otherwise perform the duties as a member, the chair needs to raise the issue of expectations about performance with the member and if necessary with the Responsible Minister. Consideration should be given at the time of reappointment of members to the issue of continued absences from board business.

Reimbursing Allowances

  1. Members travelling to meetings, or on the business of the Crown body (where the members are required to be away from their normal places of residence) are entitled to reimbursement of out of pocket travelling, meal and accommodation expenses actually and reasonably incurred. The expectation is that standards of travel, accommodation, meals and other expenses are modest and appropriate to reflect public sector norms.

  2. Standard meal, incidental and private stay allowances that apply across the public sector have been abolished, except for bodies under the Fees and Travelling Allowances Act 1951. Departments now set their own rates.

  3. The rate of reimbursing allowance to be paid to members is to be on the same basis as that paid to the employees of the servicing department. Generally this is on an actual and reasonable basis and receipts are required.

  4. Where the departmental rate is not appropriate, the allowances set under the Fees and Travelling Allowances Act will apply. Motor vehicle expenses are to be reimbursed at the rates outlined in Annex 5.

Indemnity and Insurance

  1. The legislation establishing some Crown bodies provides board members with explicit protection from liability in some circumstances. The nature of the protection varies according to the body. The Crown Entities Act 2004 contains standard provisions on immunity from liability, indemnity and insurance in relation to board members, employees, office holders, and committee members of statutory entities. Statutory entities are Crown Agents, ACEs and ICEs listed in Schedule 1 of the Crown Entities Act 2004.

  2. The extent to which a Crown body may indemnify or purchase insurance for its personnel to meet their legal expenses while working to the body may be dealt with specifically in the body’s enabling Act or document. Where it is not, then the general powers of the body must be checked to determine whether it has the power to indemnify or purchase insurance for its members.

  3. The Crown Entities Act requirements for statutory entity indemnities and insurance provide a good yardstick for other bodies, subject to their own particular enabling Acts. The Crown Entities Act provides that entities may only indemnify their personnel for acts or omissions in good faith and in performance or intended performance of the entity’s functions. Any such indemnity is limited to liability for conduct, and costs incurred in defending or settling any claim or proceeding relating to that liability. An entity may purchase insurance cover for its personnel in relation to acts or omissions unless they are in bad faith or not in performance or intended performance of the entity’s functions.

  4. In the event that insurance is not provided, the body must ensure that the individual is made aware that he or she is not covered, as well as of any relevant statutory protection from liability, so they can consider whether to make their own provision for such insurance.

Employment Status

  1. Members are generally appointed by the Crown or elected by voters and are not employees of the body or the Crown. The appointment as a member does not alter the individual’s employment status prior to the appointment (e.g. self employed, employee, not employed).

Tax on Fees

  1. Taxation matters depend on the personal circumstances of the individual member. Payments made for board membership are generally derived by the member.

  2. Board members should be advised by the servicing department or parent statutory entity to clarify their taxation status by reference to professional advice or the Inland Revenue Department (IRD). IRD does not have a fixed view on every single category of entity established under statute, though the term "Board" probably envisages a very wide range of statutory bodies including, but not limited to, those involved in some form of local body activity.

  3. Payment of fees to board members in that capacity are "honoraria" for the purposes of the Income Tax (Witholding Payments) Regulations 1979 and are subject to a tax deduction at the rate of 33 cents in the dollar unless Inland Revenue has issued an exemption certificate or a special tax rate certificate. This does not apply to contractual arrangements existing in addition to the appointment.

  4. Payments to board members, in respect of their capacity as a board member, are not subject to GST, though other arrangements additional to the appointment may be subject to GST.

  5. Inland Revenue advise that the fee payments are derived for tax purposes by the appointed member unless the member is performing the service (to which this fee relates) as an agent or representative or another entity which has agreed to perform services and that the fees are to be paid or reimbursed to that entity.

  6. If the fee payments are derived by the appointed member then the payments should be made to that member, as opposed to being paid to any other entity (such as a company). An exception to this is if:

    1. a deduction of withholding tax has been made; and

    2. written direction by the board member has been given that fee payments are to be paid to that entity.

  7. The Inland Revenue Department does have the ability to grant exemption determinations where part of a withholding payment, including an honorarium, is regarded as reimbursement of expenditure incurred in production of income, and determinations can be sought from the Commissioner of Inland Revenue accordingly.

  8. Servicing departments or parent statutory entities should ensure that total payment to the member (before deduction of any tax) does not exceed the maximum of the fee range that applies to the body’s classification under the framework, unless an exception has been approved.

Annex 5: Allowances under the Fees and Travelling Allowances Act 1951

  1. Members travelling to meetings, or on board business (where the members are required to be away from their normal places of residence) are entitled to reimbursement of out of pocket travelling, meal and accommodation expenses actually and reasonably incurred. The rate of reimbursing allowance is to be paid to members of a board on the same basis as that paid to employees of the servicing department (or to employees of the entity). Where this is not applicable, the following rates for bodies covered by the Fees and Travelling Allowances Act 1951 are outlined below.

Meal Allowances

  1. An allowance is paid for periods under 24 hours where the member is required by their duties to be away from their usual workplace during the time that they would normally eat. An allowance is not paid if a meal is provided.

    Dinner $20.00
    Lunch $5.00

Travelling on Official Business

  1. These allowances apply where the member is travelling away from home for periods greater than 24 hours. For hotel accommodation, and meals taken at that hotel, actual and reasonable reimbursement should be made, and no meal allowance paid.

    Meals, per day $62.80
    Meals, additional periods up to 10 hours $26.50
    Staying privately, per day $68.15 (includes meals)
    Staying privately, additional periods $31.30
    Incidentals $ 7.90 per day


  2. When paying "actual and reasonable", the payment is for the cost of the meal, and would not include any tip for service, bar tabs or mini bars.

  3. Where a statutory body is serviced by a government department or Crown body, and that department/Crown body has clear provisions for payment under the above circumstances, then these provisions may apply instead.

Use of Motor Vehicles

  1. Where the provisions of the servicing department are not applicable, the motor vehicle rates published by a reputable New Zealand source, representing a reasonable estimate (e.g. the New Zealand Automobile Association Inc mileage rates) may also be used to reimburse members using their private vehicle. Alternatively, the following are mileage rates for employers and employees for the purpose of calculating motor vehicle reimbursing allowances for members of statutory bodies and local authorities covered by the Fees and Travelling Allowances Act 1951.

  2. Where it would not be reasonable to travel by public transport, and the member uses their own motor vehicle to travel on official business, a mileage rate is payable. The schedule of motor vehicle mileage follows.

  3. The motor vehicle reimbursing rates reflect the rates currently used by the Department of Inland Revenue. There are three methods of calculating the allowance. These are:

The Standard Rates
  1. It is anticipated that this formula will be the most appropriate for most members of statutory bodies. It should be used where:

    • it is not possible to estimate annual average total running;

    • where the vehicle is not used almost exclusively for work purposes; and

    • where the total work-related travel is relatively small.

      Motor vehicles annual work-related kms

      1 to 3,000 km   62 cents per km
      3,001 km and over 19 cents for each km over 3,000


      Motorcycles annual work-related kms

      1 to 3,000 km 31 cents per km
      3,001 km and over 10 cents for each km over 3,000


The Flat Rate Formula
  1. This method should be used where:

    • it is possible to estimate an annual average total running;

    • where the vehicle is not used almost exclusively for work purposes; and

    • where the total work-related travel is relatively small.

      Motor vehicles - flat rate 28 cents per km
      Motorcycles - flat rate 14.5 cents per km


  2. The flat rate for motor cars is based on an annual average total running of 15,000 kilometres per annum (12,000 private running and 3,000 kms work related). The flat rate of 28 cents per kilometre has been calculated as follows:

    3,000 kms x 62 cents = $1,860.00
    12,000 kms x 19 cents = $2,280.00
      $4,140.00 ÷ 15,000 kms
      =27.6 cents
      Rounded to 28 cents per kilometre


  3. The flat rate formula can remove the need to keep individual records for each employee, and should be amended to suit the particular circumstances. If the annual average total running is less than 15,000 kms for example:

    Example

    All members of the statutory body travel close to 10,000 work-related kilometres per year on average. The flat rate the administering body could use for all those members would be:

    3,000 kms x 62 cents = $1,860
    7,000 kms x 19 cents = $1,330
      $3,190 ÷ 10,000 kms
      = 31.90 cents
      Rounded to 32 cents per kilometre


Individual Special Rates
  1. It is expected that it will be unusual for this method to apply to members of statutory or other bodies. The rates should be used where:

    • the vehicle is almost exclusively used for work purposes; or

    • the work-related travel covers considerable distances each year.

  2. The method allows fixed costs such as depreciation, interest, insurance and registration to be better apportioned to work-related travel. The data used to calculate the standard rates was split into the Automobile Association's cc rating bands in order to calculate the individual special rate. The appropriate average fixed costs will be divided by the total estimated annual travel (both work-related and private) and the result added to the running costs.

  3. The fixed and running costs are as follows:

    CC rating Up to 1,300 cc 1,301-1,600 cc 1,601-2,000 cc Over 2,000 cc
    Fixed Cost (Total)- $4,214 $4,507 $5,475 $6,308
    Running costs (Cents per km) 16.7¢ 17.2¢ 19.1¢ 22.2¢


  4. The calculation of an individual special rate would be as follows. In the example the employee uses an over 2,000 cc car and travels on average 52,000 kms per annum for both work-related and private running.

    Annual running  = $6,308 (fixed costs for over 2,000cc vehicle) divided by
     52,000 km
       = 12.13 cents per km
    Plus running costs = 22.20 cents per km
    Individual special rate  = 34.33 cents per km
    Round up to 35 cents for each kilometre of work related travel.


  5. The advantage of using this method is that you only use the flat rate for related travel. It also benefits those members who use a vehicle almost exclusively for work purposes.

    Example

    The member's car is used entirely for the job. The only private running, from the member's home to the place of work, amounts to 1,000 km per year. Work-related travel is estimated at 12,000 km for the year. The car comes within the 1,301 to 1,600 cc rating band. The calculation of the individual rate is:

    Annual running  = 13,000 divided by fixed costs for cc class ($4,507)
       = 34.66 cents per km
    Plus running costs  = 17.02 cents per km
    Individual special rate  = 51.68 cents per km

    The member can be reimbursed at a rate of up to 52 cents for each work-related kilometre.

  6. Where all members of a body use their vehicles almost solely for work purposes, or travel considerable distances, you can calculate average individual special rates to suit groups of members rather than calculating a special rate for each person. The special rates can be different for each statutory body.

1For those situations where a greater workload is expected, please seek advice from the State Services Commission

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