As you are aware, the Government's programme of reform will result in further restructuring of the public sector. The following arrangements provide additional flexibility for the identification and handling of excess staff, and supersede those issued in Memorandum (88/40).

Throughout this programme, which will obviously be difficult, it is most important that information about the rationale for any reductions and the subsequent arrangements for those affected, be made widely available.

While there will be some functions and positions which can be identified immediately as a result of the recent restructuring, other savings may only become apparent during the Fundamental Review of Programmes, which is currently being conducted in agencies. A reduction of 12,500 positions is the anticipated effect of the structural changes over the next two to three years (7,500 for the outer budget and 5,000 for the inner budget sector).

There are a number of initiatives aimed at improving the State's financial position and the efficiency and effectiveness of operation,

Specific portfolio savings requirements:

Ministers have been advised of the savings requirements which are subject to final Expenditure Review Committee determinations. Many of these do not have substantial implications for staffing levels, however where staff reductions are required and have been identified, these should be implemented without delay.

Restructure of selected agencies:

Following the changes in Ministerial portfolios announced on 6 June, organisational restructures are now generally in place to reflect the redistribution of functions.

Ministers and Chief Executives should now finalise their structures and work in close consultation with the central agencies to achieve financial benefits from this rationalisation.

Corporate Support and Contracting Out:

I am aware that there are already underway considerable activities in both the review of corporate support functions and contracting out. The Government believes that there is potential to do considerably more in these areas over the longer term, and is keen to ensure that advice and support for these initiatives is available. Guidelines to assist agencies review corporate support services, (as opposed to .'service delivery functions) will be issued in the near future by my Department to help agencies which have not yet embarked on this task. Similarly, work is progressing on options for contracting out of services and functions. It is recognised that this process will take time to achieve results. Guidelines on options for best practice are in preparation and will be released shortly.

I do expect ail Ministers and Chief Executive Officers to begin to look at corporate support functions and contracting out if these activities are not already in train. I shall be requiring a report on progress to date and the capacity for the future in the Ministerial Reviews to be held early next year.

Having identified areas in which there is scope for restructuring and dependent on the scale of staff reduction required, a number of options are available. These will vary according to the need, and range from natural attrition (i.e. not replacing employees who retire, resign, transfer or are promoted) through redeployment, retraining, voluntary redundancy and ultimately retrenchment.

All decisions in this process must be based on the need to reduce the overall cost of staffing, the continuation of all essential services and the commitment to equity in the identification process. Care should be taken to ensure that in identifying non-essential functions or surplus staff, target groups covered by the Anti-Discrimination Act are not disproportionately affected, (i.e. decisions should not be made on the basis of age, sex, pregnancy, marital status, disability, race or ethnicity).

Handling staff deemed excess requires careful consideration. Options include:

Attrition

Many agencies may find that they may achieve the results required by carefully assessing the need for recruitment action for vacant positions. Turnover rates in some areas of the public sector are traditionally high, and limiting replacements may be sufficient to reach target numbers. Attrition is a natural way to reduce the size of an organisation, however, the results will appear

across the agency, not in a targeted way, and will not be able to be included in definitive plans which can be controlled. Leaving positions vacant will obviously require management ensuring that remaining employees possess the necessary skills and knowledge to maintain essential functions. To adopt a policy which relies heavily on attrition may require initiatives under award restructuring and multi-skilling to be effective.

Voluntary Redundancy

Voluntary redundancy will attract staff who wish to leave the public sector. If targeted staff reductions are required, this may be a suitable way of "right sizing" with minimum disruption. Employees should be approached in identified functions, occupations or locations, rather than an across the organisation approach which has the potential for raising wide expectations amongst staff for whom redundancy is not an option, i.e. those holding key positions and those in short supply occupational groups. Such a process is a matter for local management, and requires careful co-ordination. The identification of positions, and the selection of staff is the responsibility of local management.

Under revised arrangements Ministers may, on the recommendation of their Chief Executive Officers, approve voluntary redundancy packages being offered to staff in identified areas of their agencies, to the extent of the number of surplus positions, and subject to the availability of funding.

The aim of this strategy is to effect easily identifiable reductions quickly. Offers can be made to staff in identified areas and if an acceptance is received within two weeks of the offer, then the voluntary redundancy incentive is available. The decision about the most appropriate timing for implementation then rests with the employer.

The quantum of the package will be increased by the following amounts subject to the above conditions.

- less than 1 year's service 2 weeks pay

- 1 year and less than 2 year's service 4 weeks pay

- 2 years and less than 3 year's service 6 weeks pay

- 3 year's service and over 8 weeks pay

To receive severance payments under the voluntary redundancy arrangements, an employee will be required to sign an undertaking that as a condition of re-obtaining permanent employment in the New South Wales public sector within a period equivalent to the payment, the person will refund to the Government, that portion of the severance payment which applies to the period of re-employment. The Minister of the employing agency may approve,

on a case by case basis, that the repayment be waived in circumstances where the further employment is on a limited part-time basis or re-employment is at a substantially lower rate of pay.

Redeployment

Wherever practicable, redeployment will remain the preferred option for surplus staff. To minimise the loss of expertise, Chief Executive Officers are encouraged to explore alternative employment options within their agencies and elsewhere in the public sector before considering voluntary redundancy or retrenchment. However, redeployment activities will be only available to persons who are genuinely seeking redeployment and will be limited to persons in occupations which are in demand in the public sector and who, therefore, have a reasonable chance of successful redeployment. The Industrial Authority will continue to be available to co-ordinate redeployment between agencies, and will provide advice within 7 days, on the likelihood of redeployment for individuals or groups of employees across public sector agencies.

Retraining

There are a number of ways in which existing staff could be retrained. Organisations may wish to initiate programmes to retrain staff with a view to either further employment or provide skills which are in demand in the broader community. Basic skills in job search, interview and application preparation are essential and should be widely available. I have approved of a special allocation being made to DIRETFE to fund retraining for inner budget sector employees who are excess to current needs. Outer budget agencies will be required to fund DIRETFE for retraining or similar services from their own budgets. Preliminary advice from CEOs on the extent, nature and approximate dates should be forwarded to assist DIRETFE plan these activities.

Retrenchment

As a last resort and not to be implemented without prior notice to my Department, Ministers may, subject to available funding, approve Chief Executive Officers' recommendations for the retrenchment of staff whose positions are excess to requirements, where redeployment is not practicable. The Industrial Authority will continue to provide advice to agencies within 7 days, on whether it is practicable to redeploy excess staff elsewhere in the public sector.

Concessional Taxation

Chief Executive Officers will need to ensure that where voluntary redundancies are envisaged, arrangements are made with the Australian Taxation Office in order to ensure concessional tax treatment of severance payments. This will
require prior approval by the Commissioner of Taxation for the voluntary redundancy to be considered as part of an early retirement scheme. This is intended to ensure that those staff who accept voluntary redundancy attract the concessional rate of taxation, similar to the rate which applies for retrenchment.

In respect of :- retrenchment, a concessional rate of taxation applies where payments meet prescribed bona fide redundancy" criteria of the Australian Taxation Office.

Funding

As at present, Treasury funding can be made available for budget sector agencies and selected outer budget sector agencies undertaking red redundancy/retrenchments. This funding is on the basis of off-setting savings being built into the forward estimates.

Further Information

Advice on this process will be available from a number of sources, and 1 have asked that assistance be provided to all Chief Executive Officers as a matter of priority. It is most important that there is adequate liaison between departments, authorities and the central agencies throughout this exercise. There will be an ongoing need for information, announcements and briefings to assist with co-ordination across agencies, and 1 have asked that my Department take responsibility for this function.

Contacts include:
PEIRA Rod Morrison 2668764
DIRETFE Industrial Relations issues Barry Riley
Redeployment issues 2668129
DIRETFE Philip Moore
Retraining issues 2668476
Treasury Bob Sendt
Funding issues 2285182
Premier's Dept Jane Bridge
Personnel policy issues and co-ordination 2285513

Separate information has issued on arrangements for SES positions, and further information is available from the SES
Unit in the Premier's Department.

Yours sincerely

Nick Greiner, MP

Issued By: Personnel Policy Division - OPM Date: 24 July 1991