General manager spells out the price tag of council’s staff restructure program
THE full cost of redundancies for Shoalhaven City Council’s directors and section managers will be more than $1.6 million.
Council undertook a major cut of staff positions earlier this year with reductions in directors from six to four.
The number of section managers and other staff positions were also reduced, with the aim of saving $2.85 million.
In the shakeup at least three directors have been made redundant or replaced, while it is believed another three section managers have also been made redundant.
The operational savings reform initiatives implemented by council have been designed to deliver savings of $6.5 million.
Responding to an information request, council has revealed that the total cost of redundancies for the three directors and three section managers who were made redundant, with all their entitlements, will cost $1,626,932.
General manager Russ Pigg said $1 million had been put aside in the 2013-14 budget to cover the costs of redundancies.
“There is a line item in the 2013-2014 budget for the transformation costs of $1 million and another line item for savings of $2.5 million,” Mr Pigg said.
“Council has so far made savings of about $970,000 from redundant positions.”
Under their contract agreements two of the directors were entitled to 38 weeks’ pay and another 30 weeks.
The total entitlement, including leave entitlements was $815,751.40.
Of that, the leave entitlement component was $415,274.60.
The section managers were paid in accordance with the award which is 34 weeks’ redundancy and five weeks in lieu of notice, totalling 39 weeks.
The total cost of their payouts, including leave entitlements, was $811,180.60.
Of that, the leave entitlement component was $563,942.70.
Council has also revealed that some staff members have deferred payments to a date to be determined by the employee but not more than 12 months from the termination date.
A total of $643,749.60 has been deferred, meaning the actual payments to directors and section managers, including those to be paid this week, are $983,182.40.
Mr Pigg put the payouts into perspective saying the paying of entitlements like annual leave, long service leave and sick leave was a sixth of the council’s annual wages bill.
Council had an overall accrued entitlements figure of $30.5 million last year and $30 million the previous year.
“As a ball park figure, our bill for wages the last financial year, ending June 2012, was $49 million,” he said.
“Of that $8.1 million was for leave entitlements, such as annual leave, long service leave and sick leave.
“The previous financial year it was $7.7 million of a wage bill of $47 million.”
Mr Pigg said consultants Blackadder Associates estimated the payouts would be $1 million.
“We always knew the payouts would outweigh the savings this year,” he said.
“But for the years to come the reduction in cost for reducing from six to four directors, and reductions in section managers, would lead to substantial savings.
“It is a long-term program that will save us major dollars over coming years.
“The previous six directors would have cost council $1.2 million in the 2013-14 financial year.
“With four directors, that cost is already reduced to $876,000, a saving of $322,000.
“We estimate the restructure will cost us $400,000 this financial year, so we will actually be $78,000 behind.
“But in subsequent years we will be making the full $332,000 saving and after five years we will be $1.5 million in front.
“People see the $400,000 figure as a loss and probably lose sight of the big picture, the net gain year after year.”
Mr Pigg again defended the decision to give the four new directors a pay rise of up to 10 per cent.
“The new directors are all taking on more roles and responsibilities,” he said.
“We have gone from six directors to four, yet they still have the workload of six directors, therefore they are taking on more responsibilities.
“In my way of calculating things the new directors will actually be 50 per cent more productive in the amount of work they have to undertake.
“And that is why the consultants Blackadder Associates recommended a pay increase for that extra workload and responsibility.
“Overall in the big scheme of things it is actually a saving, as we only have four instead of six directors.”