Motu Research has recently released a research paper, co-authored by Strategic Pay Principal Consultant Lyn Brieseman, examining pay differences between the public and private sectors using both Stats NZ data and Strategic Pay’s job evaluation database.
The paper is available here: https://www.motu.nz/our-research/population-and-labour/firm-performance-and-labour-dynamics/public-sector-pay-in-nz
The research highlights that commonly quoted comparisons can be misleading. While average pay in the public sector is around 25% higher than in the private sector, this largely reflects differences in the types of jobs and workers found in each sector rather than differences in pay for equivalent roles.
Using Stats NZ data and controlling for factors such as education, occupation and job level, the estimated pay gap narrows significantly, to around 5% – 8%. When role size is also taken into account using Strategic Pay’s SP10® job evaluation methodology, the apparent public sector premium disappears altogether.
SP10 provides a robust, evidence-based assessment of role size across ten key job dimensions, enabling genuine like-for-like comparisons. This approach offers a more accurate measure of pay differences than comparisons based solely on job title, occupation, or educational attainment.
Analysis of SP10-evaluated roles indicates that public sector base salaries are, on average, around 4% lower than those for comparably sized private sector positions. The gap widens when total remuneration is considered, with public sector total remuneration averaging approximately 8% less than private sector remuneration for equivalent roles. The research also found that the private sector pay premium is greater for men and for larger roles.
The findings suggest that the widely cited 25% public sector pay premium is primarily driven by the different mix of jobs across the two sectors. Once detailed job size information is used to compare truly equivalent roles, the evidence indicates that the private sector generally pays more than the public sector.
By enabling comparisons based on objectively measured role size, SP10 provides organisations with a clearer understanding of the real drivers of pay differences. This allows employers to better assess pay equity, identify the factors contributing to pay gaps, and make more informed remuneration decisions to ensure fair and competitive pay outcomes.
Want to ensure you’re paying fairly? Click the button below to learn more about our Job Evaluation methodologies.