Working more efficiently in a tight fiscal environment

According to a number of international studies, the APS is a relatively efficient organisation, reflecting the success of ongoing reform over many years. A 2008 Accenture study, commissioned by the United Kingdom National Audit Office, identified the public administrations of Australia, Finland and Canada as particularly strong in ensuring value for money. The study stated that these countries ‘have adopted budgeting and financial management processes that require ex-ante and ex-post justification for the appropriation of funds. They have also adopted fiscal rules aimed at ensuring the value of limited resources is maximised and safeguarding fiscal sustainability.’¹

In addition, an Organisation for Economic Cooperation and Development (OECD) Efficiency Study² found that the APS employs a relatively low proportion of the workforce compared to other OECD countries (approximately 160,000 employees or 1.5% of the employed population) yet despite this, it rates highly on a number of OECD effectiveness indicators for the public sector.³ working more efficiently in a tight fiscal environment

Notwithstanding the success of the APS in the past, increasing financial pressures faced by the government, through the impact of the global financial crisis, are driving the need for greater efficiency in all government operations.

This chapter will begin by reviewing the range of efficiency measures currently in place for the APS. It will then examine ways of improving efficiency across the APS, and within agencies, as informed by the findings of the agency and employee surveys. The chapter will also review how agencies are managing some of their costs for employees, including remuneration, and leave liabilities.

APS budget framework

The government has recently indicated that it will continue to seek savings from the APS through a number of strategies, including:

• holding real spending growth to 2% until the government’s Budget returns to surplus
• offsetting new spending by agencies through savings—portfolio ministers will be required, for the third year running, to identify savings ahead of their formal bid⁴
• conducting strategic Department of Finance and Deregulation (Finance) reviews to identify savings and efficiencies.

These measures are in addition to ongoing application of the annual efficiency dividend, which has been applied to the operational appropriation of APS agencies since 1987–88. The dividend has now returned to a rate of 1.25% following application of an additional one-off 2% efficiency dividend, effective 1 March 2008 to 30 June 2009.

In December 2008, the Joint Committee of Public Accounts and Audit (JCPAA) tabled its findings on the impact of the efficiency dividend on smaller agencies. The JCPAA highlighted significant impacts for small agencies, with unintended consequences arising from application of the dividend and made recommendations about how to alleviate these consequences.⁵ The government is yet to respond to the JCPAA’s recommendations.

Over time, agencies have needed to manage the efficiency dividend while continuing to fund wage increases. This means that in recent years, agencies have been required to find ongoing cost savings of around 1.75% to 2% per annum to help meet wage increases, on top of measures to cover the efficiency dividend.

With adoption of the Gershon recommendations in late 2008, APS agencies have also had to identify savings in their information and communications technology (ICT) budgets. Reductions to agency business-as-usual ICT budgets are being implemented, to achieve savings of $400 million annually on full implementation. Larger agencies are required to achieve a 15% reduction, and smaller agencies, a 7.5% reduction. Half of these savings will be reinvested to improve agency ICT capability.

It is clear that the total cost savings every agency in the APS is required to make each year are substantial. While it is difficult to accurately measure the APS’s productivity growth, strong imperatives for the APS to improve its productivity exist.

An ongoing difficulty in assessing productivity and efficiency in the APS is that, unlike the private sector, no agreed methodology for measuring the value of outputs is in place. Australia’s participation in a new OECD Efficiency Study will offer a basis of comparison on a range of efficiency measures with six OECD countries. The Efficiency Study, which is due for completion by the end of 2010, will develop two reports, namely:

• The International Comparative Study will include a quantitative survey on public employment, making use of OECD databases. It will be comparative, and indicate differences in the quality of services and costs of production as precisely as possible, while taking into account differences in legislation and policies between countries.
• Peer-reviewed Country Efficiency Assessments. The Australian assessment will evaluate the country’s policy plans against the background of practices and policies in other OECD countries. Each assessment will make recommendations for quality improvements in public services and potential savings.

A key focus of the OECD Efficiency Study will also be how countries have used the adoption of shared services to achieve greater efficiencies in their public sectors.

Initiatives to improve efficiency

On an APS-wide basis, more coordinated procurement arrangements across the APS are being implemented through Finance’s framework for government purchasing to support Budget measures on expenditure.

In January 2009, the government signed a volume sourcing arrangement with Microsoft. This was the first of the government’s coordinated procurement initiatives. The government has also begun investigating coordinated contracting arrangements for travel services, with a taskforce established to progress whole of government tenders for travel services. A second phase of open tenders will be conducted for provision of accommodation, hire cars and travel cards to the government.

Finance is also conducting investigations to assess the potential of coordinated contracts for a range of other services, including stationery and office supplies and labour hire and recruitment services. As indicated in Chapter 3, measures have been introduced to better coordinate recruitment advertising across the APS, and the Commission is currently undertaking an evaluation of the impact of those measures.

Almost all agencies responding to the agency survey reported taking action to improve efficiency and/or effectiveness during 2008–09, ranging from ‘root and branch’ departmental reviews to various targeted measures, such as upgrades to ICT, improvements to planning processes, increased investment in learning and development and making better use of technology to reduce travel costs (examples of agency efficiency measures in MAC agencies are provided in Appendix 1).

One-quarter of all agencies reported implementing an organisational restructure to better align resources with agency priorities. Focusing on strategic planning, appropriate governance structures and upgrading IT systems were also cited by agencies as important actions they had taken to improve performance.

Over 70% of agencies reported that the actions they had taken to improve efficiency and/or effectiveness had been successful, while the remainder considered it too soon to tell if the actions would have a positive outcome.

Agencies were also asked to identify what actions they would find most beneficial in terms of preparing the APS for the future. The main actions agencies identified concerned recruitment and retention, efficiency measures and closer ties with external stakeholders. Recruitment and retention are discussed in Chapter 3, while relations with external stakeholders are discussed in Chapter 6.

In terms of efficiency preparations for the future, agencies recognised the need for more streamlined processes and a reduction in red tape. Leveraging buying power and sharing services with other APS agencies were also identified as ways of further enhancing efficiency.

During the year, four agencies (Treasury, Finance, DEEWR and the Commission) worked together to start the development of a corporate compliance tool which would document legislative and non-legislative corporate compliance requirements of APS agencies. The project aims to ensure APS agencies are aware of compliance requirements so they can manage their reporting requirements more effectively and efficiently and to identify opportunities to consolidate and remove requirements. A subsequent part of the project will look at developing best practice templates such as Chief Executive Instructions, particularly for use by small agencies.

In addition, improved governance was identified as important for improved efficiency and effectiveness in the future. Some agencies suggested that governance needed to be improved to take account of more complex issues; others indicated it needed to be streamlined as effective governance need not be a burden.

The Auditor-General for Australia, Ian McPhee, in a recent speech confirmed the importance of effective governance in delivering high quality public administration. He listed ‘sound governance regimes’ as the first of five areas that should be on ‘any agency watch list’.⁶

Table 7.1 shows there were increases in agency measures to promote good governance across the board during 2008–09, with most agencies having these measures in place. Sound governance will build the capacity of APS agencies to be more efficient and effective. At the same time, ensuring good governance is counterbalanced with other measures to reduce inefficiencies (such as red tape) will be an ongoing challenge for agencies.

Table 7.1: Agency governance arrangements, 2007–08 and 2008–09

	2007-08	2008-09
	% of agencies
Source: Agency survey
Appropriate assessments of risk are conducted	97	100
All staff are kept informed about updates, changes or revisions to financial and other delegations	99	100
All staff have access to information that outlines the agency’s decision-making processes and/or relevant committee structures	92	96
Chief Executive Instructions (CEIs) are available to all staff	98	99

Employee views on how agencies can improve efficiency

In this year’s survey, employees were asked to identify the four most important actions the APS could take to achieve greater efficiency and effectiveness; their responses are set out in Figure 7.1.

Just under half of all respondents (44%) identified more consistent classification and remuneration across the APS as an action that would improve the efficiency and/or effectiveness of the APS.

Other actions that were identified by one-third or more of employees included sharing of best practice on innovative policy development and service delivery, improved collaboration with other APS agencies, greater mobility across the APS and better access to data and information across the APS.

The issues of mobility and consistent classification across the APS appeared to be more important to APS 1–6 and EL employees than to SES employees. See ‘Managing labour efficiency and productivity’ below for a more detailed discussion of remuneration and its impact on these issues.

Employees’ views were also sought on the necessary changes to better position the APS for the future. As shown in Figure 7.2, the most important changes, in their opinion, were reducing duplication and inefficiency across departments and across levels of government (30%), taking action to attract and retain high quality/highly skilled people (23%) and improving leadership and management skills (17%).

In another question, 34% of employees rated more streamlined administrative processes as one of the top four important actions to help their agency prepare for future challenges. This reinforces the importance for agencies to regularly review their operational processes to ensure they are not hindering organisational performance.

The employees who selected more streamlined administrative processes as an important action were asked to comment on ways of streamlining these processes. Many identified an abundance of red tape (especially around procurement and recruitment processes), a duplication of processes across areas and regions, a lack of clarity and guidance, a lack of trained support people, and inadequate information technology systems as problem areas.

Internal red tape will not be reduced without ongoing effort. It requires accurate analysis of new and existing regulatory and administrative requirements. The 2007 Management Advisory Committee (MAC) report, Reducing Red Tape in the Australian Public Service, outlined a framework for promoting ongoing reduction of unnecessary red tape, including the need for periodic cost-benefit reviews of regulation and administration.⁷

A number of employee comments on streamlining administrative processes also indicated a level of concern with the effectiveness of recordkeeping practices. Only 40% of employees this year agreed that recordkeeping practices in their agency had generally improved in the last 12 months, less than in previous years (48% in 2006–07 and 44% in 2007–08).

Improving individual productivity

In conjunction with measures to improve agency efficiency and effectiveness, it is important to provide a workplace where individuals themselves are able to improve their own productivity. The factors identified in Chapter 5 which may enhance employee engagement are also important for securing improvements in individual productivity, which in turn can help to ensure more effective achievement of agency outcomes.

Table 7.2 shows employees’ perceptions about their levels of productivity in their current job over the last 12 months. This year, 23% of employees indicated their productivity has increased markedly in their current job, with a further 39% indicating that their productivity has somewhat increased. Only 5% of employees felt their productivity had decreased over the last 12 months.

Table 7.2: Employee views on whether their productivity has increased in 2008-09 compared to the results of earlier years

	2004-05	2005-06	2007-08	2008-09
Note: results for 2006-07 are not available Source: Employee survey
Yes, markedly	23	23	26	23
Yes, somewhat	37	38	35	39
No, it has remained the same	21	22	19	21
No, it has declined	6	4	7	5
Hard to say as I have recently changed jobs	12	13	14	12

Twenty-five percent of SES employees considered that their productivity had increased markedly during 2008–09, and 43% thought that it had somewhat increased. Only 3% of SES employees indicated their productivity had declined during 2008–09.

Employees were asked in the employee survey to choose the four most important actions that would help them achieve greater personal efficiency and/or effectiveness. Employees chose from 13 strategies, identified through previous State of the Service surveys. Figure 7.3 shows that, overall, the most important actions employees chose were better internal communication (48%), spending more time being strategic (45%), improved collaboration within their agency (43%), and more effective training programs (33%).

While fewer SES employees (37%) identified improved internal communication as an action that would improve their efficiency/effectiveness, more EL (48%) and APS 1–6 (48%) employees selected this action. In contrast, 73% of SES, 60% of EL and 39% of APS 1–6 employees chose the option of less time on being reactive and more time on being strategic. These results indicate clear recognition that strategic thinking and internal communication are important for individual efficiency/effectiveness, although it is likely that the opportunity for these actions is being reduced by the more immediate demands of the job.

Further analysis showed that SES employees were also more likely to consider that improved ICT within their agency (36%) and a greater emphasis on their agency’s priorities (25%) were actions that would improve their individual efficiency/effectiveness compared to EL (28% and 18%, respectively) and APS 1–6 employees (17% and 16%, respectively).

Employees were asked to rate their agency’s performance over the previous 12 months in a number of areas relating to increasing their individual productivity. Figure 7.4 shows their level of agreement with agency performance. Employees were most likely to agree that their agency provides good working relationships (78%), increased knowledge and/or experience (65%) and information/resources to perform well in their job (63%). However, key areas for agencies to focus on to improve individual productivity include:

• guiding/supporting effective collaboration within and across government (49% of employees agreed their workplace provides this)
• promoting strategic planning (49% of employees agreed)
• guiding/supporting engagement with non-government bodies (45% of employees agreed).

Managing labour efficiency and productivity

Adopting measures to improve efficiency and productivity at the agency level in the APS are critical in meeting the overall Budget objectives for government expenditure. Managing employee costs, including remuneration and leave, are also a significant consideration when assessing the scope for securing greater efficiency, effectiveness and productivity in agency operations.

Remuneration

The government first revised the framework within which APS agencies negotiate remuneration with their employees in February 2008. The revised Australian Government Employment Framework8 confirmed that agency-level bargaining would be retained in the APS but that collective agreements would be the basis for non-SES employees’ terms and   conditions. A recent amendment9 requires additional scrutiny of any annualised wage increase of more than 3%, with effect from 1 September 2009. A common nominal expiry date for new APS agreements has been set for no later than 30 June 2011.

As shown in Table 7.3, salary increases contained in APS collective agreements (4.1%) were less than the private sector average annualised wage increase (AAWI) as at 30 June 2009 (4.3%) but higher than the Australian Bureau of Statistics (ABS) wage price index (4.0%) which covers both the public and private sectors.

Table 7.3: Comparison of wages growth, 2000–01 to 2008–09

	APS AAWI(a)(%)	APS NED to NED AAWI(b)(%)	Private sector AAWI(c)(%)	Comparable sectors AAWI(d)(%)	ABS wage cost index(e) (%)
Notes: AAWI = average annualised wage increase; ABS = Australian Bureau of Statistics; APS = Australian Public Service; NED = nominal expiry date; NA = not available. (a) Average annual wage increases in APS collective agreements entered into during the 12 months to 30 June, collected by the Department of Education, Employment and Workplace Relations (DEEWR). (b) Average annual pay increase from the NED of the previous agreement to the NED of the current agreement. The NED to NED AAWI allows for particular comparisons of annual wage increases across APS agency agreements and should only be used in this context. (c) Average annual wage increases in current private sector collective agreements. (d) Average annual wage increases in industry sectors with more than half of their employees having post-school qualifications. This data is sourced from the ABS, Census of Population and Housing. The data on AAWI by industry sector was collected by DEEWR. (e) Average annual index—ordinary time hourly rates of pay excluding bonuses. It is a broad measure of wages growth in both federal and state jurisdictions covering all employees in both the public and private sectors. This data is from ABS Cat. No. 6345.0, Labour Price Indexes, Australia. There are differences in the way agreements are handled by the Public Sector Branch and the Workplace Agreements Database and Analysis Section at DEEWR since introduction of the no-disadvantage test. The Public Sector Branch works off the approval date whereas the Workplace Agreements Database and Analysis Section continues to work off lodgement date; therefore, there may be some discrepancy between which agreements have been included for calculation of the APS NED to NED AAWI and the APS AAWI.
2000–01	4.8	3.5	3.9	3.9	3.4
2001–02	4.1	3.9	3.6	4.0	3.3
2002–03	4.9	3.9	3.8	4.1	3.4
2003–04	4.2	4.0	4.0	4.3	3.6
2004–05	4.2	4.0	3.9	4.4	3.8
2005–06	4.2	3.9	4.2	4.4	4.1
2006–07	4.2	4.1	3.6	4.2	4.0
2007–08	4.2	4.3	3.8	4.1	4.2
2008-09	4.1	-	4.3	4.4	3.9

A more accurate method of comparing APS wage increases with those of the private sector involves a comparison to those industry sectors where employees have tertiary qualifications similar to those of APS employees.10 The AAWI in collective agreements current at 30 June 2009 for industry sectors, where more than half of those employees have tertiary qualifications, was 4.4%, also higher than the APS figure of 4.1%.

It is also important to consider how the total remuneration for APS employees compares to equivalent jobs in other jurisdictions, as well as with other sectors. Table 7.4 presents the median level of total remuneration package for APS employees for each classification in 2008. The median level is used as a benchmark to compare APS remuneration levels with the equivalent jobs in the state and territory public services and in the private sector. This table shows that APS levels of remuneration continue to be above those of the public services in the states and territories; however, remuneration levels are less than corresponding private sector benchmarks (25th percentile) in most cases.

At the EL 2 classification, for example, the combined state and territory public services remunerate jobs at only 76% of the APS median while the private sector remunerates substantially above the APS level. At the 25th percentile point in the private sector market, jobs equivalent to EL 2 are remunerated at 105% of the APS median, increasing to 121% at the median point in the private sector market. Four APS classification levels—APS 1, APS 2, APS 3 and SES Band 1—at the 25th percentile, offer more competitive remuneration packages than the private sector.

Table 7.4: Comparative levels of total remuneration package, 2008^(a)

	APS	State and territory public services(b)		Private sector
	Median	Median(c)		25th percentile(c)		Median(c)
Notes: n/a = not available (a) Total remuneration package includes base salary plus benefits such as superannuation and motor vehicle, but excludes bonuses. (b) Mid-point of equivalent positions in the combined state and territory public services (excluding Tasmania and Western Australia). (c) Percentage of the APS median total remuneration package. (d) As at 15 September 2009, 16 Departmental Secretaries were remunerated at the same rate ($457,080) and three higher-level Secretaries received 6.9% more. Source: Mercer Human Resource Consulting, 2008 Broader Market Comparison-APS SES and Non-SES Remuneration survey conducted for DEEWR.
	$	$	%	$	%	$	%
Graduate	57738	n/a	n/a	n/a	n/a	n/a	n/a
APS 1	43366	37544	87	29841	69	32257	74
APS 2	50759	47341	93	43854	86	48134	95
APS 3	56729	54150	95	54546	96	60258	106
APS 4	63863	60958	95	65238	102	72383	113
APS 5	70188	68334	97	76325	109	85582	122
APS 6	81295	76844	95	92617	114	104971	129
EL 1	102614	85354	83	111418	109	127372	124
EL 2	129329	97955	76	135263	105	156593	121
SES Band 1	196880	170465	87	177500	90	210722	107
SES Band 2	248133	213991	86	251868	102	307628	124
SES Band 3	315007	279600	89	379908	121	469987	149
Departmental Secretaries(e)	457080	n/a	n/a	n/a	n/a	n/a	n/a

Salary movements

Salary dispersion within the APS has been monitored and reported in previous State of the Service reports. This year’s data shows salary dispersion of much the same magnitude as has been reported in the past two years.

Figure 7.5 shows the gap between the minimum and maximum of the salary bands between 1996 and 2008. While agency-level bargaining has delivered significant productivity gains and has helped agencies deal with labour market pressures, the disparity that has developed is possibly hindering mobility and acting as a barrier to building a stronger, unified APS identity. It also appears that employees consider this disparity to be an issue that needs to be addressed in order to improve APS efficiency and effectiveness.

Leave management

Another key factor that could enhance agencies’ productive capacity is effective management of leave. This section looks at two areas of leave management—workplace absence or unscheduled absence, and management of annual leave.

Workplace absence

Reducing workplace absence (or unscheduled leave) is one of the most effective ways agencies can improve their productivity. While a certain level of employee absence is an unavoidable element of working life and a normal feature of healthy work environments, studies of unscheduled absence have found that for organisations with high levels of workplace absence, up to 50% is discretionary and therefore avoidable.¹¹

An excessive level of workplace absence has a negative impact on performance and often reflects unhealthy organisational and management practices; lack of employee engagement can be a significant driver (see Chapter 5). Absenteeism can also have a significant financial impact. The total cost of absence has been estimated to be up to three times the direct salary costs of the absent employee.¹² Agencies, therefore, should regularly monitor and analyse workplace absences¹³ to identify and address potential problems.

The median APS-wide absence rate appears to have stabilised with a rate of 10.2 days per employee per year, which is similar to the 2007–08 rate of 10.1 days per employee per year. In 2008–09, the levels of workplace absence varied widely across the APS, ranging from 2.6 days per employee to 16.1 days per employee as illustrated in Table 7.5.

Table 7.5: Levels of workplace absence^(a) by agency and agency size, 2008–09

		Agency size
Absence per employee	Measure	Small Median = 8.0 days	Medium Median = 10.4 days	Large Median = 12.4 days
Notes: (a) When the ratio of days of absence per employee is calculated using the full-time equivalent (FTE) measure in agencies where some employees are working part-time, the ratio is higher than those that are calculated using the headcount measure. This is likely to have a marginal effect in most agencies but caution should be exercised in making direct comparisons between agencies. Source: Agency survey
0.0 to 5.9 days	FTE	AFPCS, AOFM, FFMA, GBRMPA, NBA, OPH	DCC	-
	Headcount	CGC, MDBA, NOPSA, ONA	Geoscience Australia	-
6.0 to 7.9 days	FTE	ACIAR, AFMA, ANMM, Cancer Australia, FMC, FSANZ, HREOC, OPC, Productivity Commission	ANAO, AusAID, Federal Court	BoM
	Headcount	EOWA, TSRA	Austrade	-
8.0 to 9.9 days	FTE	AIFS, AIR, ASADA, NCA, Ombudsman	ACCC, AWM, DBCDE, NMA, PM&C, RET, Workplace Ombudsman	DEWHA
	Headcount	NNTT		DFAT
10.0 to 11.9 days	FTE	AIATSIS, APVMA, ARPANSA, NFSA, NWC, Privacy Commissioner	ACC, AEC, APSC, AUSTRAC, CDPP, Comcare, DHA, ITSA	ASIC, Defence, DHS, DIISR, Infrastructure, Treasury
	Headcount	ABCC, CrimTrac, PSR, Screen Australia	AIHW, Workplace Authority	AGD, Finance
12.0 to 13.9 days	FTE	AAT, ARC, NHMRC, RAM	ACMA, NAA, NLA, MRT/RRT	ABS, Centrelink, Customs, DIAC, IP Australia, Medicare
	Headcount	-	-	DEEWR
14.0 to 16.9 days	FTE	SSAT	AHL, ComSuper, Family Court	ATO, DAFF, DVA, FaHCSIA, DoHA

The levels of absence varied by agency size, with smaller agencies generally reporting lower levels of absence than larger agencies, which is consistent with the findings of other absence studies.14 In 2008–09, no uniform change in absence rates was apparent across agency sizes. Rates of absence decreased for small agencies (from a median of 8.3 days per employee in 2007–08 to 8.0 days per employee this year), while rates of absence increased for both medium (9.8 days to 10.4 days) and large (11.9 days to 12.4 days) agencies.

While the overall absence rate was relatively stable, changes in absence rates for individual agencies varied widely. In general, the largest changes occurred for small agencies, probably reflecting the greater impact on total absence rates of small numbers of employees taking significant periods of leave.

Sick leave continues to be the most common type of unscheduled leave employees used. Where agencies could break down their total absence, by absence type, over three-quarters (76%) was taken as sick leave. The next most common absence type was carer’s leave (13%), followed by compensation leave (6%) and specific types of miscellaneous leave (4%). Unauthorised absence made up less than half of 1% of all unscheduled absences.¹⁵

In 2008–09, the median sick leave rate was 7.9 days per employee, an increase on the 7.7 days reported in 2007–08.¹⁶ A number of agencies reported that concerns about swine flu led them to encourage employees not to come to work if they were feeling unwell, and this may have contributed to the increase.

Rates of absence due to sick leave in the APS are within the range reported by other public sector jurisdictions¹⁷ as illustrated in Table 7.6.

Table 7.6: Sick leave levels for selected jurisdictions, 2007–08 to 2008–09

Public sector jurisdiction	Annual sick leave rate per employee
Notes: (a) Based on full-time employees. (b) Based on full-time permanent employees. Source: Statistics Canada 2009, Work Absence Rates Report 2008, <http://www.statcan.gc.ca>; State Services Commission 2008, Human Resource Capability Survey of Public Service Departments as at 30 June 2008, <http://www.ssc.govt.nz>; Queensland Public Service Commission – MOHRI data, 2009; State of the Service agency survey
Canadian Federal Administration, 2008	12.3 days of illness or disability leave(a)
New Zealand Public Service, 2007-08	7.3 days of sick and domestic leave(b)
Queensland Public Service, 2008–09	7.0 days per FTE
APS, 2008-09	7.9 days

A proactive absence management policy that is clear, fair, well-communicated and supported by senior and line management is one of the most effective strategies for addressing workplace absence. During 2008–09, the use of absence management strategies generally increased, which may help explain the stabilisation of the absence rate. Results show that all agencies were using at least one strategy to manage workplace absence, with almost all (95%) using at least three strategies. In general, the larger the agency, the more strategies they used. This was similar to the pattern of the previous year.

Figure 7.6 shows that the most common absence management strategies agencies used were raising awareness of health and safety issues, healthy lifestyle promotion and other prevention mechanisms (99%), and providing flexible working arrangements to enable employees to manage work-life balance (98%). The strategies that showed the greatest improvement from last year were:

• providing a reporting framework to help management monitor absences, identify patterns and trends and highlight areas for further investigation (from 71% in 2007–08 to 77% in 2008–09)
• providing support and training to line managers to build their confidence and capability in managing workplace absence (from 57% in 2007–08 to 63% in 2008–09)
• including workplace absence as a regular agenda item at senior management meetings (from 46% in 2007–08 to 52% in 2008–09).

Despite the improvements some agencies made, it is important that all agencies continue to monitor absence trends to be able to develop strategies to address the underlying issues affecting work attendance. Agencies can refer to the Commission’s better practice guide, Fostering an Attendance Culture: A Guide for APS Agencies¹⁸ to help them identify workplace absences and their possible causes, and to improve their capacity to address problems through implementing better practice strategies. To help APS line managers, the Commission has also released a companion guide, Turned Up and Tuned In—A Manager’s Guide to Maximising Staff Attendance.¹⁹

Management of annual leave

Annual leave is a statutory condition of employment that entitles employees to a paid break from their work each year. The effective management of annual leave can have a direct impact on maintaining the wellbeing of individual employees and improving an organisation’s productivity, as well as reducing the costs associated with agency leave liabilities (the total value of annual leave liabilities was estimated to be $1.8 billion in 2007–08).²⁰

In 2006, the ANAO recommended that agencies adopt certain strategies to capture, process, review and monitor employee attendance and their leave entitlements, to improve management of annual leave.²¹ This year’s agency survey asked about the extent that these recommendations were being implemented (see Table 7.6).

Table 7.7: actions agencies took to manage employees’ level of annual leave, 2008–09

Table 7.7: Actions agencies took to manage employees’ level of annual leave, 2008–09

Actions to manage employees’ level of annual leave	Yes (%)	Being developed (%)	No (%)	N/a (%)
Notes: N/a = not applicable. (a) Includes one agency that did not provide a response. (b) Includes two agencies that did not provide a response. Source: Agency survey
Excess leave balances are monitored on a regular basis and appropriate follow-up action is taken when required	92	3	5	0
Leave arrangements as outlined in the agency’s collective agreement are fully implemented	91	3	0	6
Line managers are provided with information to assist in the proactive management of annual leave	91	6	2	1
Agency’s collective agreement outlines a threshold where an employee can be directed to take annual leave or is deemed on leave (e.g. 60 days)	78	2	13	7(a)
Control measures to manage unactioned leave applications in Employee Self-Service system	83	4	2	11
Risks associated with the management and processing of leave are included in relevant fraud control plans	67	8	22	2
Excessive leave balances and leave liabilities included as a regular agenda item at senior management meetings	55	12	31	3(b)
Risks associated with the management and processing of leave are included in relevant risk management plans	48	17	30	5
Agency’s collective agreement outlines a threshold where an employee cannot be denied leave (e.g. 40 days)	17	2	72	9

All except one agency reported using two or more strategies to manage employees’ levels of annual leave. The most popular strategies used were regular monitoring of excess leave balances and taking appropriate follow-up action when required (92%), full implementation of leave arrangements as outlined in the agency’s collective agreement (91%), and providing line managers with information to aid proactive management of annual leave (91%).

Key chapter findings

Ensuring the APS operates in the most efficient and effective manner is an ongoing requirement for a high performing public service. Internationally, and over time, it appears the APS has been performing well in terms of its productivity performance. However, there are now increased imperatives for ensuring an efficient and effective APS, and a number of APS-wide measures are in place to enable agencies to meet the government’s budgetary objectives.

Agencies have reported a range of measures to help increase their efficiency and effectiveness, including organisational restructures to boost performance. They also identified that a continuing focus on more efficient, streamlined processes, as well as a reduction in red tape, would improve their preparedness for the future. Effective and improved governance is also likely to assist in their efforts to improve efficiency.

Employees have also pointed to the need for a continuing strong focus on effective administrative processes, and reducing red tape, as a way of better positioning the APS to meet future challenges. A substantial proportion of employees considered that moving to a more consistent classification and remuneration arrangement across the APS would boost overall efficiency and effectiveness.

Along with agency measures to improve performance, it is important for individual employees to be encouraged to continue improving their own productivity. This year, employees have placed a strong emphasis on better internal communication as a means of improving their own productivity. Other areas for agencies to focus on to improve individual productivity include guiding/supporting effective collaboration within and across government, promoting strategic planning, and guiding/supporting engagement with non-government bodies.

How agencies manage their employee costs is also important for productivity. This year’s data on remuneration continues to show significant dispersion across salary bands at most levels in the APS.

Managing leave arrangements is critical for agencies seeking to improve their performance and productivity. There is scope for agencies to improve their capacity to manage unscheduled absences, particularly given that the APS absence rate appears to have stabilised at just over 10 days per employee per year. Agencies should also consider how they manage annual leave arrangements as these can affect individual productivity, as well as organisational performance.

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