The recent Defence Strategic Review has identified a range of workforce pressures that currently affect the ADF's efforts at recruiting and retaining a complete workforce. Whilst these pressures are not unique to the ADF, many existing barriers to entry and prospects of remuneration in line with the private sector are inhibiting recruitment across all three services.

The independent review has identified that Defence requires ‘innovative and bold’ solutions to overcome these challenges in the short to medium term. As we consider how to meet increasing recruitment targets, we face the age-old challenge of retaining the personnel currently in uniform. What if there was a solution in the short-medium term that would serve to improve recruitment whilst also improving ADF retention rates?

Experience has shown that any discussion of retention leads to pay. Across all services, existing retention schemes have included sizeable lump sum payments for identified Employment Category Numbers (ECNs) in exchange for a greater defined commitment to service. Many have rightly jumped at the opportunity; however, many of these personnel were also likely those who had little intent to separate from the ADF.

These personnel have benefited from working within an understaffed ECN and are likely overworked as a result. What if we could capture a greater commitment from our soldiers and officers from the outset? What if a greater return of service commitment at the point of entry is met with greater pay? Is this enough to alleviate some of the retention pressures in the short term whilst providing an attractive recruitment prospect to would-be recruits?

One thing that the ADF (and APS) have in their favour over the private sector is transparent pay scales that are graded against qualifications and experience. One thing that they do not incorporate is an individual member’s commitment. Whilst pay in the private sector is a process of negotiation, the ADF can tell you on your first day what you will be earning and tell you what you will be earning at each career milestone. This is an attractive proposition to many who seek job-security and stability in their lives. For Defence, this is a simple method for calculating total workforce remuneration against quantity of positions.

To alleviate the strain that retention and recruitment are putting on the system; Defence should incorporate a Return of Service Obligation (ROSO) for Pay scheme. By making the offer to ab initio trainees from the outset, Defence can offer an increased pay increment in exchange for a longer time-based commitment. There are three primary methods by which this could be conducted:

1. Defined Extra Commitment / Increased Pay Grade (Likely greatest benefit to the member, most costly to Defence due greatest variation in pay amounts).
2. Defined Extra Commitment / Increased Pay Increment (Most balanced option for all parties).
3. Defined Extra Commitment / Establish a new allowance (Likely greatest benefit to the organisation, lowest reward for the member).

Of course, as like all schemes, there are inherent benefits and weaknesses for each option. Option one is certainly the most expensive to the organisation. It is understandable that this is likely untenable in the current budgetary environment. Option two is a more cost-affordable option that still rewards a greater commitment to the personnel through a staggered pay increase per annum. Whilst this is the case, it has greater benefit for rank (as is option one) which may be viewed unfavourably; however, pay rises are simply existing pay rises committed to one year ahead of schedule.

The third option, which provides greatest benefit to the organisation and lowest value to the member is a simplified allowance (like field pay). A benefit of this is that it can be scaled to encapsulate staggered time commitments (e.g., two years of extra ROSO versus four years). A clear detriment to this option is that it is likely unscalable based on rank which may reduce its effectiveness for officer retention.

With these considerations in mind, I argue that option two offers the greatest benefit to Defence and the member. Whilst it offers increased pay to members with a greater commitment, it is simple in its implementation and the benefits remain clear. I propose that such a scheme could offer two time-based commitments: a two and four-year ROSO extension. Incremental pay benefits of this scheme should become ‘live’ once a member completes their ab initio training commitment. Therefore, with option two, an example officer who elected for a two-year ROSO extension would have a career that looks like this:

Note: This example uses a pay grade 3 Officer (non-technical) who was a direct entry candidate to the Royal Military College – Duntroon. This scheme would work the same for the Other Ranks stream; however, for simplicity, the officer stream is most easily demonstrated due to existing time-based career milestones. It should be noted that based on existing pay-scales, the officer career stream is most costly per-person to Defence. For simplicity, I have excluded increased superannuation payments; however, with these included this scheme remains more cost-effective than existing retention schemes on a per-person basis. This scheme can be scaled for all existing entry-methods, including members who attend ADFA and have longer ROSOs.

A clear advantage to this scheme is that benefit over time to the member is easily quantifiable against existing ADF pay scales. Greater initial commitment by all members is rewarded through pay above that of their peers. This system is fair as it is open to all members, rather than only those from critical trades. As demonstrated, it is more affordable per-person than the existing retention initiatives that only aim to target the most critical trades. This can be run alongside existing retention arrangements if required to alleviate short-term workforce pressures in critical ECNs.

This scheme could be extended, where members who have completed their ROSO may elect to further commit for an additional period, locking in continuation of incremental pay rises. This scheme is also beneficial to the ADF’s recruitment efforts by continuing to enable measurable retention rates and enabling longer-term workforce planning through having a greater number of ADF personnel locked into time-based contracts.

This scheme, and variations in and thereof, offer Defence a unique pay-based solution to help alleviate existing workforce pressures. Pay has been an elephant in the room in retention discussions, yet all existing retention schemes have ultimately focussed upon it. The ADF can reduce the amount of retention schemes required overall by targeting retention at the point of entry.

As demonstrated above, in one of the costliest cases, such schemes can be far more affordable to the organisation than existing retention schemes whilst providing tangible pay benefits to a greater number of ADF members. Whilst retention schemes traditionally focus on at-risk and critical trades, a scheme such as that proposed above can help to limit such instances occurring in the first place. For Defence, there is no cost in an instance where a member elects not to have a longer ROSO that is greater than is currently being faced today.

Cove Team: The author's submission ends here, what follows is a response from the APCB.

CAPT Costello has provided an innovative proposal in order to increase the propensity of soldiers and officers to serve beyond their initial service obligation period. I have been graciously asked by The Cove to provide a response as the Army’s representative for Industrial Relations and Remuneration matters. I will first address the proposed scheme and then take the opportunity to speak to remuneration more broadly. APCB offers the following considerations in response to the suggestions made by CAPT Costello.

Consideration must be given to inadvertently creating two parallel structures at the point of entry – this is traditionally where salary matters the least to individuals. The ADF should consider whether offering differential pay at this point of time is a good return on investment, and whether forcing a decision to serve longer at the beginning of one’s service is fair. Once a member completes their extra time commitment, for example six years (four for the initial IMPS plus two extra), reverting the member back to the pay scale they should be on may have unintended consequences. Going backwards in pay is considered sacrilegious in the Industrial Relations world and most people would consider that an unacceptable outcome. Finally, the situation where a member accepts additional pay and then decides not to complete their extra service period would present a challenge to the parent Service. This may necessitate legally compelling the member to continue to serve or calculating the extra salary they received and ask them to pay it back. Both are fairly unattractive options. Life and circumstances changes, we certainly don’t want the situation where our members are serving transactionally because they are legally (or financially) compelled to.

Army currently employs approximately 48,700 permanent and part time uniformed members; therefore, our pay structure must be both fair as well as simple to understand and administer. Creating more permutations to pay points introduces greater complexity. This is the reason why, traditionally, financial incentives for retention (i.e., bonuses) are kept clean and separate from salaries. This is not a criticism of CAPT Costello’s proposal, but a reflection that pay setting is a highly complicated endeavour, especially so for a workforce the size of ours.

Speaking more broadly, we are well aware of the current challenging economic conditions; higher than normal inflation and interest rates as well increasing rental costs are affecting the buying power of all Australians. Our members are not immune to this. As a result, Army and the ADF has recently introduced several initiatives aimed at tackling this situation. For example:

• The ADF Employment Offer Modernisation Program is in the process of reforming allowances which includes a $2000 pay increase to all ranks.
• The Modernisation Program has also introduced more flexible options for recognising more types of family constructs, alternative location options, and greater flexibility in the usage of leave.
• The Recruitment and Retention Tiger Team (R2T2) have recently worked with the Government to secure approval for a $50,000 bonus to members who recommit to another 3 years of service.
• The ADF is seeking to secure another general percentage pay rise before to the end of 2023 as part of the Workplace Remuneration Arrangement bargaining process.

One area the ADF needs to be better at doing at all levels is communicating and understanding our total remuneration package. Often, we see our workforce comparing a civilian job offer directly with ADF pay, which can be misleading.

For example, a corporal at Pay Group 3 – $82,611 will often see a private sector offer of a $120,000 package, which can seem attractive at face value. I have provided some figures below for illustration purposes (these numbers are informative and does not constitute financial advice).

Breakdown of ADF Pay vs a typical private sector offer:

Once the member factors in superannuation, exemption from Medicare levy / surcharge, as well as rental assistance; the private sector offer may not end up as attractive as initially thought. Additional conditions of service considerations need also be considered such as a generous leave allocation, stand-down periods, free medical and dental, travel benefits, and location benefits should also be considered as part of the decision-making process.

The other aspect of retention we must keep in the mind is that it is not always about remuneration. Our exit data shows that many members of our workforce accept salary reductions in favour of other factors such as location stability, desire to pursue another career, family considerations, and seeking more job satisfaction. These are all valid reasons and if someone’s desire to leave Service is primarily for non-remunerative reasons, no amount of additional money will keep them. The ADF is also looking at other non-remunerative options to make work more flexible, more supportive of families, and increasing job satisfaction. These factors must all work together in concert as part of an overall employee value proposition.

I would like to thank CAPT Costello for initiating the conversation and encourage other members to come forward through avenues like The Cove to continue to do so. While remuneration is not the sole reason for service, we understand that it is a critical component and has a profound effect on the member and their family.