Most of the Ministry and Foreign Affairs 600 staff will have to reapply for their jobs under a radical restructuring proposal that could see up to 300 jobs go and lucrative allowances for staff on overseas postings whittled back to boost pay packets back home.
Staff will be told on Thursday about proposals to cull up to 50 diplomatic positions by closing embassies in cities including Stockholm and Warsaw, and downsizing others.
As many as 140 overseas-based administration jobs and around 100 corporate positions - some based in Wellington and the rest on secondment overseas - are also in line to be axed and some of those functions contracted out.
Under the most radical proposal, up to 600 positions engaged in work outside MFAT's overseas development aid arm - most of the ministry's core staff - will be advertised and staff told to reapply.
Sources say the proposals are an attempt to shake up a ministry which awards promotions based on pecking order and seniority.
But there is also concern that they could spark an exodus of the most talented staff if they are not handled sensitively, which is why there is expected to be a lengthy period of consultation.
The changes come as the Government expects deeper cost cuts from the public service.
Labour's foreign affairs spokesperson Phil Goff said he would be alarmed at any moves to slash New Zealand diplomacy abroad.
"It is false economy. Basic policy work is being contracted out
to consultants at an inflated cost," he said.
He said he was concerned about New Zealanders who might find themselves in trouble overseas and require consular assistance.
"According to initial planning documents families of Kiwis hospitalised in a developing country or jailed may get an 0800 number instead of consular help."
But sources say a bottleneck at the senior management level had seen a drift of younger, talented staff to positions in the private sector, because MFAT's system for deciding promotions barred many of those staff from getting a better position if someone more senior than them applied.
They also fingered the perks associated with overseas postings, which acted as a strong incentive for senior staff to stay on, and helped create a huge imbalance between the pay packets of workers back in Wellington, compared with their colleagues overseas.
One source said diplomats and staff seconded to overseas missions had all their expenses covered including school fees, accommodation, transport and travel and also received an allowance equal to 20 per cent of their salary if their spouse was not working, plus extra allowances for each child.
Once salaries and extra support were taken into account, some senior diplomats were receiving equivalent to $500,000 a year, while staff back in Wellington received rates considered below average for the public sector.
The aim of a remuneration review launched last year had been to
address that imbalance and it was proposed to increase salaries for
Wellington based staff, while reducing offshore allowances.
Some of the jobs that are set to disappear from overseas posts include drivers, chefs and administration staff, a number of which are seconded from Wellington and receive the same allowances.
Others are employed locally for those positions and could be re-employed once those functions are contracted out.
The proposals signal the biggest shake up of MFAT in decades and follow Foreign Affairs Minister Murray McCully putting the agency on notice last year that he planned to tip tradition on its head.
In a speech last year he said diplomatic postings would be advertised for all-comers and warned that MFAT focused too much on Europe, when the balance of trade and economic opportunity had moved toward Asia, South America and regions like the Gulf states.