David Cameron said the bonus pot for senior civil servants and NHS managers would be slashed by two thirds this year, lobbing £15m off the public sector wage bill.
From now on, just a quarter of staff that have made an “exceptional contribution” will be paid a bonus.
Cameron said the most pressing task facing the new government was the “record budget deficit” which could only be tackled by “leading from the front”.
“That’s why last week the Cabinet and I agreed to take a five per cent pay cut. Now we need senior civil servants to join us in showing leadership,” he said.
Head of the civil service Sir Gus O’Donnell has now been charged with overhauling the pay and bonus structure for senior civil servants.
Cabinet Office minister Francis Maude said it was only right that highly paid civil servants should “play their part” in reducing the public sector wage bill.
Around 4,200 people are employed in the Senior Civil Service (SCS) and 1,100 NHS senior managers. In 2008-09, the average bonus for a director general in the SCS was £12,700, while NHS senior managers received up to seven per cent of their salary.