Parliamentary leaders will be taking home more in their pay packets over the coming years thanks to a decision from the Remuneration Authority, but ministers have admitted the salary bumps have come at an "awkward" time.

The Prime Minister will be paid an additional $50,000 a year over the next three years, which will bring Christopher Luxon's salary to $520,000 annually. Meanwhile, the average back-bench MP will now be raking in close to $200,000 a year.

Luxon has already confirmed he will be donating the $50,000 increase to charity, while it's up to individual MPs whether or not they will be taking home the extra amount in their pockets.

The pay increases were scrutinised by the New Zealand Taxpayer's Union, which demanded that MPs reject their additional $17,239 in base salaries due to the pay rise being "out of touch".

"While the average income of households is going backwards, MPs are locking in annual increases that don’t reflect the real world. The decision demonstrates that the Wellington-based Remuneration Authority are out of touch with the rest of New Zealand," said the union's spokesman, Jordan Williams.

"The economy is going backwards. Household incomes continue to decline. The Government is adding $75 million a day to the national debt. Now is not the time to hike MPs' pay."

Police Minister Mark Mitchell and former Cabinet minister Ginny Andersen appeared on Newstalk ZB this morning, where Mike Hosking proposed a game to the pair, asking them to suggest what their salaries should be worth.

Asked first, Mitchell stuttered and mumbled an incoherent response until, upon being prodded further by Hosking, addressed the pay rises in a general sense.

"The reason we have an independent authority is for that very reason. They will set what we're worth and it's important that politicians can't interfere with that and have a say," he told Hosking.

Andersen's response to the same question was equally as defective, claiming that it would be insensitive to make claims around pay during a cost of living crisis and economic recession.

"Kiwis are doing it really tough right now, the cost of living crisis is biting people so I think there's a general reluctance to talk about how much you're worth," she said.

We know that on a day-to-day basis, families that are losing potentially free school lunches [and] free kids on buses ... there are families that struggle to put food on the table each week and so that's where my thoughts are, not how much I can generate from being here."

The Remuneration Authority chairman, Geoff Summers, explained that five criteria are considered when the authority determines whether or not to increase a government representative's salary. The same process is followed for all 2500 people whose pay is set.

Four years ago, Summers said, the law was changed to say that after an election a pay review should be undertaken, then the prospective pay increases should be indicated in advance for the following three years.

The first time this was meant to be implemented was 2020, but the Covid-19 pandemic meant the authority simply invoked a provision in the law which meant no pay raises would be given that year.

"So, this is the first time we've really done it this way, which is why our review was so extensive and our report is so extensive," said Summers.

The authority is given room for interpretation when determining the pay bumps based on five criteria. Judgement is always involved and scientific method is often impossible to apply. Summers said that in this case, experience would always be counted on for the most impartial and prudent of decisions.

"I've been in pay-setting mechanisms for over 50 years now, so hopefully I can apply some really good judgement. And we're really confident that we've got this about right according to the law."

Summers joked with Hosking that, at dinner parties, he'll sometimes tell people that his job is to decide how much politicians get paid. He said the most common response was that he "shouldn't give them any money, because they're useless".

"But depending on who I'm talking to, it tends to be the other half," he told Hosking.

Trying to determine what an appropriate amount should be for a politician to earn is a hard science to crack, according to Newstalk ZB political editor Jason Walls, who agreed with the sentiment that the amount of work politicians put into their weekly lives deserves to be compensated fairly.

He said he personally believes politicians deserve a salary bump, given the last one hadn't come since 2017.

"If you look at what the role of the PM is in terms of the scrutiny they get, the media access they have to be in front of, and the sheer workloads - of course they're underpaid," said Walls.

"Half a million dollars for someone who does twice the work of the usual CEO is frankly not enough money. And, frankly, I think Luxon made the right decision to give the excess to charity but that's because he's quite a well-off man and can afford to do that."

Hosking said to Walls that some of the standard MPs are "bog standard" and don't deserve 5 per cent of what they're paid, to which Walls agreed and that a middle ground needed to be found.

However, Walls said, politicians will hardly ever take up their roles in office for financial compensation.

"I remember talking to a very senior MP about when they came into opposition and they told journalists: 'Look this might be a hard pill for you to swallow, but 163k is just not a lot of money for somebody coming out of the corporate world'."

Mitchell agreed, stating everybody comes into politics for different reasons and admitted he did work very long hours. But he compared his role to other jobs in the country that were equally as gruelling and didn't earn nearly as much.

"I look at when I was a very proud member of the NZ Police as a dog handler and ... I worked enormous hours in the day in a dangerous profession," he said.

"It's a really tough one, but certainly from my perspective, it's come at an awkward time because we're doing it tough as a country. And we're trying to work as hard as we can to get ourselves back on track and we will get ourselves back on track. But I'm pleased it's not for politicians to decide."