The Abbott government has rekindled the threat of instigating yet more public service job cuts in order to offset new enterprise pay deals after staff at Employment Minister Senator Eric Abetz’s own department were told that almost 50 jobs would need to go if they want to realise the better of two low-ball offers floated to staff.

In a so far informal pitch to Department of Employment staff – who are responsible for administering more than $5 billion in policy changes for job seekers, employment assistance service providers and employers – public servants are being given the controversial choice of thinning their ranks and reducing their conditions to achieve a marginally better deal.

While the deal appears to throw down the gauntlet to unions, it could pave the way for parts of the bureaucracy to relinquish heavily commoditised back office functions like information technology support which are often already routinely performed by IT service providers and their contractors.

Government departments and agencies have for well over a decade struggled to recruit and keep permanent IT staff since the Howard government instigated its whole-of-government IT outsourcing push in the 1990s, with talented staff opting to contract into government for far higher rates of pay.

At one stage the Australian Information Management Office (which was for a time overseen by Senator Abetz as Special Minister of State during the Howard government) even pushed in a submission for departments and agencies to have greater access to the 457 visa scheme to address a skills shortage and rising IT labour costs.

The Department of Employment has for some years counted under its umbrella the Shared Services Centre which acts as a kind of internal technology outsourcer for both the Departments of Education and Employment as well as a raft of smaller agencies ranging from Prime Minister and Cabinet to the Australian Public Service Commission.

Although seen as one possible model for increasing externally delivered back office services across the federal sector, some parts of the Coalition are known to be increasingly sceptical about how much could be saved by government effectively outsourcing to itself. The core argument is that the private sector should contest such work through a much more centralised back office arrangement that is made available to far more departments.

Nailing down government IT costs remains one of the only conspicuous points of furious agreement between Labor and the Coalition.

Both remain committed to a “cloud first” policy to wean departments of expensive legacy infrastructure and enterprise applications and modernise their online service delivery, moves that ultimately automate public service back office and IT contractor jobs.

But that’s where the consensus starts and ends.

With the Abbott government firmly committed to limiting the influence and representation of unions in the public service and the powerful Community and Public Sector Union digging in for a protracted battle, the result of any pay bargaining at the Department of Employment carries with it highly elevated levels of symbolism for both sides.

Senator Abetz’s office notably steered away from talking-up any potential for an industrial dispute at his own department on the grounds of proper protocol.

The Employment Minister’s office said as it was not the bargaining agent, it thus wasn’t not appropriate for him to comment “in relation to any ongoing bargaining negotiations.”

The CPSU was more direct.

The union branded the informal offer a “nasty” part of a “hardline approach to public sector pay and conditions” and said that Senator Abetz was now “facing a big test with staff in his own department set to vote on a deal that cuts a raft of their conditions and rights in return for a pay rise of less than 1 per cent a year.”

“Minister Abetz is the one who imposed this unworkable policy on Departments and now he is trying to get his own staff to swallow the dud deal the Government’s policy has produced,” said CPSU National Secretary Nadine Flood.

“More than 70 public service agencies have been trying to bargain under his policy for the last six months and not one has been able to present a reasonable deal to staff. Does he really expect his own staff to stomach such a terrible deal?”

The Department of Employment is still playing it relatively safe in terms of early discussions.

In a note to staff it said as part of its “initial bargaining position” the Department has “proposed five productivity/cash savings initiatives that could be used to fund a pay increase.”

“Not all initiatives may be acceptable to employees. If that is the case, some initiatives may be removed and the associated value of the pay offer would also be reduced,” the note said.

But what’s tentatively on the table so far in terms of a new pay deal is unlikely to inspire much enthusiasm given it’s still firmly below inflation.

Under “Option 1” staff would have to trade away access to higher duties allowances and “Health Related Allowance” as well as having an increase in the “increment points in the salary range for each classification” that would act to make promotion slower in order to get an increase of 1.7 per cent over three years.

Under “Option 2” the same dilution of conditions applies but are bolstered by a 30 minute per week extension to working time and a “staff reduction through natural attrition of 46 jobs (over three years)” to provide a “cash offset” to deliver a total 2.8 per cent pay increase

And in what could be a telling sign, under the heading of “Are there other options” the Department of Employment said that options it had not included “at this stage do not yield the savings we are looking for or do not meet the requirements of the bargaining policy.”

Far less clear is whether the government is planning significant future changes to either the role or structure of the Australian Public Service Commission – which enforces the bargaining framework   following the announcement on Friday that its Commissioner Stephen Sedgwick will imminently depart, with a replacement still not named.