Pay rises for MPs will be pegged back so their salaries fall closer in line with changes to public sector salaries after the new law was passed in Parliament overnight.

Under the Remuneration Authority Amendment Bill, the average annual percentage change in public sector pay, as measured by Statistics New Zealand's Quarterly Employment Survey, will now determine their pay increases.

The overall pay rise for MPs for the year starting July 1, 2014 will be 1.5 per cent after the Remuneration Authority Amendment Bill was passed last night.

'This means that MPs pay will increase in line with average public sector salary movements,” says Workplace Relations and Safety Minister Michael Woodhouse.

Under the law change, the Remuneration Authority will be required to take the previous year's base salary and superannuation and multiply this by the QES index to reach a remuneration figure for the current year.

Michael says the Authority will be required to adjust this remuneration where there is a new personal benefit entitlement or a real change to an existing entitlement.

'For example, if the travel allowance for a dependant was removed, then the resulting reduction in personal benefit will be shifted to the base salary,” he adds.

'The changes will come into force the day after Royal Assent on the Remuneration Authority Amendment Bill is given and will be backdated to 1 July 2014.

'This means MPs' overall pay rise for the year starting 1 July 2014 will be 1.5 per cent, rather than the 3.56 per cent announced by the Remuneration Authority.”

The passing of the bill follows an outcry after the Remuneration Authority lifted the pay of a backbench MP by $8200 - a rise of 5.4 per cent to $156,000 a year. On average, the base salary movement for MPs rose by about 3.5 per cent.

At the time, Prime Minister John Key said that the increase was neither necessary nor justified at a time when inflation was at 0.8 per cent.

As the story broke, Tauranga MP Simon Bridges, Bay of Plenty MP Todd Muller and NZ First MP Clayton Mitchell all agreed with the decision to fall closer in line with the public sector, claiming none of them got into politics for the money.