Australian banks have made "substantial progress" in overhauling their retail remuneration arrangements and are on target to meet commitments given when the process began two years ago.However, the results are more mixed when it comes to third parties.An assessment of the banks' progress by former Public Service Commissioner Stephen Sedgwick, which was made public yesterday, says banks are moving at different speeds but generally things are moving to plan.In April 2017, the industry launched an overhaul of the way banks reward retail staff. The program was based on work by Sedgwick, with a 2020 deadline for full implementation.Commitments that were made at the time included no longer paying retail bank staff bonuses based directly or solely on sales, basing incentives on a range of measures such as service and good outcomes for customers, and not basing incentives on product types.The Hayne royal commission said that full implementation of the Sedgwick recommendations was an "important first step towards improving frontline remuneration practices."In his latest report, Sedgwick says banks have "significantly reduced" the use of bonuses based on financial incentives for frontline staff. Bonuses for tellers are now based on broader customer service measures.Banks are retraining staff to encourage a "customer first" approach, rather than a sales focus.There is still progress to be made on the use of "leader boards", which track individual performance. Sedgwick found this practice was still occurring in some branches. Sedgwick says the most concerning elements of previous arrangements, such as direct links between sales achieved and variable pay, and the use of accelerators linked to sales, "have all but gone".Changes still need to be made, particularly steps to reduce the likelihood of miscommunication about desired practices and culture, "especially in terms of lingering perceived direct links between sales performance and rewards".Sedgwick also wants changes to customer measures. Net promoter scores and customer satisfaction are still the primary measures but "there is an encouraging attempt to capture the quality of relationships across all interactions with the customer, not just those that lead to a sale"."Legacy culture" that remains entrenched in some parts of the banks has made progress uneven."Progress is generally slower and much more mixed in respect of recommendations that relate to third parties," Sedgwick says."Changes to broker remuneration to date have been modest. Payments other than commissions have generally been removed. The move to pay brokers commission based on the loan drawn down net of offsets is a step in the right direction but does not fully meet my original recommendation, which favoured the introduction of a lender-paid fee for service related to the effort required of the third party, rather than relative to loan size."