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Public entity executive remuneration policy

Find information about the Public Entity Executive Remuneration (PEER) policy, for senior executive service in Victorian public entities.

Background                    

The Public Entity Executive Remuneration (PEER) Policy has been updated to support the determination of remuneration bands for executives employed in prescribed public entities (Determination).

The Determination, along with the revised PEER Policy, introduces a new regime for regulating public entity executive remuneration. This new regime ensures greater consistency and transparency of remuneration of executives across the public sector. It also reflects the increased role of the Victorian Independent Remuneration Tribunal (Tribunal) in the oversight of public entity executive remuneration.

In addition to the Determination, as part of the new regime, the Tribunal has issued Guidelines to assist employers to place executives within the range of a specific remuneration band. The Victorian Public Sector Commission’s (VPSC) Public Entity Executive Classification Framework (PEECF) and the Victorian Public Service Executive Classification Framework (VPSCF) provide a methodology for assessing the work value of public entity executive positions and classifying them within the Determination remuneration bands.

These reforms are the final substantive changes to be introduced following the VPSC’s 2015 review of Victoria’s executive officer employment and remuneration framework and the subsequent Industry Segment Reviews, which followed extensive consultation with public entities. The purpose of these reforms is to promote greater consistency and coherence in the framework for public entity executive employment and to provide stronger guidance and support to public entity boards when making executive employment decisions.

Updates to PEER Policy

Commencement

The updated PEER Policy commences on the same date the Determination is made, being Friday 18 December 2020.

Scope

The PEER Policy covers all public entities that are prescribed under the relevant regulations made in relation to section 44 of the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards Act 2019 (VIRTIPS Act). Find a list of these entities on the Victorian Legislation website.

Application to executives

The scope of application of PEER Policy has changed and the new PEER Policy now also covers public entity executives employed under Part 3 of the Public Administration Act 2004 (PAA), whose role is classified under the VPSCF.

The new PEER Policy continues to apply to all other public entity executives whose role is yet to be classified under the PEECF, who have a Total Remuneration Package (TRP) of at least $ 185,711. In addition, it applies to those public entity executives whose role has been classified under the PEECF with a work value score of at least 21.

The new PEER Policy also covers all CEOs, including CEOs of small entities, who may not meet the definition based on remuneration or work value score.

Determination

PEER Policy requires that prescribed public entities ensure that their executives are remunerated within the relevant remuneration band in the Determination. This also applies to executives who are employed at prescribed public entities under Part 3 of the PAA.

Prescribed public entities must also comply with any relevant guidelines as issued by the Tribunal.

If an employer proposes to pay an executive above the top of the relevant band, they must first obtain advice from the Tribunal.

Classification under the PEECF or the VPSCF

Under paragraph 6 of the updated PEER Policy, prescribed public entities are required to apply the work value assessment methodology as set out in the PEECF or, in the case of public entity executives employed under Part 3 of the PAA, the VPSCF. The PEECF and VPSCF provide a consistent, fair and transparent mechanism for classifying executive positions based on work value.

Prescribed public entities must facilitate the VPSC to undertake and moderate the classification of all executive positions against the work value assessment methodology set out in the PEECF or VPSCF, on a fee-for-service basis, within 12 months of the first Determination or by 31 December 2021 (whichever is later). Delay to the work value assessment beyond this time may only be undertaken in exceptional circumstances, with the written consent of the relevant department Secretary and in consultation with the Department of Premier and Cabinet and VPSC.

An entity must have a current work value assessment (conducted within the previous 12 months) in place before creating a new position, renewing an expiring contract or making a remuneration adjustment, including any executive recruitment currently underway. This may require arranging an ad hoc assessment with VPSC. Further information about the classification frameworks and scheduling work value assessments is available from the Victorian Public Sector Commission's website.

Executive roles that have not yet been assessed using the applicable framework will be classified according to their TRP immediately prior to the date of the Determination, until such time as an assessment can be undertaken.

Other matters

Certain mandatory contractual terms and conditions are required to be included in public entity executive contracts, including:

  • a maximum contract term of up to 5 years
  • the total remuneration package includes base salary, superannuation contributions, employment benefits (i.e. non-salary) and the annual cost to the employer of providing the non-monetary benefits, including any fringe benefits tax payable 
  • termination of contract provisions – the employer may terminate a contract by providing the executive with four months’ notice in writing
  • no compensation for termination of a contract beyond payment in lieu of notice and accrued leave
  • any unexpired portion of a contract may only be paid out in exceptional circumstances, with the written consent of the relevant department Secretary
  • for executives employed on or before 3 February 2020, a capped bonus opportunity

These terms are reflected in the template standard contract for public entity executives available from the Victorian Public Sector Commission website. Boards of public entities are encouraged to use the standard contract for their executives.

This also applies to contracts for those executives who are employed in a prescribed public entity under Part 3 of the PAA.

PEER Policy Q & A

Find the Q & A about the updated PEER Policy below, or download the Q & A:

  • In mid-2018, the Victorian Public Sector Commission (VPSC) recommended a number of reforms to public entity executive employment. The VPSC undertook a review at the request of the Premier and recommended developing a framework for classifying public entity executives, developing remuneration bands for entity executives and the removal of bonuses from executive contracts. These reforms follow the roll out of similar changes for VPS executive employment and are intended to provide greater consistency and coherence in the framework for public entity executive employment.

  • The Public Entity Executive Remuneration (PEER) Policy has been updated to support the Determination of remuneration bands for executives employed in prescribed public entities and the rollout of the Public Entity Executive Classification Framework (PEECF).

    The updated PEER Policy:

    • ensures greater consistency and transparency in the regulation of remuneration of executives across the public sector
    • supports the rollout of the PEECF and mandates its application
    • reflects the expanded role of the Victorian Independent Remuneration Tribunal in the area of public entity executive remuneration.
    • The updated PEER Policy commenced on the same date as the Determination, being 18 December 2020
  • Consultation was undertaken with Ministers with public entities in their portfolios, departments, the Victorian Public Sector Commission and the Victorian Independent Remuneration Tribunal.

  • The scope of the Public Entity Executive Remuneration (PEER) Policy has been aligned with the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards (Prescribed Public Entities) Regulations 2019 (VIRTIPS Regulations).

    This means the PEER Policy applies to the 139 entities listed in Schedules 1 and 2 of the VIRTIPS Regulations. Aligning the PEER Policy with the VIRTIPS Regulations has resulted in an additional six public entities (set out below) being required to comply with the PEER Policy:

    Schedule 1

    • Office of the Convenor of Medical Panels
    • Family Violence Prevention Agency (Respect Victoria)

    Schedule 2

    • Emergency Services Superannuation Board
    • Victorian Commission for Gambling and Liquor Regulation
    • Victorian Fisheries Authority
    • Victorian WorkCover Authority
  • Schedules 1 and 2 of the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards (Prescribed Public Entities) Regulations 2019 list public entities required to comply with the Public Entity Executive Remuneration (PEER) Policy and the Determination of remuneration bands for executives employed in prescribed public entities (Determination).

    Schedule 1

    Public entities listed in Schedule 1 follow the Determination and the Public Entity Executive Classification Framework.

    Schedule 2

    Public entities listed in Schedule 2 have public service employment powers under Part 3 of the Public Administration Act 2004 and may employ some of their executives under Part 3. The PEER Policy requires that these executives are assessed under the Victorian Public Service Executive Classification Framework and follow the relevant remuneration bands for Part 3 executives as provided for in the Determination.

  • The previous Public Entity Executive Remuneration (PEER) Policy defined an executive by reference to total remuneration package (TRP) determined by the Victorian Public Service (VPS) executive officer remuneration range and the level of management responsibility, with certain exclusions.

    The new PEER Policy defines an executive by a role’s work value score under the Public Entity Executive Classification Framework (PEECF), or, for public entity executives employed under Part 3 of the PAA, the VPS Executive Classification Framework (VPSCF).  A role requires a work value score of at least 21 under the PEECF or VPSCF to be classed as an executive role.

    The focus of the definition on work value scores under the PEECF and VPSCF means that whether someone is an executive, is now linked to the nature of their role, as opposed to their TRP.

    Roles that have not been assessed under the PEECF or VPSCF will be temporarily deemed to meet the definition of executive if on or after 1 July 2019 they had a TRP of at least $185,711.

    The new definition also includes all Chief Executive Officers (CEOs) and equivalent positions. This ensures CEOs of small entities, who may not meet the definition of an executive based on their remuneration or work value score, are brought in scope of the Determination.

    The exclusions in the previous definition of an executive remain relevant and continue to apply. Accordingly, you will not be an executive if:

    • your remuneration rates are specified by an award or enterprise agreement; or
    • you are a technical specialists who meets one of the criteria outlined above, but do not have a people management function; or
    • you are a statutory or prerogative office holders appointed to a public entity
  • If any of the following apply to you, then you will be an executive:

    • you hold a CEO position
    • your position has been assessed to have a work value score of at least 21 under the Public Entity Executive Classification Framework (PEECF)
    • you are a public entity executive under Part 3 of the Public Administration Act 2004 and your position has been assessed to have a work value score of at least 21 under the Victorian Public Service Executive Classification Framework (VPSCF)

    If your role has not yet been assessed under the PEECF or the VPSCF, your remuneration will be used to temporarily assign you to a band, pending implementation of the results of your work value assessment. This means you will be an executive if on or after 1 July 2019 you had a TRP of at least $185,711.

  • Each year, the Tribunal will adjust the value of the remuneration bands. This is a legislative requirement, set by section 20 of the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards Act 2019.

    The annual adjustment provisions in the Public Entity Executive Remuneration Policy are therefore no longer required and have been removed.

  • The removal of the 70/80% rule was recommended by the Industry Segment Reviews conducted by the Victorian Public Sector Commission on the basis that it was an arbitrary constraint unrelated to work value.

    In lieu of the 70/80% rule, the Public Entity Executive Remuneration Policy requires that employers determine the appropriate level of remuneration for an executive in accordance with the Determination of remuneration bands for executives employed in prescribed public entities, the Guidelines and the relevant classification framework.

  • Public entities listed in Schedules 1 and 2 of the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards (Prescribed Public Entities) Regulations 2019 are required, under section 92 of the Public Administration Act 2004, to comply with all provisions of the PEER Policy.

    The Victorian Public Sector Commission (VPSC) is establishing a compliance certification process for executive reforms, including compliance with the updated PEER Policy. Further advice on the compliance certification process is available from the VPSC.

  • Public entities in scope of the Public Entity Executive Remuneration (PEER) Policy are bound to follow the PEER Policy under section 92 of the Public Administration Act 2004.

    Section 5 of the PEER Policy states that public entities must ensure that the remuneration of their executives is within the relevant Determination bands.

    The PEER Policy also provides that entities must comply with any Guidelines made by the Victorian Independent Remuneration Tribunal.

  • Some public entities created since March 2019 may not be listed in the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards (Prescribed Public Entities) Regulations 2019. The regulations will be updated in consultation with relevant Ministers. If an entity is not prescribed it is not required by law to follow the PEER Policy. However, it is recommended that nevertheless the entity should have regard to the determination and the provisions of PEER Policy when considering executive classification and remuneration decisions.

  • The Determination of remuneration bands for executives employed in prescribed public entities (Determination) sets remuneration bands for executives employed in public entities prescribed in Schedule 1 and Schedule 2 of the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards (Prescribed Public Entities) Regulations 2019.

    The relevant remuneration bands for public entities prescribed in Schedule 1 whose roles have been assessed under the Public Entity Executive Classification Framework (PEECF) are:

    Classification

    Base of band TRP $ per annum

    Top of band TRP $ per annum

    Public Entity Senior Executive Service-3

    $360,001

    $479,900

    Public Entity Senior Executive Service-2

    $249,701

    $360,000

    Public Entity Senior Executive Service-1

    $135,000

    $249,700

    If a role has not been classified under the PEECF, the relevant remuneration band for the role is:

    • if their TRP (based on 1.0 FTE) immediately prior to the Determination was $360,001 per annum or greater, Public Entity Senior Executive Service-3;
    • if their TRP (based on 1.0 FTE) immediately prior to the Determination was between $249,701 and $360,000 (inclusive) per annum, Public Entity Senior Executive Service-2;
    • if their TRP (based on 1.0 FTE) immediately prior to the Determination was $249,700 per annum or less, Public Entity Senior Executive Service-3

    Public entities prescribed in Schedule 2 are required to follow the remuneration bands above, unless their executives are employed under Part 3 of the Public Administration Act 2004. In this case, the Determination requires these executives to be remunerated in accordance with the latest Tribunal determination under section 21 and 22 of the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards Act 2019.

  • The Victorian Independent Remuneration Tribunal is an independent statutory authority and makes Determinations taking into account a number of matters required under the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards Act 2019.

    These matters include the roles of executives employed in prescribed public entities and the existing remuneration provided to executives, any prevailing Victorian Government statement or policy with respect to its Wages Policy and current and projected economic conditions and trends.

    The Tribunal also consulted broadly, including calling for submissions from interested parties.

    Any questions about the Determination of remuneration bands for executives employed in prescribed public entities should be referred to the Tribunal.

  • The Victorian Independent Remuneration Tribunal no longer determines individual executive remuneration.

    The positioning of an executive within the relevant remuneration band is at the discretion of the executive’s employer. However, the Tribunal has issued Guidelines about the placement of executives within the bands, which employers are required by the Public Entity Executive Remuneration Policy to follow.

    If an employer proposes to pay an executive above the band, they must seek the advice of the Tribunal.

  • Entities can find guidance to help with setting executive remuneration in the Victorian Independent Remuneration Tribunal’s Guidelines.

    The Guidelines specify principles and factors to consider in setting executive remuneration. Refer to the Tribunal’s website for a copy of the Guidelines.

  • Previously, CEO remuneration was separately determined by the Victorian Independent Remuneration Tribunal.

    Remuneration is now set by a CEO’s employer (i.e. the entity’s board or the responsible Minister, depending on the entity’s governance arrangements), subject to the relevant remuneration band in the Tribunal’s Determination of remuneration bands for executives employed in prescribed public entities.

    Guidelines issued by the Tribunal will also assist employers in placing a CEO within the relevant remuneration band.

    Employers no longer need to make submissions to the Tribunal, although if they propose to pay the CEO above the relevant band, they must seek the Tribunal’s advice.

    The relevant band for the CEO’s remuneration is determined based on the work value score for the CEO’s role under the relevant classification framework. 

  • Employers are required by the Public Entity Executive Remuneration Policy to pay their executives within the relevant band.

    An employer should only contemplate paying an executive above the relevant band in exceptional circumstances when the requirements of a role necessitate it.

    Section 37 of the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards Act 2019 requires that employers seek the advice of the Victorian Independent Remuneration Tribunal if the employer proposes to pay an executive above the band.

    Forms and a guide are available from the Tribunal’s website for employers to request this advice.

  • Requests for advice to pay above the band are only expected in exceptional circumstances. Additionally, to support transparency, accountability and evidence-based decision making in relation to remuneration arrangements, the Victorian Independent Remuneration Tribunal intends to publish its advice on its website (more information about publication is available in the Tribunal’s Guide).

    Under section 37 of the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards Act 2019, if an employer proposes to pay an executive above the relevant remuneration band, the employer is first required to request and consider the Tribunal’s advice on the proposal.

    The Tribunal has developed a process for employers to seek advice, which is set out in a Guide published on the Tribunal’s website. The process requires employers and executives to complete a form and provide information about the proposal and the reasons for paying above the band. For a new appointment, advice may be sought before the recruitment process commences in relation to the executive position, to enable the employer to advertise the position. While employers must consider the advice of the Tribunal, ultimately, they have the discretion to determine the remuneration amount, subject to any requirements that their Minister or portfolio department may determine.

  • Public entities operate under individual governance arrangements and are responsible to their portfolio Ministers. Departments advise Ministers in relation to these governance obligations and Departmental Secretaries have a responsibility under the Public Administration Act 2004 to advise Ministers on matters relating to a public entity and to work with and provide guidance to a public entity to assist it in relation to public administration and governance. In discharging these duties, Departments may set up processes to provide advice to their entities in relation to executive classification and remuneration decisions and to monitor classification and remuneration outcomes.  It is up to departments to set up these arrangements in conjunction with their public entities, including whether they wish to be consulted before an entity seeks advice on payment of executives above bands.

  • The Determination of remuneration bands for executives employed in prescribed public entities must be applied to all executives from the time at which it is made.

    Given work value assessments under the Public Entity Executive Classification Framework, or the Victorian Public Service Executive Classification Framework (as applicable), are not anticipated to be completed until the end of 2021, an executive’s remuneration (i.e. total remuneration package) will be used to assign them to a band pending implementation by the employer of the results of the work value assessment.

  • The Determination sets remuneration bands for executives employed in prescribed public entities. Executive’s existing employment contracts, including remuneration, terms and conditions, are not varied by the Determination.

    Following assessment under the relevant classification framework, if an executive’s position is found to be remunerated below the relevant band, the employer may increase the executive’s remuneration or reduce their duties to the applicable classification level. However, the executive’s position is found to be remunerated above the applicable classification level, the employer cannot reduce the executive’s remuneration under an existing contract, without the executive agreeing to a contract variation.

  • The Determination of remuneration bands for executives employed in prescribed public entities are total remuneration packages and are inclusive of superannuation. The Determination does not override any entitlements or statutory requirements that apply in relation to employer superannuation contributions.

  • The Determination of remuneration bands for executives employed in prescribed public entities are total remuneration packages and are inclusive of non-salary benefits and superannuation. There is no change in the way a total remuneration package is calculated. The executive motor vehicle policy is not affected by the Determination.

  • The Public Entity Executive Classification Framework (PEECF) and the Victorian Public Service Executive Classification Framework (VPSCF) set out the work value methodology for assessing and classifying Victorian public sector executive roles.

    Refer to the Victorian Public Sector Commission website for a copy of the PEECF and VPSCF.

  • The Public Entity Executive Classification Framework (PEECF) applies to entities listed in Schedules 1 and some executives in public entities listed in Schedule 2 of the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards (Prescribed Public Entities) Regulations 2019. This means it applies across all portfolios and industry segments and includes most of Victoria’s public entities.

    The PEECF does not apply to executives in public entities who are employed under Part 3 of the Public Administration Act 2004. These executives are required by the Public Entity Executive Remuneration Policy to be classified under the Victorian Public Service Executive Classification Framework.

  • The Public Entity Executive Classification Framework (PEECF) and the Victorian Public Service Executive Classification Framework (VPSCF) provide a consistent, fair and transparent mechanism for classifying public entity executive positions based on work value.

    Section 6 of the Public Entity Executive Remuneration (PEER) Policy requires that public entities facilitate the Victorian Public Sector Commission to undertake and moderate, on a fee-for-service basis, the classification of all public entity executive positions under the relevant classification framework.

    Furthermore, section 6 of PEER Policy requires that all new executive positions, renewing or expiring contracts, must have a current work value assessment under the relevant classification framework and the relevant position must be classified according to the assessment.

  • The Public Entity Executive Remuneration Policy requires that a current work value assessment (i.e. within the last 12 months), under the relevant classification framework, must be undertaken and the relevant position classified according to the assessment, prior to creating a new position or renewing an expiring contract.

    An employer proposing to make a mid-contract remuneration adjustment, other than as a result of the annual adjustment determined by the Tribunal or government, also requires that the position has a current work value assessment.

  • The Victorian Public Sector Commission (VPSC) is undertaking and moderating work value assessments progressively throughout 2021.

    Public entities have been scheduled according to their relevant portfolio department. If a position at a public entity requires a work value assessment prior to the entity’s allotted period, the VPSC may facilitate this on an ad hoc basis in consultation with the portfolio department.

    The Victorian Public Sector Commission has more information on the work value assessments, including scheduling an assessment.

  • If recruitment has commenced, but an offer has not yet been made, the employer should contact the Victorian Public Sector Commission to seek an expedited work value assessment under the relevant classification framework.

PEER policy flow chart

Find the PEER Policy flowchart below, which outlines the process for employers to operate under the updated PEER Policy:

Contacts

Questions about public entity executive employment and remuneration should be directed to your portfolio department in the first instance.

For questions about the PEER Policy, please contact PublicSectorWorkforce@dpc.vic.gov.au.

For more information on the Tribunal’s Determination or Guidelines, as well as how to request advice on a proposal to pay above the band, visit the Tribunal’s website.

For more information on the PEECF and VPSCF or for general enquiries about non-remuneration related executive employment matters (including salary packaging, the Handbook and the standard contract for public entity executives) visit the VPSC’s website.

Enquiries about the executive vehicle scheme can be directed to the Department of Treasury and Finance, through VicFleet.

Bonus removal offer

The Governor in Council gave effect to the Premier’s decision to remove bonus opportunities from public entity executive contracts through previous updates to the Public Entity Executive Remuneration Policy (PEER Policy) on 4 February 2020.

The decision to remove bonus opportunities follows a review by the Victorian Public Sector Commission of executive employment in the public sector (Industry Segment Reviews) that recommended public sector executives should no longer be eligible for bonuses.

In summary, the policy requires that:

  • All new contracts — both new appointments and re-appointments — for public entity executives entered into on, or after, 4 February 2020 must not include a bonus opportunity.
  • For each public entity executive employed on or before 3 February 2020 who has a bonus opportunity specified in their current contract, the employer must make a bonus buy-out offer that represents a once-off increase to the total remuneration package of the executive in exchange for removal of the bonus opportunity from the current contract from 1 July 2020. These offers must be made by 1 May 2020 and implemented by 1 July 2020.

While there are no restrictions on minimum bonus buy-out offers, caps apply to the bonus buy-out offers that public entities can make to existing executives. Further information about bonus buy-outs and caps are set out in PEER Policy.

For any questions about the bonus removal offer process, contact: BonusRemovalOffer@dpc.vic.gov.au.

Bonus removal policy fact sheet

Public entities and executives can refer to the Bonus removal policy fact sheet below for guidance on how to implement the buy-out process.

Bonus removal offer - template letter

Public entities may use the template letter and modify it according to their needs.

Bonus buy-out calculator

Public entities can use the bonus buy-out calculator prepared by the Department of Premier and Cabinet to calculate the caps that apply to the offers that they can make, and to confirm that their proposed offers do not exceed the caps.

For instructions on how to use the bonus buy-out calculator, please watch the instructional video below. 

Q & A: Bonus buy-out

Find the Q & A about the public entity bonus buy out below, or download the Q & A:

  • Yes, there will be 2 caps applied to bonus buy-outs.

    The 'entity pool cap' limits the total sum that each public entity can offer its eligible executives to a maximum of 8% of the combined value of the total remuneration package of those eligible executives.

    There is also an 'individual cap' that will mean that the maximum buy-out offer made to an executive is either the average of their percentage bonus for the last three years, or 10% of their total remuneration, whichever is lower.

  • The government believes this is a fair offer that can be applied universally to a range of bonus arrangements across a wide variety of organisations and executives.

  • Boards have the authority to make remuneration arrangements for their senior executives, such as CEOs, provided they are consistent with government policy. The Public Entity Executive Remuneration Policy sets out the government’s expectations for executive remuneration arrangements in public entities.

    Bonus provisions have, in some cases, been a component of historical or current remuneration arrangements for a cohort of executives. The government has made it clear that, in future, bonus arrangements are not to continue as part of remuneration arrangements for public entity executives.

  • Victorian public entities are expected to comply with government policies, including the bonus buy-out policy. The updated Public Entity Executive Remuneration Policy sets out the government’s policy for executive remuneration in public entities, which includes the requirement to remove bonus opportunities from these remuneration arrangements. The Victorian Independent Remuneration Tribunal administers the Public Entity Executive Remuneration Policy on behalf of the government.

    Departments will work together with the Victorian Independent Remuneration Tribunal and the Victorian Public Sector Commission, which is responsible for promoting the efficiency, effectiveness and capability of the public sector overall, to collect information and data about the phase-out of bonus opportunities.

  • Departments will work together with the Victorian Independent Remuneration Tribunal and the Victorian Public Sector Commission to collect data on the implementation of the bonus buy-out policy. This will be reported back to the government following the conclusion of the buy-out process at the end of the current financial year.

  • Yes, the bonus buy-out calculations will be completed by 1 May 2020. If the Premier grants an adjustment for the 2020–21 financial year, the adjustment rate will be applied to an executive’s total remuneration package after the buy-out has been calculated.

  • Contract variations removing bonus opportunities and increasing remuneration are required to be finalised within the 2019-20 financial year to take effect from 1 July 2020. Executives whose contracts expire on or before 30 June 2020 may be eligible to participate in the buy-out process.  Employers should consider whether an executive’s contract will be extended beyond its current expiry date or renewed before including the executive in the bonus buy-out process (see hypotheticals below). Employers and executives should also note that the buy-out will not be paid as a lump sum, but will form part of the executive’s total remuneration package.

  • If an executive has never received a bonus (for example if they have only recently been employed) the lower of the maximum bonus opportunity in their contract or the 10% individual cap subject to the entity pool cap will be the maximum that an employer can offer. The employer may decide an offer lower than 10% is appropriate in some circumstances.

    Hypothetical

    A new executive’s contract commenced on 10 December 2019 and has a maximum bonus opportunity of 17%.

    The executive has never received a bonus payment as their employment commenced in the current financial year. The maximum bonus buy-out offers the employer can make is 10% of the executive’s TRP. However, given the executive has no history of receiving bonuses, the employer may consider making an offer of less than 10%.

  • No

  • No additional funding will be provided to entities to fund bonus buy-outs. The process will be cost neutral for employers because the buy-outs will substitute the current cost of bonus payments.

  • Bonus buy-out offers up to the caps are at the discretion of the employer. The 10% individual cap and the 8% entity cap are upper limits. Entities may apply a lower rate based on budget and average past bonus payments. If an executive declines a buy-out offer, they will retain their bonus opportunity for the duration of their contract.

  • There is no need to provide a new contract. Contract variations may be administered in the form of a letter to be co-signed by the employer and the executive. The letter may include reference to the bonus opportunity clause in the contract to be deleted from 1 July 2020 and the new total remuneration package.

  • The amended Public Entity Executive Remuneration Policy commences on 4 February 2020 by Order of the Governor in Council. The bonus buy-out calculations should be based on executive remuneration immediately prior to the operative date to ensure the most up-to-date figures are used.

Reviewed 04 January 2021

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