Public entity executive remuneration policy

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

Context

The Public Entity Executive Remuneration (PEER) Policy was updated in December 2020 to support the determination of remuneration bands for executives employed in prescribed public entities (Comprehensive Determination).

The Comprehensive Determination, along with the revised PEER Policy, introduced a framework for regulating public entity executive remuneration. This framework 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 Comprehensive Determination, 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 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 remuneration decisions.

PEER Policy

Commencement

PEER Policy was updated on 18 December 2020.

Scope and list of prescribed public entities

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). A list of executive-employing public entities which are covered under the current regulations is available below.

Regulations - List of prescribed employer public entities and Q&As

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.

Classifying executive roles

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.

Paragraph 6.1 provides that 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. The intention of this approach is primarily transitional to create a baseline and build capability within public entities to conduct their own assessments in the future. The scheduled program of these assessments has been extended with expected completion by June 2022.

Under paragraph 6.3, 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. Public entities are permitted to conduct these ad hoc assessments themselves except for CEO and Managing Director roles. The VPSC still intends to undertake ad hoc assessments for these roles to ensure consistent moderation of CEO roles across relevant sectors.

Further information about the classification frameworks and scheduling work value assessments is available from the Victorian Public Sector Commission's website.

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 flow chart

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

Executive remuneration annual adjustment

The Remuneration Tribunal undertakes annual reviews of the prescribed public entity executive remuneration bands and publishes any adjustment to those bands in its annual adjustment Determinations. These are the bands within which prescribed public entity executives must be remunerated (unless advice from the Remuneration Tribunal to pay above the band has been obtained and considered). The latest executive remuneration bands can be found on the Tribunal’s website.

The Premier traditionally announces an annual adjustment guideline rate (guideline rate) to provide a mechanism for adjusting executive remuneration.

For the 2023-24 financial year, the Premier announced a guideline rate of 3%.

Employers typically have discretion to pass on an increase to an executive’s remuneration up to the guideline rate. The guideline rates apply from 1 July of the relevant financial year.

Further information on the implementation of the guideline rate is provided in the Public Entity Executive Employment Handbook, available on the VPSC’s website.

Superannuation Q & A material

Remuneration of public service executives

For information and guidance relating to remuneration of Victorian Public Service executives, including executives employed in public entities under Part 3 of the Public Administration Act 2004, please visit the public service executive remuneration policy website.

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 policy fact sheet
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Bonus removal offer - template letter

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

Template letter
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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.

Bonus buyout calculator - up to 12 executives
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Bonus buyout calculator - up to 70 executives
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For instructions on how to use the bonus buy-out calculator, please watch the instructional video below.

Annual adjustment Q & A material

Further information

Where can I find further information on the guideline rate?

The guideline rate has been published on the Victorian Public Sector Executive Remuneration website.

General guidance on executive remuneration is also available in the VPSC’s VPS and Public Entity Executive Employment Handbooks.

Who can I contact for further information?

Further information on executive employment arrangements is available on the VPSC’s website. The VPSC manages the VPS Standard Executive Contract, Standard Contract for Public Entity Executives, VPS Executive Employment Handbook and Victorian Public Entity Executive Employment Handbook. Questions concerning these documents can be directed to: info@vpsc.vic.gov.au.

Questions about executive employment policy, including implementation of the guideline rate, PEER Policy and executive superannuation policy can be directed to publicsectorworkforce@dpc.vic.gov.au.

Questions about seeking the Tribunal’s advice on proposals to pay above the remuneration band can be directed to enquiries@remunerationtribunal.vic.gov.au.

Questions about superannuation can be directed to the relevant payroll area in the first instance.

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