Public service executive remuneration policy

The Premier’s annual remuneration adjustment guideline rate is a salary increase that employers may pass onto executive and senior office holders. It is also known informally as the ‘guideline rate’.

The Premier has issued a guideline rate of 3% for 2023-24. Employers may increase executive and senior office holder salaries up to the guideline rate. 

The guideline rate applies from 1 July 2023. Any remuneration increases for the guideline rate will be back paid to 1 July 2023, if required.

Employers may increase the salary component of an executive’s TRP by an amount up to the guideline rate. For clarity, the ‘salary component’ of an executives TRP includes all monetary benefits, including any executive vehicle and/or fringe benefits tax payable. 

The ‘salary component’ does not include superannuation.

Yes. Consistent with previous practice, an updated version of the remuneration schedules contained in the Board appointment, remuneration and diversity guidance will be published to pass on the guideline rate to board appointees. DPC will also notify those within departments responsible for board appointments on how the guideline rate will be passed on to board appointees.

Departments should support their Ministers to advise their portfolio entities about the guideline rate and ensure that it is passed onto statutory office holders in their portfolio. 

Yes. Employers have a general discretion to increase executive salaries up to the guideline rate. In addition, employers have discretion not to pass on the guideline rate if the executive has been appointed to their role, or has received a remuneration increase, within the last six months.

This means that employers have discretion whether or not to pass on the guideline rate to:

• any executive who commenced executive employment between 1 January 2023 to 30 June 2023, and/or 
• any executives who may have received a remuneration increase (e.g. through contract renegotiation) during the period between 1 January 2023 to 30 June 2023. 

Executives who commence on or after 1 July 2023 are not entitled to receive the guideline rate increase for 2023-24.

The Tribunal is required to make an annual adjustment to the remuneration bands it sets in a Comprehensive Determination. These are known as ‘annual adjustment determinations’.

The Tribunal made annual adjustment Determinations to the values of the remuneration bands for executives employed in public service bodies and prescribed public entities on 29 June 2023.

The VPS AA Determination adjusts the values of remuneration bands for executives employed in public service bodies, which the Tribunal set in its comprehensive Determination on 22 May 2020.

The PPE AA Determination adjusts the values of remuneration bands for executives employed in prescribed public entities, which the Tribunal set in its comprehensive Determination on 18 December 2020.

The adjusted remuneration bands for VPS executives (including Administrative Office Heads and Departmental Secretaries/Victorian Public Sector Commissioner) and PPE executives can be found on the Tribunal’s website.

Note: the remuneration bands are for executives employed on a 1.0 FTE basis, and apply pro rata to executives employed on a part-time basis.

An executive whose remuneration drops below the base of the relevant band as a result of the Tribunal’s annual adjustment determinations must have their remuneration increased to the base of the new band in accordance with section 24(5)(a) of the Public Administration Act 2004 and paragraph 5.1 of the PEER Policy.

As mentioned above, employers must ensure that executives are paid within their relevant band (which may have changed due to the Tribunal’s determination). 

If an increase to an executive’s salary due to the Tribunal’s annual adjustment Determination is less than the guideline rate, the employer has discretion to increase the salary by the difference (so that the total increase is equal to the guideline rate).

If the increase to an executive’s salary due to the Tribunal’s annual adjustment Determination is more than the guideline rate, the executive is not entitled to receive the guideline rate.

There are detailed example calculations for HR practitioners in Attachment A.

Yes. Passing on the guideline rate to executives is subject to section 37 of the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards Act.

If an employer proposes to pay an executive above the maximum of the band, the employer must first seek and consider the Tribunal’s advice. Passing on the guideline rate may result in an executive being paid above the maximum of the band, including if they are already paid above the band. The Tribunal has established a streamlined process for assessing payments above the band in these instances. Further guidance on when to seek advice is available on the Tribunal’s website.

Yes, in limited circumstances.

The VPS AA Determination applies to prescribed public entities that employ executives under Part 3 of the Public Administration Act 2004. This requirement is set out in the Remuneration bands for executives employed in prescribed public entities (Victoria) Determination No. 01/2020 (PPE Determination).

All other public entities prescribed under Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards (Prescribed Public Entities) Regulations 2021 (Prescribed Public Entities) must follow the PPE Determination. If in doubt, employers should review the latest regulations to confirm the correct coverage.

No. Statutory office holders and public sector Boards are not within the scope of the Tribunal’s jurisdiction.

No. A new pay schedule is not required to give effect to the guideline rate.

Any adjustment to an executive’s remuneration due to new remuneration bands or applying the guideline rate will be reflected in the executive’s payslip.

An employee may request an updated pay schedule to their contract from their relevant payroll or human resources unit at any time.

Public service and public entity employers are responsible for funding remuneration increases for the guideline rate, superannuation changes and any increases in remuneration resulting from the Tribunal’s adjustments to the remuneration bands.

Any public sector employer experiencing financial difficulty in funding these increases should raise the matter with their portfolio department.

Employers should ensure that payroll providers process the remuneration increases as soon as reasonably practicable during the 2023-24 financial year.  

Individual executives are not required to take further action.

The superannuation guarantee is the compulsory superannuation contribution employers are legally required to make into an employee’s accumulation fund, expressed as a percentage of the employee’s ordinary time earnings, in accordance with the Superannuation Guarantee (Administration) Act 1992 (Cth).

The compulsory superannuation contribution was 10.5 per cent for 2022-23 and is increasing to 11 per cent of an employee’s ordinary time earnings for 2023-24, applicable from 1 July 2023.

The MSCB is the maximum individual employee earnings on which an employer is required to pay the superannuation guarantee. Employers are not required to pay the superannuation guarantee on earnings above the MSCB. For executives earning below the MSCB, the employer is required to pay the superannuation guarantee on their total ordinary time earnings.

The ATO indexes the MSCB each year. The amount of superannuation payable for executives who are members of superannuation accumulation schemes may increase each year as a result of this indexation.

For 2023-24, the ATO has set the MSCB at $249,080 per annum.

This means that executives on a TRP greater than $276,479 ($249,080 + 11% superannuation guarantee) are entitled to a $2,106.40 increase to the employer contribution of their superannuation accumulation scheme.

The superannuation guarantee and MSCB apply to executives who are members of accumulation schemes. For the purposes of superannuation adjustments, payroll providers should increase an executive’s superannuation by either 0.5 per cent for the new superannuation guarantee or by the MSCB. 

The superannuation guarantee and MSCB do not apply to executives who are members of defined benefits schemes (such as the Emergency Services and State Super Defined Benefits Scheme).

Generally no. As provided for in clause 7.2(a)(B) of the standard executive contracts for public service and public entity employers:

If there is any change in the minimum superannuation contributions required to avoid a charge under the Superannuation Guarantee (Administration) Act 1992 (Cth), the superannuation contribution will be varied accordingly, and there will be no impact on your base salary.

This means public service and public entity employers whose executives use the standard VPS Contract or Public Entity Contract must bear the cost of increases to both the superannuation guarantee and the annual ATO indexation of the MSCB, as applicable across their executive workforce.

For public entity executives not using the standard contract

Public entities whose executives use another contract are required to comply with the terms of that contract. If there is discretion within the terms of the contract, employers are encouraged to follow the approach set out above that applies to the standard contract to promote consistency across the public sector.

For executives employed on a standard executive contract, where remuneration is expressed as a TRP, employers should establish the new value of an executive’s base salary by applying the guideline rate to the salary component.

For clarity, the ‘salary component’ of an executives TRP includes all monetary benefits, including any executive vehicle and/or fringe benefits tax payable. The ‘salary component’ does not include superannuation.

The new superannuation contribution payable should then be calculated on the new salary component, up to the MSCB. 

For executives employed with disaggregated remuneration packages, for example, where remuneration is expressed as salary plus superannuation, the same process will apply.

Both increases are to be made at the cost to the employer. 

No. As per clause 7.2(a)(B) in the standard executive contracts, employers bear the cost of increases to both the superannuation guarantee and the annual ATO indexation of the MSCB. This means that the application of the guideline rate and either of the required superannuation adjustments (superannuation guarantee rate increase or MSCB indexation) must be calculated separately. Both changes are applicable from 1 July 2023. 

Payroll providers should be aware of the changes to the superannuation guarantee and MSCB indexation and will make adjustments automatically. The increases to superannuation contributions will be reflected in an executive’s payslip.

If an executive has any questions about the content of their payslip, they should contact their payroll or human resources unit in the first instance.

No. The Tribunal has published a statement at Remuneration bands for executives employed in public service bodies  that its advice is not required if an employer’s compliance with the Superannuation Guarantee (Administration) Act 1992 (Cth) results in an executive being paid above the maximum of the relevant remuneration band. 

In its statement, the Tribunal considers that this does not constitute a “proposal” to pay above the remuneration band given the employer is giving effect to statutory provisions regarding superannuation benefits.