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’ or the ‘annual adjustment’.

The Premier has issued a guideline rate of up to 1.5% for the 2022-23 financial year.

The approved rate is applicable from 1 July of the financial year.

Employers may increase the salary component of an executive’s remuneration by up to the maximum of 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.

The Tribunal is required to make annual adjustments to the remuneration bands it sets in its comprehensive Determinations. These are known as ‘annual adjustment Determinations’.

The Tribunal made its most recent annual adjustment Determinations to the values of the remuneration bands for both executives in public service bodiesand in prescribed public entitieson 22 June 2022.

Both annual adjustment Determinations are effective from 1 July 2022.

Employers must ensure that executives are paid within their relevant band.

In this context, employers have discretion to pass on a salary increase to executives up to the guideline rate, effective 1 July of the given financial year.

If an executive’s remuneration falls below the base of their relevant band following the Tribunal’s adjustment of the remuneration bands, the executive is entitled to have their remuneration increased to the base of the new band. If the increase to the salary component is less than the guideline rate for that year, the employer has discretion to increase the salary component by the difference. This may result in the employer needing to increase the superannuation component.

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. This may occur when passing on the guideline rate. Further guidance on when to seek advice is available on the Tribunal’s website.

The Tribunal’s annual adjustment Determinations take effect on 1 July of the year in which it is made.

In line with section 25(4) of the Public Administration Act 2004 and paragraph 5.1 of the Public Entity Executive Remuneration Policy, any executive who is paid below their relevant band must have their remuneration increased to the base of the new band.

This means that VPS and public entity employers with executives paid below the base of the bands, must increase their remuneration to the base of the new bands. This adjustment is effective from 1 July 2022.

Yes. VPS employers are required to pay executives within the relevant band under section 25(4)(a) of the Public Administration Act 2004.

Prescribed public entity employers must also pay executives within the relevant band under paragraph 5.1 of the Public Entity Executive Remuneration Policy.

This means that any executive whose remuneration drops below the base of the relevant band as a result of a Tribunal determination, must have their remuneration increased to at least the base of the band.

Yes. Employers have discretion not to pass on the guideline rate if the executive has been appointed to their role, or 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 2022 to 30 June 2022; and/or
• any executives who may have received a remuneration increase during the period between 1 January 2022 to 30 June 2022.

However, in exercising this discretion, the executive must not fall below the relevant remuneration band.

DPC provides guidance to departments on the application of the guideline rate to share internally and with their portfolio agencies. Employers are then responsible for advising executives of the guideline rate.

Once employers consider the adjustments for their executives, the adjustments should be made as soon as reasonably practical in the 12-month period to 30 June of the current financial year.

Individual executives are not required to take further action.

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 payslips.

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

Public service and public entity employers are responsible for funding any increases to the salary component as a result of applying the guideline rate.

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

The VPS annual adjustment Determination adjusts the values of remuneration bands for executives employed in public service bodies, which the Tribunal initially set in its comprehensive Determination on 22 May 2020. The adjusted remuneration bands are set out in the body of the comprehensive Determination.

Yes, in limited circumstances.

The VPS annual adjustment 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 must follow the PPE Determination. A list of prescribed public entities is available on the DPC website.

The prescribed public entity (PPE) annual adjustment Determination adjusts the values of remuneration bands for executives employed in prescribed public entities, which the Tribunal initially set in its comprehensive Determinationon 18 December 2020. The adjusted remuneration bands are set out in the body of the comprehensive Determination.

The Tribunal’s determinations set or adjusts the remuneration bands that apply to public sector executives.

If an executive’s remuneration falls below the base of their relevant band following a determination, the employer must increase the executive’s remuneration to the base of the new band. If the increase to the salary component is less than the guideline rate for that year, the employer has discretion to increase the executive’s salary component by the difference.

Please see the Q&A “Do executives whose remuneration increased to the base of the band also receive the guideline rate?” for more information.

Generally, no. Any 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 PEER Policy.

However, if the increase to the salary component is less than the guideline rate for that year, the employer has discretion to increase the salary component by the difference.

The Premier has capped the guideline rate at 1.5% for the 2022–23 financial year.

Accumulation fund superannuation scheme

For executives employed on a standard executive contract, where remuneration is expressed as a total remuneration package (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 executive’s 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 maximum superannuation contribution base (see also: the Q&A document on Superannuation).

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.

Defined benefits schemes

Executives on defined benefits superannuation schemes should have the guideline rate applied to their total remuneration packages rather than their salary only.

Yes. Passing on the guideline rate to executives is subject to section 37 of the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards Act 2019.

This requires employers to request the Tribunal’s advice on proposals to pay above the remuneration bands. Please refer to the Tribunal’s website for further guidance.

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

Yes. Consistent with previous practice, an updated version of the remuneration schedules contained in the Appointment and Remuneration Guidelineswill be published. 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 ensure that they support their Ministers to advise their portfolio public entities about the guideline rate and ensure that it is passed on to statutory office holders in their portfolio.

The superannuation guarantee is the compulsory superannuation contribution employers are legally required to make into an employee’s accumulation fund, in compliance with the Superannuation Guarantee (Administration) Act 1992 (Cth).

The compulsory superannuation contribution is 10.5% from 1 July 2022.

There are legislated annual increases to the superannuation guarantee rate scheduled between 2021 and 2025. Those increases must be passed on to eligible executives.

From 1 July 2022, the Superannuation Guarantee (Administration) Act 1992 (Cth) provides for the superannuation guarantee rateto increase from 10% to 10.5%.

This means that from 1 July 2022, employers need to increase their superannuation contributions to 10.5%, up to the maximum super contribution base(MSCB). In 2022–23, the MSCB is $240,880.

The MSCB is the maximum individual employee earnings on which an employer is required to pay the superannuation guarantee, i.e. the employer is 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 earnings.

As the Australian Taxation Office (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 2022-23, the ATO has set the MSCB at $240,880 per annum.

This means that executives on a total remuneration package greater than $266,172.40 ($240,880 + 10.5% superannuation guarantee) are entitled to a $1,724.40 increase to the employer contribution to their superannuation accumulation scheme.

The superannuation guarantee and MSCB apply to executives who are members of accumulation schemes. However, for the purposes of superannuation adjustments, payroll providers should increase an executive’s superannuation by either the new superannuation guarantee rate or the MSCB. This is because the MSCB indexation is inclusive of the new superannuation guarantee rate.

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).

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 on other contracts

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

Given clause 7.2(a)(B) of the standard executive contracts, employers are expected to fund the increase required under the Superannuation Guarantee (Administration) Act 1992 (Cth). This should not be at the expense of an executive’s base salary.

Any public sector employer experiencing financial difficulty in funding the adjustments to superannuation should raise the matter with their portfolio department.

If an executive’s remuneration is described as: “base salary + other benefits + superannuation”, the change will be to the superannuation component only. The executive’s salary component and other benefits cannot be reduced to offset the additional superannuation payments.

No. The superannuation guarantee rate increase and MSCB indexation are legislated employer obligations and are not contingent on the pay schedule of an executive’s contract being updated before it can be passed on.

The increases to superannuation contributions will be reflected in executive’s payslips.

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

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 Premier’s guideline rate and either of the required superannuation adjustments (superannuation guarantee rate increase or MSCB indexation) must be calculated separately. However, both should be calculated from 1 July of the given financial year.

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

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

HR Directors should ensure that payroll providers process the adjustments as soon as reasonably practicable. The superannuation adjustments should be calculated from 1 July of the given financial year.

No. The Tribunal has published a statement on its website 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.