Remuneration bands for executives employed in prescribed public entities (Victoria) annual adjustment Determination 2021 – notice of intention
In accordance with section 24(1) of the (VIRTIPS Act), the Tribunal hereby publishes notice of its intention to make a Determination providing for an annual adjustment to the values set in the Remuneration bands for executives employed in prescribed public entities (Victoria) Determination No. 01/2020 (Comprehensive Determination).
The Comprehensive Determination was made on 18 December 2020. The Tribunal cannot make an annual adjustment Determination within nine months of this date (section 20(2) of the VIRTIPS Act), that is, before 19 September 2021. The annual adjustment Determination will take effect retrospectively from 1 July 2021 (section 25(5) of the VIRTIPS Act).
Details of the matters to be considered by the proposed Determination are set out below.
The Determination will adjust the values of remuneration bands for executives employed in prescribed public entities.
In making the Determination, the Tribunal is required to consider the following matters under section 24(2) of the VIRTIPS Act:
- any statement or policy issued by the Government in respect of its wages policy (or equivalent) and the remuneration and allowances of any specified occupational group as defined in the VIRTIPS Act
- the financial position and fiscal strategy of the State of Victoria
- current and projected economic conditions and trends
- submissions received in relation to the Determination.
The Tribunal’s understanding of economic and financial conditions and trends, and public entity executive employment and remuneration policies, is set out below.
On 27 May 2021, the Acting Premier announced that Victoria would move to ‘circuit breaker’ restrictions. Official estimates of the economic and financial impacts of these restrictions were not available at the time of publication of this notice of intention. In general, there is considerable uncertainty about future conditions, following policy responses to the coronavirus (COVID-19) pandemic.
Current and projected economic trends
The Reserve Bank of Australia’s (RBA) latest (May 2021) noted that the Australian economy is continuing to recover strongly from the impacts of the COVID-19 pandemic. The recovery has been supported by favourable health outcomes, the removal of restrictions and substantial fiscal and monetary support. Nonetheless, the RBA noted that the recovery is expected to be uneven as the pandemic continues to weigh on some parts of the economy (e.g. tourism and educational service providers).
Australia’s Gross Domestic Product (GDP) grew by 1.8% over the March quarter 2021, and is now 0.8% higher than its pre-pandemic level. This follows consecutive quarters in which GDP growth exceeded 3.0%, resulting in a 1.1% increase over the 12 months to March 2021. Meanwhile, the national and Victorian unemployment rates decreased to 5.5% in April, down from a peak of 7.5% (recorded in July and June 2020, respectively).
- real Gross State Product (GSP) is estimated to have contracted by 2.0% in 2020-21 (compared to the 4.0% fall forecasted in the previous budget), and is forecast to grow by 6.5% in 2021-22
- the unemployment rate is expected to average 5.75% in 2021-22, before reaching 5.5% in 2022-23.
Regarding movements in wages and prices, the Tribunal notes the following:
- the Consumer Price Index (All Groups) for Melbourne grew by 0.8% between March 2020 and March 2021
- the Victorian Wage Price Index grew by 1.5% between March 2020 and March 2021
- average weekly ordinary time earnings for full-time adults in Victoria increased by 4.4% over the 12 months to November 2020.
Financial position and fiscal strategy of the State of Victoria
The most recent , released in November 2020, noted that the COVID-19 pandemic ‘necessitated a significant shift in the state's revenue and expenditure policies, with longer term consequences for financial sustainability’ (p.1). The report highlighted the significant unexpected falls in revenue, and increases in expenditure in 2019-20 and consequently debt, compared with 2018-19 and the original and revised budgets.
The Victorian Budget forecast an operating deficit (for the general government sector) of approximately $11.6 billion for 2021-22, with smaller deficits expected in the following years. Net debt is forecast to be $102.1 billion (20.3% of GSP) in 2021-22 and to increase to $156.3 billion (26.8% of GSP) by 2024-25. These forecasts reflect an improvement relative to the previous budget, which the Victorian Budget states is principally due to improvements in the Government’s operating position.
The Victorian Budget also outlined the Victorian Government’s four-step fiscal strategy:
- Step 1: creating jobs, reducing unemployment and restoring economic growth
- Step 2: returning to an operating cash surplus
- Step 3: returning to operating surpluses
- Step 4: stabilising debt levels.
The Victorian Budget includes significant infrastructure spending to support economic recovery, with annual Government infrastructure investment (GII) expected to average $22.5 billion over the budget and forward estimates.
The Government has also announced several efficiency measures for the public sector, as part of its strategy to return to an operating surplus in the medium term. In particular:
- indexation of departments’ base funding will be revised, with different rates to apply to wage and non-wage components
- from 1 January 2022, the guaranteed annual wage increases for public sector employees will be reduced from 2% to 1.5% through the Victorian Government’s Wages Policy (see below).
Relevant Victorian Government remuneration policies
The VIRTIPS Act requires the Tribunal to consider any statement or policy issued by the Government of Victoria which is in force with respect to its Wages Policy (or equivalent) and the remuneration and allowances of any specified occupational group (which includes executives employed in prescribed public entities, among other groups). The Victorian Government Wages Policy and Enterprise Bargaining Framework (Wages Policy) which applies to departments and agencies in the Victorian public sector until 31 December 2021, is reproduced below.
The Victorian Government Wages Policy and Enterprise Bargaining Framework has three pillars:
- Pillar 1: Wages - increases in wages and conditions will be capped at a rate of growth of 2 per cent per annum over the life of the agreement. In practice this means employee wages and conditions will be allowed to grow at this rate.
- Pillar 2: Best Practice Employment Commitment - all public sector agencies will be required to make a Best Practice Employment Commitment which will outline measures to operationalise elements of the Government's Public Sector Priorities that reflect good practice within Government and can be implemented operationally or without significant costs.
- Pillar 3: Additional strategic changes - additional changes to allowances and other conditions (not general wages) will only be allowed if the Government agrees that the changes will address key operational or strategic priorities for the agency, and/or one of more of the Public Sector Priorities.
A 'Secondary Pathway' is also available for public sector agencies whose current enterprise agreement reaches its nominal expiry date on or before 30 June 2020 which permits one annual wage and allowance increase capped at 2.5 per cent (instead of 2 per cent).
Source: Industrial Relations Victoria, ‘Victorian Government Wages Policy,’ Wages Policy and the Enterprise Bargaining Framework (State Government of Victoria: Melbourne, Victoria, 2019).
- the annual cap on wages and conditions, under Pillar 1 of the Wages Policy, will be adjusted from 2 per cent to 1.5 per cent
- additional changes to allowances and other conditions (not general wages) will continue to be available to address key operational or strategic priorities, where they are fully funded from appropriate offsets, and capped at 0.5 per cent of the salary base per annum
- a limited one-year rollover option with a 2 per cent increase will be available for parties whose current enterprise agreements reach their nominal expiry date in 2022.
The PEER Policy sets out mandatory contractual terms and conditions which must be included in an executive’s contract of employment, including that the executive’s Total Remuneration Package consists of:
- base salary
- superannuation contributions
- employment benefits (i.e. non-salary)
- the annual cost to the employer of providing the non-monetary benefits, including any fringe benefits tax payable.
The Victorian Public Service Commission (VPSC) publishes a standard contract for the employment of public entity executives. However, use of the contract is not mandatory for public entities. The standard contract states than the executive’s remuneration is to be reviewed on an annual basis.
The superannuation guarantee and maximum superannuation contribution base (MSCB) apply to executives who are members of an accumulation scheme. The superannuation guarantee is the minimum rate of employer superannuation contributions that an employee is entitled to, set as a percentage of their ‘ordinary time earnings’. The MSCB acts as a cap on the ‘ordinary time earnings‘ that are used to calculate an employee’s superannuation entitlements — earnings over the MSCB are not counted for the purpose of working out entitlements.
The amount of superannuation payable may increase each year as a result of the indexation of the MSCB, or changes to the superannuation guarantee. The Handbook states that public entity employers whose employees are on the standard contract must bear the cost of such increases in superannuation liabilities.
The Tribunal invites submissions from any person or body, including any affected person or class of affected persons, in relation to the proposed Determination. Submissions are invited regarding the following questions:
- What level of adjustment to the values of the remuneration bands should the Tribunal consider?
- Are there any other matters the Tribunal should consider when making the Determination, in addition to those listed in the VIRTIPS Act?
Submissions must be made by 5pm on Friday 16 July 2021.
Publication of submissions
The Tribunal may use information provided in submissions in its Determination.
All submissions will be published in full or in summary form as appropriate on the Tribunal website unless the person making the submission seeks confidentiality or the submission contains information that is identified as commercially sensitive. In this instance, the submission will be published in a form which protects the confidentiality or commercial sensitivity.
The Tribunal may remove identifying information from submissions if published.
Submissions that contain offensive or defamatory comments, or which are outside the scope of the Determination will not be published.
The Tribunal may receive a request under the . Any such requests will be determined in accordance with that Act which contains provisions designed to protect personal information and information given in confidence. Further information can be found at the website.
The Tribunal received the following submissions. Each party that made a submission requested that it be published in a de-identified form. Sections of the submissions that identify the submitting party have been redacted.
Reviewed 21 July 2021