Remuneration bands for executives employed in public service bodies – annual adjustment

In accordance with section 24(1) of the Victorian Independent Remuneration Tribunal and Improving Parliament Standards Act 2019 (Vic) (VIRTIPS Act), the Tribunal hereby publishes notice of its intention to make a Determination.

Details about the proposed Determination and how to make a submission are set out below.

The Determination will provide for an annual adjustment to the values of the remuneration bands for executives employed in public service bodies. The current values of the remuneration bands are available on the Tribunal’s Remuneration bands for executives employed in public service bodies webpage.

The Determination will apply to executives employed in: 

• departments 
• Administrative Offices
• the Victorian Public Sector Commission.

It will also apply to public service body Heads, who are defined in the Public Administration Act 2004 (Vic) as:

• Secretaries of departments
• heads of Administrative Offices
• the Victorian Public Sector Commissioner.

As set out in the VPSC’s Victorian Public Service Executive Employment Handbook, employers retain the power to set an individual executive’s remuneration within the relevant band.

When will the Determination take effect?

Once made, the Determination will have effect from 1 July 2023.

Submissions

The Tribunal invites submissions from any person or body, including any affected person or class of affected persons, in relation to the proposed Determination.

You may wish to consider the following questions when preparing your submission:

• What adjustment to the values of the remuneration bands should the Tribunal consider, if any?
• Which economic and financial indicators should the Tribunal consider in adjusting the values of the remuneration bands?
• What other matters should the Tribunal consider when making the Determination, if any, in addition to those listed in the VIRTIPS Act?

Written submissions (and requests for assistance to make a submission) should be emailed to the Tribunal Secretariat at enquiries@remunerationtribunal.vic.gov.au.

Written submissions must be received by the Tribunal by 5pm on Friday 28 April 2023.

The Tribunal may also accept requests from interested parties to make submissions after 28 April 2023. Please contact the Tribunal Secretariat at enquiries@remunerationtribunal.vic.gov.au to request to make a late submission.

Those wishing to make an oral submission must advise the Tribunal Secretariat via email by 5pm on Friday 14 April 2023.

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 Freedom of Information Act 1982 (Vic). Any such request will be determined in accordance with the Freedom of Information Act 1982 (Vic) which contains provisions designed to protect personal information and information given in confidence. Further information can be found at the Office of the Victorian Information Commissioner.

How will the Tribunal make its Deterination?

In making its Determination, section 24(2) of the VIRTIPS Act requires the Tribunal to consider:

• current and projected economic conditions and trends
• the financial position and fiscal strategy of the State of Victoria
• 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
• submissions received in relation to the Determination.

Current and projected economic conditions and trends

The Tribunal’s understanding of current and projected economic conditions and trends will be informed by the Victorian and federal budgets (both expected in May 2023), statements by the Reserve Bank of Australia, the outcome of the Fair Work Commission’s Annual Wage Review 2022‑23 (expected in mid-June 2023) and other relevant information.

The Tribunal will also have regard to the latest data on key economic indicators published by the Australian Bureau of Statistics, including the following releases:

• Australian National Accounts: National Income, Expenditure and Product 
• Average Weekly Earnings
• Consumer Price Index (CPI)
• Labour Force
• Wage Price Index (WPI).

At the time of issuing this notice, the Tribunal notes the following with respect to the Australian and Victorian economies:

• the annual change in Australia’s real Gross Domestic Product to the December quarter 2022 was 2.7%
• Victoria’s unemployment rate (in trend terms) in February 2023 was 3.8%
• Victoria’s labour force participation rate (in trend terms) in February 2023 was 66.9%
• the annual change in the Victorian WPI to the December quarter 2022 was 3.4%
• the annual change in the Melbourne CPI to the December 2022 quarter was 8%
• the annual change in the trimmed mean (a measure of underlying inflation in Australia) to the December 2022 quarter was 6.9%.

Financial position and fiscal strategy of the State of Victoria

The Tribunal’s understanding of the financial position and fiscal strategy of the State of Victoria will be informed by the Victorian Budget (expected in May 2023) and the latest Auditor‑General’s Report on the Annual Financial Report of the State of Victoria (October 2022).

At the time of issuing this notice, the Tribunal notes the following with respect to Victoria’s financial position and fiscal strategy:

• according to Victoria’s Mid-Year Financial Report (March 2023):
  • the general government sector recorded an operating deficit of $4.2 billion for the first half of 2022-23
  • net debt for the general government sector was $104.2 billion at 31 December 2022
• the 2022 Victorian Pre-Election Budget Update (November 2022) forecast a return to an operating cash surplus in 2022‑23, followed by an expected return to an operating surplus in 2025-26.

Relevant Victorian Government remuneration policies

The Tribunal is required to take into account the Victorian Government Wages Policy, which applies to enterprise agreements entered into by departments and agencies in the Victorian public sector.

The current Wages Policy caps increases in wages and conditions at 1.5% per annum over the life of an agreement. Additional changes to allowances and other conditions are capped at 0.5% per annum of the salary base, provided that the changes address key operational or strategic priorities for the agency, and/or one or more of the Public Sector Priorities.

The Tribunal is also required to consider Victorian Government policies in relation to the remuneration of executives employed in public service bodies. These include the requirement for VPS bodies to bear the cost of any increases to compulsory superannuation contributions for their executives.

The minimum superannuation entitlements of executives will increase on 1 July 2023 as a result of the following changes:

• the superannuation guarantee percentage will increase from 10.5% to 11%
• the maximum superannuation contribution base will be indexed in line with full-time adult average weekly ordinary time earnings.

The Tribunal received one submission which has been published in a de-identified form as requested. 

Submission - de-identified

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What will the Determination cover? 

The Determination will adjust the values of remuneration bands for executives employed in public service bodies.

The Determination will apply to executives employed in: 

• departments 
• Administrative Offices
• the Victorian Public Sector Commission (VPSC).

The Determination will also apply to public service body Heads who are defined in the Public Administration Act 2004 (Vic) as:

• Secretaries of departments
• Heads of Administrative Offices
• the Victorian Public Sector Commissioner.

As set out in the VPSC’s Victorian Public Service Executive Employment Handbook (Handbook), employers retain the power to set an individual executive’s remuneration within the relevant band.

Submissions

The Tribunal invites submissions from any person or body, including any affected person or class of affected persons, in relation to the proposed Determination.

You may wish to consider the following questions in your submission:

• What level of adjustment to the values of the remuneration bands should the Tribunal consider?
• Which economic and financial indices should the Tribunal consider when adjusting the values of the remuneration bands?
• Are there other matters the Tribunal should consider when making the Determination, in addition to those listed in the VIRTIPS Act?

Please email written submissions to the Tribunal Secretariat at enquiries@remunerationtribunal.vic.gov.au.

If you require assistance to make a submission, please contact the Tribunal Secretariat at enquiries@remunerationtribunal.vic.gov.au.

Submissions have now closed.

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 on the Tribunal’s 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 confidentiality or commercially sensitive information.

The Tribunal may remove identifying information from submissions if published.

Submissions that contain offensive or defamatory comments, or that are outside the scope of the Determination, will not be published.

The Tribunal may receive a request under the Freedom of Information Act 1982 (Vic). Any such request will be determined in accordance with the Freedom of Information Act 1982 (Vic) which contains provisions designed to protect personal information and information given in confidence. Further information can be found at the Office of the Victorian Information Commissioner. 

How will the Tribunal make its Determination  

Under section 24(2) of the VIRTIPS Act, the Tribunal is required to consider the following matters when making the Determination:

• current and projected economic conditions and trends
• the financial position and fiscal strategy of the State of Victoria
• 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
• submissions received in relation to the Determination.

Current and projected economic conditions and trends

Data from the Australian Bureau of Statistics (ABS) (March 2022) show that Australia’s Gross Domestic Product (GDP) increased by 3.4 per cent in the December quarter 2021 as Victoria, New South Wales and the Australian Capital Territory came out of extended lockdowns. Over the 12 months to December 2021, GDP increased 4.2 per cent. As at February 2022, national and Victorian unemployment rates were 4.0 per cent and 4.2 per cent, respectively (in seasonally adjusted terms). Participation rates were 66.4 per cent (national) and 67.1 per cent (Victoria) in seasonally adjusted terms.

The Federal Budget 2022-23 (March 2022) highlighted the resilience of the Australian economy, noting that ‘conditions are in place for a sustained economic recovery’. The Federal Budget reported the following outlook for the Australian economy:

• real GDP is forecast to grow 4.25 per cent in 2021-22 and 3.5 per cent in 2022‑23
• unemployment rate is expected to reach 3.75 per cent in the September quarter 2022 — the lowest rate in nearly half a century
• annual growth in the Wage Price Index is expected to be 2.75 per cent over 2021-22 and 3.25 per cent over 2022-23.

In his Statement on 5 April 2022, the Governor of the Reserve Bank of Australia, Dr Philip Lowe, similarly observed that the ‘Australian economy remains resilient’ and that ‘spending is picking up following the Omicron setback’. Dr Lowe acknowledged pressure on household budgets from rising prices, while noting that inflation remains lower in Australia than in many other countries. Dr Lowe also noted that while wages growth has increased, it remains at the relatively low rates seen prior to the COVID-19 pandemic (although larger wage increases are occurring in some areas).

The Tribunal notes the following movements in prices and wages in the Victorian economy:

• Consumer Price Index (All Groups) for Melbourne grew by 2.5 per cent between December 2020 and December 2021 — the lowest growth of all capital cities
• Victorian Wage Price Index grew by 2.5 per cent over the 12 months to September 2021 — the highest growth of all mainland states
• average weekly ordinary time earnings for full-time adults in Victoria increased by 2.4 per cent over the 12 months to November 2021.

The 2021/22 Victorian Budget Update (Budget Update), released in December 2021, reported the following economic outlook for Victoria:

• real Gross State Product (GSP) forecast to grow by 2.25 per cent in 2021-22 and by 4.5 per cent in 2022-23
• unemployment rate expected to average 4.5 per cent in 2021-22 and 2022-23
• annual growth in the Victorian Wage Price Index is expected to gradually increase to 3 per cent in 2024-25 and expected to exceed growth in the Melbourne Consumer Price Index over the next few years.

Financial position and fiscal strategy of the State of Victoria

The most recent Victorian Auditor-General’s Office Report on the Annual Financial Report of the State of Victoria (November 2021) stated that ‘the COVID-19 pandemic continues to affect the financial performance and position of the state, with longer term consequences for its financial sustainability’. The report noted that revenue remained below, and expenditure well above, pre‑pandemic expectations, and highlighted emerging risks including operating expenditure growth in the general government sector.

The 2021-22 Mid-Year Financial Report (March 2022) reported that the Victorian general government sector recorded an operating deficit of $10.0 billion for the six months to December 2021. The Report estimates that the operating deficit for 2021-22 will be $19.5 billion.

As at 31 December 2021, net debt for the general government sector was $89.6 billion (18.1 per cent of GSP). According to the Budget Update, net debt is forecast to increase to $162.7 billion (27.9 per cent of GSP) by 2024‑25.

The Budget Update reiterated the Victorian Government’s commitment to its 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.

Wages Policy and other 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.

The Victorian Government Wages Policy and Enterprise Bargaining Framework (Wages Policy) which applies to departments and agencies in the Victorian public sector is reproduced below.

The Premier’s annual remuneration adjustment guideline rate is a salary increase that public sector employers may pass onto executives and senior office holders. In November 2021, the guideline rate for both 2021-22 and 2022-23 was set at 1.5 per cent.

The Victorian Public Service Enterprise Agreement 2020, finalised in October 2020, provides for annual pay increases for non-executive staff averaging two per cent per year over the life of the agreement (which expires in March 2024).

Remuneration policies that apply to Victorian public service executives are set out in the VPSC’s Victorian Public Service Executive Employment Handbook (Executive Employment Handbook) and in the Standard VPS Executive Contract (Standard Contract).

The Executive Employment Handbook and the Standard Contract set out the components of executive remuneration. The Total Remuneration Package of an executive is defined as the sum of:

• base salary
• superannuation contributions
• employment benefits (i.e. non-salary) specified in the executive’s contract of employment
• the annual cost to the employer of providing the non-monetary benefits, including any fringe benefits tax payable.

The Standard Contract requires that each executive’s remuneration be reviewed on an annual basis. The employer may also agree to undertake a remuneration review at any time upon receiving a written request from the executive. A review does not guarantee an increase to any element of an executive’s remuneration.

The superannuation guarantee and maximum superannuation contribution base (MSCB) apply to executives who are members of an accumulation superannuation scheme. The superannuation guarantee is set as a percentage of ‘ordinary time earnings’ and refers to the minimum rate of employer superannuation contributions an employee is entitled to receive. The MSCB acts as a cap on the ‘ordinary time earnings’ used to calculate an employee’s superannuation entitlements — earnings over the MSCB are not included for the purpose of calculating superannuation guarantee entitlements.

The amount of superannuation payable may increase each year as a result of changes to the rate of the superannuation guarantee or as a result of indexation of the MSCB. The Executive Employment Handbook provides that public service employers must bear the cost of any such increases in superannuation liabilities (i.e. there should be no reduction in base salary).

The Executive Employment Handbook further states that employers are not to offset the cost of changes to superannuation guarantee contributions by passing on less of an annual remuneration adjustment (determined following the annual review of the executive’s remuneration required by the Standard Contract, explained above) to an individual executive than they otherwise would have.

The Tribunal’s previous Determination of an annual adjustment to the remuneration bands was consistent with the requirements of the Executive Employment Handbook.

In accordance with section 24(1) of the Victorian Independent Remuneration Tribunal and Improving Parliament Standards Act 2019 (Vic) (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 public service bodies (Victoria) Determination No. 01/2020.

The Determination will take effect 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 Tribunal invites submissions from any person or body, including any affected person, or class of affected persons, in relation to the proposed Determination. Consultation questions and information on how to make a submission are provided below.

What will the Determination cover?

The Determination will adjust the values of remuneration bands for executives employed in public service bodies.

The Determination will apply to executives employed in:

• departments 
• Administrative Offices
• the VPSC.

It will also apply to public service body Heads who are defined in the Public Administration Act 2004 (Vic) as:

• Secretaries of departments
• heads of Administrative Offices
• Victorian Public Sector Commissioner.

As explained in the VPSC’s Victorian Public Service Executive Employment Handbook (Handbook), employers retain the power to set an individual executive’s remuneration within the relevant band. An executive may only be paid above the relevant band if the Tribunal’s advice has been obtained and considered under section 37 of the VIRTIPS Act.

Submissions

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?

All written submissions should be emailed to the Tribunal Secretariat at enquiries@remunerationtribunal.vic.gov.au.

Submissions must be made by 5pm on Thursday 29 April 2021.

If you require assistance to make a submission, please contact the Tribunal Secretariat by email at enquiries@remunerationtribunal.vic.gov.au.

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 Freedom of Information Act 1982 (Vic). 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 Office of the Victorian Information Commissioner website.

How will the Tribunal make its Determination?

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 current economic and financial conditions and remuneration policies is set out below.

Current and projected economic trends

The coronavirus (COVID-19) pandemic has had a significant impact on the Australian and Victorian economies since early 2020.  The latest Reserve Bank of Australia’s (RBA) Statement on Monetary Policy noted that a faster than expected economic recovery has been aided by Australia’s relatively better health outcomes (by global standards), the easing of restrictions and supportive fiscal policy. However, the RBA also noted that the recovery is likely to be bumpy and uneven, and will require ongoing fiscal and monetary support.

Australia’s Gross Domestic Product (GDP) grew by 3.3% in the December quarter 2020, marking the first time in the more than 60-year history of the national accounts that quarterly GDP growth has exceeded 3% in consecutive quarters. Assuming that there are no further large outbreaks and accompanying hard lockdowns, the RBA noted that it expects GDP to reach pre-pandemic levels by mid-2021. The national unemployment rate decreased to 5.8% in February, down from a peak of 7.5% in June 2020.

The 2020/21 Victorian Budget  forecast that Victoria’s real Gross State Product (GSP) would contract by 4% in 2020-21, following a 0.5% contraction in 2019-20. More recently, the Mid-Year Financial Report for the State of Victoria noted that recent economic data has been positive. The report noted that Victoria’s State Final Demand (a measure of the total value of goods and services purchased in the state) grew by 6.8% in the December quarter 2020, led by a strong rebound in consumer spending. The report also noted rises in business and dwelling investment and signs of recovery in the housing market.

Regarding movements in wages and prices, the Tribunal notes the following:

• both the Consumer Price Index for Melbourne and Victorian Wage Price Index grew by 1.3% in the 12 months to December 2020
• the average weekly ordinary-time earnings for full-time adults in Victoria increased by just over 4% in the 12 months to November 2020.

Financial position and fiscal strategy of the State of Victoria

The Victorian Auditor-General’s Report on the Annual Financial Report of the State of Victoria, 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 2020/21 Victorian Budget forecast an operating deficit of approximately $23.3 billion for 2020-21, with smaller deficits expected in the following years. Net debt is forecast to be $86.7 billion (19.5% of GSP) in June 2021 and to increase to $154.8 billion (28.9% of GSP) by June 2024.

The 2020/21 Victorian Budget included significant infrastructure spending. Annual capital investment is estimated to average $19.6 billion over the next 4 years, a substantial increase over the previous 4 years.

The Victorian Government outlined several efficiency measures for government departments in the 2019/20 Victorian Budget. Given the government’s priorities of responding to the COVID-19 pandemic and of economic recovery, the 2020/21 Victorian Budget noted that implementation of these efficiency measures had been deferred.

More recently, the Victorian Government’s 2020-21 Mid-Year Financial Report reported a higher operating deficit for the first 6 months of the 2020-21 financial year than in the previous full financial year ($10.1 billion compared with $6.5 billion, respectively).

In February 2021, Moody’s Investor Service downgraded Victoria’s credit rating to Aa1 from Aaa and changed its financial outlook to ‘negative’, reflecting the state’s elevated debt burden due to the COVID-19 pandemic.

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 public service bodies, 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, is reproduced below.

^{Source: Industrial Relations Victoria, ‘Victorian Government Wages Policy,’ Wages Policy and the Enterprise Bargaining Framework (State Government of Victoria: Melbourne, Victoria, 2019).}

The Victorian Public Service Enterprise Agreement 2020 was finalised in October 2020. It provided for annual pay increases for non-executive staff averaging 2% per year over the life of the agreement.

Remuneration policies that apply to Victorian public service executives are set out in the Handbook and the Standard VPS Executive Contract (standard contract).

The Handbook and standard contract set out the components of an executive’s total remuneration package, defined as the sum of:

• base salary
• superannuation contributions
• employment benefits (i.e. non-salary) specified in the executive’s contract of employment
• the annual cost to the employer of providing the non-monetary benefits, including any fringe benefits tax payable.

The standard contract requires that an executive’s remuneration be reviewed on an annual basis. The employer may also agree to undertake a remuneration review at any time requested in writing by the executive. A review does not guarantee an increase to any element of an executive’s remuneration.

The superannuation guarantee and maximum superannuation contribution base (MSCB) apply to executives who are members of an accumulation scheme. 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 explains that public service employers must bear the cost of such increases in superannuation liabilities. The Handbook further states that employers are not to offset the cost of changes to superannuation by passing on less of an annual remuneration adjustment (determined following the annual review of the executive’s remuneration required by the standard contract, explained above) to an individual executive than they otherwise would have.