Notice of intention to make a Determination
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 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.
The Determination will adjust the values of remuneration bands for executives employed in public service bodies.
The Determination will apply to executives employed in:
- Administrative Offices
- the VPSC
- Secretaries of departments
- heads of Administrative Offices
- Victorian Public Sector Commissioner
As explained in the VPSC’s , 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.
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 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 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 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 , 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.
The Victorian Government Wages Policy and Enterprise Bargaining Framework has 3 pillars:
- Pillar 1: Wages — increases in wages and conditions will be capped at a rate of growth of 2%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 or 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% (instead of at 2%).
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.
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 Thursday 29 April 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.
Reviewed 08 April 2021