Setting remuneration
Remuneration is agreed between the employer and executive at the time of appointment.
Schedule C of the contract provides a breakdown of an executive’s remuneration, and includes:
- base salary
- employment benefits (i.e. non-salary benefits) – full cost of any benefits is met by the executive;
- the annual cost to the Employer of providing the non-monetary benefits, including any fringe benefits tax payable
- employer superannuation contributions.
An executive may request at any time to re-structure their remuneration, but it cannot be retrospective.
An executive’s remuneration must not be be conditional on their performance.
The Tribunal determines the remuneration bands for executives in VPS bodies and in prescribed public entities.
Under section 25(4) of the PAA, an executive’s remuneration must be within their relevant remuneration band, unless the employer has obtained advice from the Tribunal. The Public Entity Executive Remuneration Policy similarly requires executives employed in prescribed public entities be remunerated within their relevant remuneration band. An executive’s remuneration band is determined with reference to the relevant classification framework.
Executive roles will typically be advertised with a remuneration range. Actual remuneration for the role is subject to negotiation ahead of the executive’s appointment.
The Tribunal has published guidelines for the placement of executives within their relevant remuneration band. This includes a set of overarching guiding principles and factors an employer should consider when setting remuneration.
When negotiating remuneration, some research indicates asking employees about their previous salary during the recruitment process can reinforce gender pay gaps from previous employers. Employers should consider gender equality when setting remuneration, consistent with the Tribunal’s guidelines and guidance from the Public Sector Gender Equality Commissioner
Salary
Salary is the component of an executive’s remuneration which is sometimes referred to as take-home pay. Any post-tax deductibles, including post-tax employee superannuation contributions are considered salary.
Other non-salary benefits and associated costs
Executives may include non-salary benefits as part of their remuneration. Items that may be salary sacrificed as non-salary benefits include:
- contributions made towards a motor vehicle accessed through the Executive Vehicle Scheme or Novated Leasing Arrangement;
- salary sacrificed superannuation arrangements.
Non-salary benefits may attract fringe benefits tax. While FBT is payable by the employer, any FBT payable will be factored into the executive’s remuneration.
Executives should seek independent financial advice to assist with their decision making. The ATO publishes useful material on FBT, including rulings and handbooks detailing salary sacrifice items and FBT status.
Employers must:
- keep records of FBT liability;
- complete and lodge an annual FBT return with ATO by 21 May each year; and
- provide executives with a payment summary of the total taxable value of the fringe benefits received in an FBT year exceeding $2,000 (from 1 July 2007). The ATO uses the payment summary in income tests for a number of government benefits, e.g. Medicare Levy.
The conditions for an effective salary sacrifice arrangement have been decided by ATO rulings and policy. Executives are strongly advised to obtain independent financial advice before entering a salary sacrifice arrangement. Employers accept no liability for an executive’s decision to request a salary sacrifice arrangement.
Visit the Australian Taxation Office for more information.
Superannuation
Employers are required to make superannuation contributions in accordance with Commonwealth law.
It is strongly recommended that executives seek financial advice before making decisions relating to superannuation.
Executives joining the public sector, or who are already a member of superannuation fund, must ensure their scheme is a complying superannuation fund or choose a complying superannuation fund to which employer contributions can be paid. A complying fund is one that meets certain regulatory requirements listed on the Australian Prudential Regulation Authority’s website (see below).
Executives are required to provide the necessary documentation to their employer to prove their fund is a complying fund if a fund other than the default fund is chosen by an individual. Most funds provide this proof by way of a ‘complying fund status’ letter which can be accessed on their website.
When commencing a new contract, executives must nominate a super fund for their employer to make contributions.
The contract distinguishes between the two main types of superannuation funds: accumulation and defined benefits (or statutory superannuation) schemes.
APRA register of superannuation institutions
Accumulation fund
An accumulation fund is a lump sum fund where the investment of the individual and earnings on that investment determine the outcome for the individual on retirement. The employer contribution required under the Superannuation Guarantee (Administration) Act 1992 (Cth) is made into the accumulation fund.
An employer’s contribution is calculated on the basis of a notion of salary called “ordinary time earnings” in accordance with the Superannuation Guarantee (Administration) Act 1992 (Cth). This is multiplied by the superannuation guarantee rate of 12 per cent (from 1 July 2025).
An employer is required to make contributions up to the maximum super contribution base (MSCB), as determined by the ATO and indexed yearly. Under the contract, employers must bear the cost of any changes to the superannuation guarantee rate or the MSCB without any impact to base salary.
Employers do not need to seek the Tribunal’s advice to increase an executive’s superannuation benefits to comply with the Superannuation Guarantee (Administration) Act 1992 (Cth) if this results in the executive being paid above the relevant remuneration band.
Defined benefits fund
A defined benefits fund provides a benefit by way of lump sum, pension, or a combination of the two. These schemes are established by legislation and have a prescribed level of contribution.
A member of a statutory superannuation scheme, as defined in section 3 of the Superannuation (Public Sector) Act 1992 (Cth), who is about to enter an executive contract, must elect to either continue or cease to be a member of that scheme. An executive should carefully consider their decision because once a choice has been made to cease membership of a statutory superannuation scheme that decision cannot be reversed. The choice to remain in a statutory superannuation scheme may be changed prospectively at any time in the future.
Employers and executives are required to make employer and employee superannuation contributions if they are under a defined benefits scheme.
These schemes include the Emergency Services Superannuation Scheme (ESSS), Revised Scheme, New Scheme, Transport Scheme and the State Employment Retirement Benefits Scheme. Most of these schemes closed to new members in the 1990s and 2000s. Only the ESSS is open to new membership (for operational emergency services workers).
Under the Superannuation (Public Sector) Act 1992 (Vic), superable salary for the purposes of a defined benefits scheme is:
- 70 per cent of the total remuneration package
- the pre-contract superable salary, if that salary is higher.
Where an executive has elected to remain in a defined benefits scheme, membership of that scheme ceases on cessation of employment. The nature of any payment from the superannuation fund will be determined by the fund in accordance with the Superannuation (Public Sector) Act 1992 and will depend on the reasons for the cessation of employment.
Employee contributions
Employees may make additional contributions to their fund either before tax (which can include through a salary sacrifice arrangement or concessional contribution) or after tax as a personal contribution (also called a ‘non-concessional contribution’). This can occur through regular deductions or as a lump sum contribution.
Employees who are members of accumulation schemes may contribute additional voluntary contributions (whether concessional or non-concessional) subject to the rules of the relevant fund.
Limits apply with respect to concessional and non-concessional contributions. If contributions are made above these limits, additional tax may apply. Please check with your super scheme or the ATO website.
Employee contributions to defined benefits schemes are defined in the State Superannuation Act 1988.
Temporary changes to remuneration
Where an assignment is for a period of more than 12 months, the higher level of remuneration may be included in salary for superannuation purposes in a defined benefit scheme and also will constitute “ordinary time earnings” for Superannuation Guarantee purposes for members of accumulation funds.
Superannuation contributions during periods of parental leave
Superannuation payments will be made with respect to a period of Primary Caregiver Parental Leave to 104 weeks. The superannuation contribution amount paid will be the applicable contribution rate under the Superannuation Guarantee (Administration) Act 1992 (Cth) at the time the payment is made, on “ordinary time earnings”.
The employer will pay the superannuation contribution as a lump sum to the executive’s superannuation fund on or before the first superannuation guarantee quarterly payment due date following the executive’s return to work at the conclusion of their Primary Caregiver parental leave.
Reviewing remuneration and adjusting salary
An executive’s remuneration can be reviewed annually or, if an employer agrees, at any time requested in writing by the executive.
An employer must notify the executive in writing if there are any changes to base salary or employment benefits. The executive does not need to be separately notified for changes to superannuation.
A review does not guarantee an increase in any element of an executive’s remuneration.
Annual reviews
Employers are required under the contract to review an executive’s remuneration on an annual basis.
The annual remuneration adjustment guideline rate
The Premier determines an annual remuneration adjustment guideline rate for executives. Employers may increase an executive’s salary component (including any non-monetary benefits and/or fringe benefits tax payable) by an amount up to the guideline rate.
The guideline rate applies from 1 July of the relevant year. The annual adjustment may be made at any time during the 12-month period to 30 June of the current year, but not backdated prior to 1 July of the previous year.
An executive absent on paid or unpaid Primary Caregiver parental leave is also eligible to have any guideline rate issued during the first 52 weeks of their absence applied to their salary.
Employers are not to offset the cost of changes to superannuation by passing on less of the annual adjustment to an individual executive than they otherwise would have.
Employers may choose to pass on the guideline rate to executives on secondments and higher duties arrangements.
Employers may determine not to pass on the guideline rate if the executive was appointed to the role within six months of the date the guideline rate takes effect, or if an executive has recently received a separate remuneration increase. An executive’s remuneration may be increased up to the amount of the guideline rate for the relevant financial year. Employers are not required to pass on the guideline rate, and any increase to remuneration is subject to the employer's discretion.
Changes to the remuneration bands set by the Tribunal
The Tribunal sets the value of remuneration bands for executives. The Tribunal regularly reviews the bands and publishes them on its website.
An executive must not be remunerated below the base of their relevant remuneration band.
An executive whose remuneration drops below the base of their relevant band following a Determination made by the Tribunal must have their remuneration increased to the base of the new band in accordance with section 25(4)(a) of the PAA.
These requirements apply even if an executive's remuneration was increased following the application of the guideline rate. It is never permissible to pay an executive below the minimum of their relevant remuneration band.
Employers are responsible for implementing required changes to an executive's remuneration due to a change in the remuneration bands. Any changes in remuneration due to the Tribunal's Determinations must be consistent with the Determination's effective date, which may require backdating changes. Employers should implement any changes in a timely manner.
Ad hoc reviews
An employer may agree to review remuneration at any time as requested by an executive. This may be to acknowledge changes in responsibility, accountability or for retention purposes.
If a review results in an increase to base salary or employment benefits (including as a result of a change in the annual cost to the employer of providing the non-monetary benefits), the executive must be notified in writing.
If an executive’s responsibilities significantly change, the employer should consider undertaking a new work value assessment of the role. The outcome of the work value assessment will determine whether the role should be reclassified.
Payment above the band
If an employer proposes to pay an executive above the maximum of their relevant remuneration band, it is required by law to seek and consider the Tribunal’s advice. This is required under section 37 of the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards Act 2019 (Vic). This includes any remuneration proposal for a new appointment, reappointment or a mid-contract remuneration adjustment.
There are occasions when the Tribunal’s advice may not be required, such as when passing on mandatory superannuation increases.
Further guidance on seeking the Tribunal’s advice
Vehicles
An executive may access a vehicle as part of their remuneration package through either:
- the Executive Motor Vehicle Scheme or
- entering into a novated leasing arrangement.
Executive Motor Vehicle Scheme
An executive may elect to salary sacrifice for a motor vehicle benefit in accordance with the Executive Motor Vehicle Scheme.
An executive may choose a vehicle from a list of approved vehicles published by VicFleet for business and private use. The scheme is based on sharing costs between the executive and employer.
The cost of the motor vehicle to the executive’s total remuneration package is calculated using a formula based on whole of fleet costs. Employers must use the cost-to-package calculator to determine an executive’s contributions.
Novated leasing
Executives, as with non-executives, may select to enter into a novated lease for the private use of a vehicle.
This arrangement is entered into with the agreement of the employer. The vehicle is arranged through a finance company and the employer facilitates the payments through a salary sacrificing arrangement. The executive bears all costs of the vehicle. If the executive’s employment ends, the arrangement continues between them and the finance company.
Executives should refer to their employer for further information.
Health check
Contracts may hold an entitlement to receive a reimbursement of $1,000 (inclusive of FBT payable) for an annual medical check to review their overall health and fitness for work. An employer may agree to rollover this amount.
This is not considered part of an executive’s remuneration.
An employer may also require an executive to undergo a medical examination to ensure the executive is able to perform duties set out in the contract. This is at the employer’s expense.
Higher duties allowance
The employer may pay a higher duties allowance for a temporary assignment that is at a higher band level. If the employer wishes to pay an allowance, the employer will determine an appropriate remuneration level for the period of the temporary assignment, in accordance with the employer’s higher duties policy.
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