Generally, the employer may terminate an executive’s contract by providing four months’ written notice.
An employer may terminate a contract without notice for reasons of serious misconduct.
An executive must give four weeks’ notice to end their contract.
An executive’s employment may end due to the expiry of the contract, voluntary resignation, termination of contract, retirement or death.
Executives must be paid out any accrued entitlements (i.e. annual leave and long service leave) at the end of their employment, as appropriate. Any payments in lieu of accumulated annual leave and long service leave entitlements are not considered to be ordinary time earnings so the Employer is not required to pay a superannuation contribution on them. Payments in lieu of these leave entitlements are calculated in accordance with the source of the entitlement (for example, the ‘base rate of pay’ as defined in the Fair Work Act 2009 (Cth) or the ‘ordinary time rate of pay’ as defined in the Long Service Leave Act 2018 (Vic).
Pay in lieu of notice is based on 100 per cent of the TRP.
Some executives are entitled to a right of return (section 27 of the PAA). The right of return provides the executive with appointment to a non-executive role at the most senior non-executive level (currently the Senior Technical Specialist level), provided the appointment remuneration does not increase and subject to a maximum salary at the midpoint of that classification.
Information or products developed by the executive during their employment in the VPS remains the property of their employer.
10.1 Circumstances Ending Employment
An executive’s employment can end in a number of different circumstances. Some of these circumstances and the responsibilities of each party are discussed below.
The standard executive employment contract requires that the employer:
- consult the executive at least six months prior to the expiry of the contract regarding whether a further contract will be offered. In the case of a short-term contract (one year or less), the consultation should be undertaken at least three months prior to the expiry of the contract;
- advise the executive on the decision about contract renewal no later than four months before contract In the case of a short-term contract, no later than two months before contract expiry;
- The contract provides that the parties may agree to such other period in writing.
- If a new contract is oﬀered, the employer should ensure that the administrative processes (i.e. payroll processes, new contract ready for signing, delegations continue, etc.) are in place to execute the contract before the current contract expires.
If a contract is not renewed, the executive must be paid any outstanding accrued but untaken annual and/or long service leave entitlements, if applicable.
10.1.2. Payment of Accrued Entitlements
Executives must be paid out any accrued entitlements (i.e. annual leave and long service leave) at the end of their employment, as appropriate. Any payments in lieu of accumulated annual leave and long service leave entitlements are not considered to be ordinary time earnings so the Employer is not required to pay a superannuation contribution on them. Payments in lieu of these leave entitlements are calculated in accordance with the source of the entitlement (for example, the ‘base rate of pay’ as defined in the Fair Work Act 2009 (Cth) or the ‘ordinary time rate of pay’ as defined in the Long Service Leave Act 2018 (Vic)).
10.1.3. Termination of Contract
A contract may be terminated by the employer or employee under the terms set out in their contract, and subject to the requirements of the PAA. See appendix C for more detail on summary dismissal.
- If the employer chooses not to continue employment through to the end of the notice period, payment in lieu of notice may be offered.
Payment of accrued entitlements
If the contract is terminated, the executive must be paid any outstanding accrued but untaken annual and/or long service leave entitlements as indicated above, if applicable.
An executive may choose to retire at any time after reaching the age of 55 (section 20(4) of the PAA) – (some defined benefit superannuation funds may provide for a lower age for retirement benefits). It is unlawful to discriminate against an employee on the basis of age or for the employer to compulsorily retire an employee due to age (refer to the Equal Opportunity Act 1995). An exemption from the Attorney-General can be sought for compulsory age retirement in certain circumstances.
Payment of accrued entitlements
On retirement an executive must be paid out:
- any outstanding remuneration;
- accumulated annual leave; and
- outstanding long service leave entitlements.
It is important that employers have in place processes to deal with an executive’s family, friends and colleagues, should an executive die in their employment. Most VPS agencies should have access to an Employee Assistance Program.
Payment of entitlements
The deceased executive’s family (dependents or non-dependents) or representative (trustee) is to be paid any outstanding:
- remuneration; and
- annual leave and long service leave payment, provided that all legal requirements are satisﬁed.
- Termination of contract is covered in the standard executive employment contract and reﬂects sections 34 and 35 of the PAA. A generic step-by-step guide for ending employment is in appendix D.
10.2 Right of Return
Section 27 of the PAA provides a right of return for some executives. The right of return is available to an executive:
- where their contract is terminated by the employer
- the executive was a VPS employee prior to their initial employment as an executive and this employment was continuous.
The right of return provides the executive with appointment to the most senior non-executive classification level at a remuneration level no higher than the midpoint of that classification.
- There is no minimum contract period required for a right of return.
An executive loses the right of return if their employment is terminated for misconduct within the meaning of section 22 of the PAA. The Public Administration (Review of Actions) Regulations 2015 establish procedures for dealing with allegations of misconduct. An executive may waive in writing their right of return. If the right of return is exercised the executive is not entitled to any payment in lieu of notice.
During a review in accordance with the regulations, it may be necessary to suspend an executive on pay pending the outcome.
Calculating the right of return salary level
The PAA provides that an executive returns to the midpoint of the highest non-executive classification unless that midpoint would result in an increase in salary. The right of return salary is calculated as follows:
- Executive’s TRP minus the employer superannuation contribution subject to the maximum salary being the midpoint of the most senior non-executive classification. The executive is not to receive a higher remuneration on return.
The rate of salary on return is calculated by taking the employer superannuation contribution (the SG rate) from the contracted TRP to arrive at the maximum cash figure (Note that this method of calculation was approved by Government to ensure that all returning executives were treated equally regardless of superannuation scheme membership).
The STS position is an award-based classification. The STS midpoint does not include the employer superannuation guarantee contribution.
Effect on non-salary benefits
An executive on return to a non-executive role relinquishes any benefits that have been provided exclusively as part of the executive contract – notably the executive scheme motor vehicle. Other arrangements the executive had may continue, e.g. novated motor vehicle lease, VPS health insurance payments through salary sacrifice or deduction.
Redeployment to a vacancy at a similar level may be considered for an executive who is identified as surplus, in line with the VPS Agreement. Executives are not entitled to the redundancy packages set out in the PAA.
10.4 Outplacement Support
An employer must offer reasonable outplacement support to an executive who is leaving the public service involuntarily save as a result of termination on notice due to failure to fulfil duties or due to summary termination. The outplacement assistance provides the executive with support and enables them to search for a new job for up to 4 months.
10.5 Conﬁdential Information
When an executive leaves an organisation, any work produced by the executive remains the property of the employer, unless otherwise agreed in writing between the employer and executive. Conﬁdential information obtained by an executive during his or her employment must not be used for personal gain or to advantage a prospective employer or business, or disadvantage the Victorian Government.
10.6 Restraint of Trade Clause
A restraint of trade clause is a clause in an Executive’s contract that prevents them from performing work for particular employers outside the Victorian Public Sector (VPS) for a period of time after their employment with their VPS employer ends. For certain Executive roles, the employer may wish to consider including an appropriately drafted restraint of trade clause in the Executive’s contract prior to entry into the contract.
Restraint of trade clauses can only be used in limited circumstances and under the close guidance of a lawyer. Before deciding whether to include a restraint of trade clause in an Executive’s contract, the employer should consider whether a restraint is appropriate in the circumstances. Some of the relevant considerations include:
- the seniority of the role including whether the role involves access to sensitive information that could provide an unfair advantage
- whether the role includes significant interaction with private sector clients or contractors, and
- whether the role involves negotiating commercial agreements.
The duration, area and nature of activities restrained will need to be carefully considered. Both the VPS employer and the person about to enter into an Executive Contract should seek, and keep a record of, legal advice before including a restraint of trade clause.