This document is part of the Victorian Public Service executive employment resource.

This looks at how the remuneration package is determined and what is included.

Summary

  • The Victorian Independent Remuneration Tribunal (the Remuneration Tribunal) determines executive remuneration bands for public service executives and may issue guidelines on the placement of executives within remuneration bands.
  • The executive employment contract provides that a review of individual executive remuneration is undertaken annually.
  • Each employer must establish an Executive Remuneration Committee.
  • Employers must report executive employment details annually to the Victorian Public Sector Commission (VPSC) in the form and detail advised at the time.

What is Considered Remuneration?

The total remuneration for executives includes:

  • base salary (including any post-tax employee superannuation contributions or other post-tax deductibles);
  • employer superannuation contributions (compulsory employer contributions and pre-tax contributions directed by the executive);
  • employment benefits (i.e. non-salary benefits) – full cost of any benefits is met by the executive; and
  • the annual cost to the Employer of providing the non-monetary benefits, including any fringe benefits tax payable.

4.1 Remuneration Bands

Executive employment is structured in three work value levels described as bands. The work value of the band levels are described in the VPS Executive Classification Framework.

The VPS Executive remuneration bands are set by the Premier and apply to all VPS executives and are available on the VPSC website. Public Service Body Heads may determine remuneration levels for individual executives.

4.2 Departmental Executive Remuneration Committee

Each department must establish an Executive Remuneration Committee. The committee’s role is to ensure that a consistent and rigorous approach is taken to setting and adjusting executive remuneration.

4.2.1. Responsibilities of Departmental Executive Remuneration Committees

The specific role and responsibilities of an Executive Remuneration Committee are for each employer to determine. A suggested model is set out below.

The Executive Remuneration Committee’s responsibilities are to:

  • provide a budget forecast of expenditure on executive salaries for each financial year;
  • provide a forecast of any changes to the executive profile in the department and the challenges this will bring;
  • monitor budget expenditure and report progress against the forecast on a six-monthly basis;
  • review all proposals for remuneration levels and adjustments to assure transparency and fairness;
  • ensure that the distribution of executive salaries is reported in the Department’s Annual Report (for more details, refer to the current Financial Reporting Directions issued under the Financial Management Act 1994 which are published on the Department of Treasury and Finance website);
  • report to the VPSC annually, details of executive employment in the agency in the form and format advised at the time;
  • provide the VPSC with an aggregate agency report on the total cost of executive employment on an annual basis; and as required
  • ensure it has documented its methodology for determining work value, related benchmarks, reasons for any remuneration level, including changes in, and premium remuneration. These policies must stand up to review.

Note:

  • The committee must have an independent external member– someone who can provide an unbiased external viewpoint.
  • The VPSC maintains a whole-of-government database on executive remuneration. Reports are provided to the Government and the Victorian Secretaries Board. Therefore, accurate and timely information must be provided.

4.3 When is Remuneration Reviewed?

4.3.1. Annual Remuneration Policy Reviews

The Remuneration Tribunal undertakes a review of executive remuneration policy annually. Details of any increase and its application are notified to employers in the public service annually by the Remuneration Tribunal Secretariat.

4.3.2. Individual Annual Executive Remuneration Reviews

The standard executive employment contract provides that an executive’s remuneration will be reviewed annually. The agency’s remuneration review for individual executives is conducted in the context of the outcome of the remuneration policy review of executive remuneration policy (see above). For administrative purposes, agencies usually align their individual executive remuneration review to the effective date of the annual remuneration policy review. Agencies’ remuneration adjustments should be assessed with regard to:

  • sustained performance evidence of the executive’s application of key competencies, and
  • retention factors.

The annual review does not guarantee a remuneration increase for individual executives.

The annual review average increase in remuneration for individual executives in an agency (undertaken in response to the policy increase advised as effective from 1 July each year) must not exceed the adjustment approved by the Remuneration Tribunal. This does not include ad hoc reviews that may be undertaken at any time during the year.

4.3.3. Ad Hoc Reviews

An employer may agree to undertake an ad hoc remuneration review at any time. This may be to acknowledge changes in responsibility, accountability or for retention purposes. An employer agreeing to undertake this review does not guarantee any increase to any element of the Executive’s remuneration.

Any increases or other change 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) shall be notified to the executive in writing.

An executive may request in writing at any time to re-structure base salary and any employment benefits for consideration by the Employer. Should the Employer agree to this request, such a re-structure shall only apply prospectively, and must include a superannuation component at least equivalent to the minimum superannuation contribution required by the Employer to avoid a charge under the Superannuation Guarantee (Administration) Act 1992 (Cth) (although note that special requirements may arise for an executive who is a member of a statutory superannuation scheme where superannuation contribution obligations arise through the relevant legislation).