Public entity executive remuneration policy

Overview of the PEER Policy

The Public Entity Executive Remuneration (PEER) Policy supports consistency and transparency in executive employment and remuneration in prescribed public entities.

The PEER Policy requires that:

executive roles in prescribed public entities are classified under the relevant framework;
executive roles in prescribed public entities are appropriately remunerated in accordance with the relevant remuneration band; and
executive contracts contain specified contractual terms and conditions.

On 2 July 2024 the Governor in Council issued the updated PEER Policy, on the recommendation of the Premier.

You can find the Order, including the PEER Policy, in the Government Gazette dated 4 July 2024. You can also find it below.

This replaces the previous PEER Policy issued on 15 December 2020.

1. Objective
1.1 The Victorian Government Public Entity Executive Remuneration Policy (PEER Policy) details the Victorian Government’s approach to executive employment, classification and remuneration in specified public entities.
2. Commencement
2.1 The PEER Policy comes into operation on the day that the Victorian Independent Remuneration Tribunal (Tribunal) makes the first determination of remuneration bands for executives employed in prescribed public entities under section 19 of the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards Act 2019 (VIRTIPS Act) (Determination).
3. Scope
3.1 All public entities (as defined in section 4(1) of the Public Administration Act 2004 (PAA)) that are prescribed public entities for the purposes of the VIRTIPS Act, under regulations made pursuant to section 44 of the VIRTIPS Act (VIRTIPS Regulations), are required to comply with the PEER Policy.
4. Application to executives
4.1 The PEER Policy applies to executives in a public entity prescribed under the VIRTIPS Regulations that are:
- a CEO (or similar role if not titled as such); or
- in a role that has been classified under the Public Entity Executive Classification Framework (PEECF) with a work value score of at least 21; or
- in a role that has not yet been classified under the PEECF that has a Total Remuneration Package (TRP) of at least the equivalent of the minimum TRP value of the Senior Executive Service 1 remuneration band for executives employed in public service bodies
but does not include:
- staff whose remuneration rates are specified by an award or enterprise agreement; or
- technical specialists who meet one of the criteria outlined above, but do not have a people management function; or
- statutory or prerogative office holders appointed to public entities.
4.2 The PEER Policy also applies to executives in a public entity prescribed under the VIRTIPS Regulations that are employed as an executive under Part 3 of the PAA, including by virtue of a specific legislative reference or an order/instrument made under legislation.
5. Determinations of remuneration bands
5.1 Prescribed public entities must ensure that the remuneration of each executive to which the PEER Policy applies is within the relevant remuneration band of the applicable determination made by the Tribunal under sections 19 and 20 of the VIRTIPS Act.
5.2 Despite clause 5.1, the remuneration of an executive to which the PEER Policy applies may exceed the maximum of the relevant remuneration band, only if the employer of the executive has obtained advice from the Tribunal under section 37 of the VIRTIPS Act.
5.3 Prescribed public entities must comply with any Guidelines made by the Tribunal under section 36(6)(a) of the VIRTIPS Act.
6. Classification under the PEECF or VPSCF
6.1 Public entities must facilitate the classification of all executive positions within the meaning of paragraph 4.1 and 4.2 consistent with:
- the mandatory requirements in the Victorian PEECF; or
- in the case of executives employed under Part 3 of the PAA, the Victorian Public Service Classification Framework (VPSCF).
The PEECF and the VPSCF can be found on the Victorian Public Sector Commission's (VPSC) website (vpsc.vic.gov.au), with supporting guidance.
6.2 A current work value assessment under the PEECF or VPSCF (as applicable) must be undertaken and the relevant position must be classified accordingly where:
a) creating a new position; or
b) renewing an expiring contract; or
c) making a remuneration adjustment (other than as a result of an annual adjustment determined by the Tribunal or government).
For the purposes of this paragraph, a work value assessment is considered current if it is completed within the 12 months preceding the circumstances of 6.2.b and 6.2.c.
6.3 Public entities are required to consult with their portfolio department before finalising a work value assessment:
a) for a new executive position; or
b) where a change to the classification of an existing executive position is proposed.
7. Other remuneration and contractual matters: mandatory contract terms and bonus opportunities
7.1 Executive contracts for executives employed in public entities subject to the PEER Policy, including executives employed under Part 3 of the PAA, are required to include the following mandatory contractual terms and conditions:
- contract of employment to be offered for a maximum term of up to five years
- TRP includes base salary, superannuation contributions, employment benefits (i.e. non-salary) and the annual cost to the employer of providing the non-monetary benefits, including any fringe benefits tax payable
- termination of contract provisions – the employer may terminate a contract by providing the executive with four months’ notice in writing
- no compensation for termination of a contract beyond payment in lieu of notice and accrued leave
- an unexpired portion of a contract may only be paid out in exceptional circumstances, with the written consent of the relevant department Secretary capped bonus opportunity for executives employed on or before 3 February 2020 (see below).
7.2 The mandatory terms and conditions outlined above are reflected in the template standard contract for public entity executives available from the VPSC website. Boards of public entities are encouraged to use the standard contract for public entity executives.
7.3 Subject to paragraph 8.4, all new or renewed executive contracts entered into from 4 February 2020 onwards must not include a bonus opportunity.
8. Ongoing bonus opportunities
8.1 The maximum bonus opportunity available to public entity executives employed on or before 3 February 2020 and who did not accept a bonus buy-out offer, is either 17 per cent or 20 per cent.
8.2 Bonuses should only be paid when an executive’s performance exceeds planned targets. The total cost of bonuses in a public entity where a 17 per cent maximum opportunity currently applies cannot exceed 6 per cent of the pro rata aggregate of TRPs of those executives who are assessed for a bonus. Executives or public entities that have opted to retain the 20 per cent bonus opportunity are not subject to the 6 per cent total bonus average provisions
8.3 Paragraphs 8.1 and 8.2 cease to apply from 3 February 2025. This is in recognition of 3 February 2020 being the final date on which a new public entity executive contract could have been created with a bonus opportunity and that the maximum contract term being five years.
8.4 Specific roles at the Treasury Corporation of Victoria and the Victorian Funds Management Corporation will continue to be eligible for bonus opportunities. These roles will be determined by the Premier and the responsible Minister.
9. Contact
9.1 For further information regarding PEER Policy, please contact the Department of Premier and Cabinet, via this email address: publicsectorworkforce@dpc.vic.gov.au

Scope of the PEER Policy

The PEER Policy applies to executives in prescribed public entities to ensure executive positions are appropriately assessed, classified and remunerated consistently.

Prescribed public entities are defined in the Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards (Prescribed Public Entities) Regulations 2021 (VIRTIPS Regulations) with reference to the definition of public entities in section 4(1) of the Public Administration Act 2004 (PAA). All public entities are prescribed unless they are specifically exempted in the VIRTIPS Regulations.

The following executive roles in prescribed public entities are covered by the PEER Policy:

A Chief Executive Officer (or similar role); or
A role with a work value score of 21 or more; or
A role not yet classified under the Public Entity Executive Classification Framework (PEECF), but which has a minimum total remuneration package (TRP) value equivalent to the minimum value of the SES-1 remuneration band for executives in public service bodies (not the public entity remuneration band).

The PEER Policy also applies to executives in prescribed public entities that are employed under Part 3 of the PAA. Under the Victorian Independent Remuneration Tribunal’s (Tribunal) public entity Determination, these executives are subject to the Tribunal’s VPS remuneration bands (as opposed to the public entity remuneration bands).

List of entities

You can find a list of prescribed public entities on the Victorian Public Sector Commission (VPSC) website, List of public sector employers.

Under the column ‘VIRT Determination’ it will note whether the agency is a prescribed public entity.

Exemptions

The VIRTIPS Regulations specify which public entities are exempt from the PEER Policy. Exemptions from the PEER Policy are not common. Obtaining an exemption will typically require approval from the relevant Minister, the Premier and the Governor in Council.

Please contact publicsectorworkforce@dpc.vic.gov.au for more information.

As specified in the VIRTIPS Regulations, exempt entities include:

public hospitals, multi purpose services or public health services;
ambulance services;
the Victorian Institute for Forensic Mental Health;
school councils;
the State Electricity Commission and its subsidiaries; and
some committees of management appointed under the Crown Land (Reserves) Act 1978.

Classifying executive roles

The PEER Policy requires prescribed public entities to facilitate the classification of executive positions.

Under clause 6.2 of the PEER Policy, an entity must have a current work value assessment (conducted within the previous 12 months) in place before creating a new position, renewing an expiring contract or making a remuneration adjustment, including any executive recruitment currently underway.

Prescribed public entity executive positions must be classified consistent with the Public Entity Executive Classification Framework (PEECF). In the case of executives employed under Part 3 of the PAA, positions must be classified consistent with the Victorian Public Service Classification Framework (VPSCF).

The PEECF and VPSCF provide a consistent, fair and transparent mechanism for classifying public entity executive positions based on work value. You can find information on the PEECF and VPSCF on the VPSC website.

Please also see the VPSC website for guidance material to assist in undertaking work value assessments, and other tools and materials to support executive classifications.

The PEER Policy provides flexibility for entities in facilitating work value assessments. For example, public entities may choose to undertake assessments in-house or facilitate a third-party provider to undertake the assessment. Work value assessments may also be completed by the relevant portfolio department, by agreement.

When engaging third-party providers, public entities should ensure they follow the principles outlined in the Administrative Guidelines on Engaging Professional Services in the Victorian Public Service, and Administrative Guidelines on Engaging Labour Hire in the Victorian Public Service issued under section 36A of the PAA. The entities to which the guidelines apply are set out in each document.

These guidelines provide decision making principles and practical guidance that supports public service bodies and entities to determine when the use of professional services is appropriate. These principles need to be included in decision-making processes.

Please also see the website, Administrative Guidelines on Engaging Professional Services for guidance material and other tools to assist in decision making when engaging third-party providers.

Requirement for entities to consult with departments

Under clause 6.3 of the PEER Policy, entities must consult with their portfolio department prior to finalising work value assessments when:

establishing a new executive position; or
changing the classification of an existing position.

This requirement is intended to ensure that departments can fulfill their portfolio oversight obligations and support consistency in the application of the PEECF and VPSCF. As such, departments are responsible for establishing appropriate consultation processes, and entities should get in touch with their key departmental contacts to confirm how this consultation should occur.

The final decision regarding the work value assessment lies with the public entity head or the Board, as appropriate.

While prescribed public entities operate under individual governance arrangements and are responsible to their portfolio Ministers, departments advise Ministers in relation to these governance obligations. Departmental Secretaries have a responsibility under the PAA to advise Ministers on matters relating to a public entity and to work with and provide guidance to a public entity to assist it in relation to public administration and governance.

To discharge these duties, departments may wish to set up processes to provide advice to entities in relation to executive classification and remuneration decisions and to monitor classification and remuneration outcomes. Departments are also responsible for establishing appropriate processes for consultation regarding work value assessments.

Remuneration

Clause 5.1 of the PEER Policy requires that executive remuneration falls within the relevant remuneration band, which is determined by the Tribunal. Prescribed public entities must also comply with any relevant guidelines issued by the Tribunal.

The current executive remuneration bands and guidelines can be found at the website, Remuneration bands for executives in prescribed public entities.

Executives in prescribed public entities must be remunerated within the relevant band, unless the Tribunal’s advice on a proposal to pay above the band has been obtained and considered. While the work value assessment provides a useful starting point, establishing an executive’s remuneration within a band may also consider other factors.

For advice regarding proposals to pay above the remuneration band, please visit the Tribunal’s website or contact enquiries@remunerationtribunal.vic.gov.au.

For information on annual adjustments to public entity executives’ remuneration please visit the website, Executive and senior office holders annual remuneration changes.

Executive contracts

Clause 7 of the PEER Policy requires contracts for executives in prescribed public entities to contain certain mandatory terms and conditions.

The PEER Policy outlines mandatory terms and conditions, which are included in the standard contract template for public entity executives available on the VPSC website.

On 4 February 2020 the Governor in Council gave effect to the Premier’s decision to remove bonus opportunities from public entity executive contracts. Some executives may have bonus buy-out offers in their employment contract. Only executive contracts entered prior to 4 February 2020 may include this bonus buy-out offer.

Please see the website, Bonus Removal Offer, for further information.

Further information

The Department of Premier and Cabinet manages executive employment policy, including:

the Premier's guideline rate;
the PEER Policy;
matters relating to standard executive contracts, remuneration and employment policy;
executive vehicle policy; and
executive superannuation policy.

Queries on these matters can be directed to publicsectorworkforce@dpc.vic.gov.au.

The VPSC hosts:

the VPS Standard Executive Contract;
the Standard Contract for Public Entity Executives;
the VPS Executive Employment Handbook; and
the Victorian Public Entity Executive Employment Handbook.

For more information, please visit the VPSC executive employment website, or contact executive.employment@vpsc.vic.gov.au.

The Tribunal is responsible for:

determining remuneration bands for executives employed in prescribed public entities and public service bodies; and
advising on proposals to pay public sector executives above the remuneration band.

For further information, please visit the Tribunal’s website, or contact enquiries@remunerationtribunal.vic.gov.au.

Governance

Updated 4 July 2024

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