Remuneration bands for executives employed in prescribed public entities – annual adjustment

In accordance with section 24(1) of the Victorian Independent Remuneration Tribunal and Improving Parliament Standards Act 2019 (Vic) (VIRTIPS Act), the Tribunal hereby publishes notice of its intention to make a Determination.

Details about the proposed Determination and how to make a submission are set out below.

What will the Determination cover?

The Determination will provide for an annual adjustment to the values of the remuneration bands for executives employed in prescribed public entities. The current values of the remuneration bands are available on the Tribunal’s Remuneration bands for executives employed in prescribed public entities webpage.

The Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards (Prescribed Public Entities) Regulations 2021 (Vic) specifies the public entities within the scope of the Determination.

As set out in the Victorian Government’s Public Entity Executive Remuneration Policy (PEER Policy), employers retain the power to set an individual executive’s remuneration within the relevant band.

When will the Determination take effect?

Once made, the Determination will have effect from 1 July 2023.

Submissions

The Tribunal invites submissions from any person or body, including any affected person or class of affected persons, in relation to the proposed Determination.

You may wish to consider the following questions when preparing your submission:

• What adjustment to the values of the remuneration bands should the Tribunal consider, if any?
• Which economic and financial indicators should the Tribunal consider in adjusting the values of the remuneration bands?
• What other matters should the Tribunal consider when making the Determination, if any, in addition to those listed in the VIRTIPS Act?

Written submissions (and requests for assistance to make a submission) should be emailed to the Tribunal Secretariat at enquiries@remunerationtribunal.vic.gov.au.

Written submissions must be received by the Tribunal by 5pm on Friday 28 April 2023.

The Tribunal may also accept requests from interested parties to make submissions after 28 April 2023. Please contact the Tribunal Secretariat at enquiries@remunerationtribunal.vic.gov.au to request to make a late submission.

Those wishing to make an oral submission must advise the Tribunal Secretariat via email by 5pm on Friday 14 April 2023.

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 Freedom of Information Act 1982 (Vic). Any such request will be determined in accordance with the Freedom of Information Act 1982 (Vic) which contains provisions designed to protect personal information and information given in confidence. Further information can be found at the Office of the Victorian Information Commissioner.

How will the Tribunal make its Determination?

In making its Determination, section 24(2) of the VIRTIPS Act requires the Tribunal to consider:

• current and projected economic conditions and trends
• the financial position and fiscal strategy of the State of Victoria
• 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
• submissions received in relation to the Determination.

Current and projected economic conditions and trends

The Tribunal’s understanding of current and projected economic conditions and trends will be informed by the Victorian and federal budgets (both expected in May 2023), statements by the Reserve Bank of Australia, the outcome of the Fair Work Commission’s Annual Wage Review 2022‑23 (expected in mid-June 2023) and other relevant information.

The Tribunal will also have regard to the latest data on key economic indicators published by the Australian Bureau of Statistics, including the following releases:

• Australian National Accounts: National Income, Expenditure and Product
• Average Weekly Earnings
• Consumer Price Index (CPI)
• Labour Force
• Wage Price Index (WPI).

At the time of issuing this notice, the Tribunal notes the following with respect to the Australian and Victorian economies:

• the annual change in Australia’s real Gross Domestic Product to the December quarter 2022 was 2.7%
• Victoria’s unemployment rate (in trend terms) in February 2023 was 3.8%
• Victoria’s labour force participation rate (in trend terms) in February 2023 was 66.9%
• the annual change in the Victorian WPI to the December quarter 2022 was 3.4%
• the annual change in the Melbourne CPI to the December 2022 quarter was 8%
• the annual change in the trimmed mean (a measure of underlying inflation in Australia) to the December 2022 quarter was 6.9%.

Financial position and fiscal strategy of the State of Victoria

The Tribunal’s understanding of the financial position and fiscal strategy of the State of Victoria will be informed by the Victorian Budget (expected in May 2023) and the latest Auditor‑General’s Report on the Annual Financial Report of the State of Victoria (October 2022).

At the time of issuing this notice, the Tribunal notes the following with respect to Victoria’s financial position and fiscal strategy:

• according to Victoria’s Mid-Year Financial Report (March 2023):
  • the general government sector recorded an operating deficit of $4.2 billion for the first half of 2022-23
  • net debt for the general government sector was $104.2 billion at 31 December 2022
• the 2022 Victorian Pre-Election Budget Update (November 2022) forecast a return to an operating cash surplus in 2022‑23, followed by an expected return to an operating surplus in 2025-26.

Relevant Victorian Government remuneration policies

The Tribunal is required to take into account the Victorian Government Wages Policy, which applies to enterprise agreements entered into by departments and agencies in the Victorian public sector.

The current Wages Policy caps increases in wages and conditions at 1.5% per annum over the life of an agreement. Additional changes to allowances and other conditions are capped at 0.5% per annum of the salary base, provided that the changes address key operational or strategic priorities for the agency, and/or one or more of the Public Sector Priorities.

The Tribunal is also required to consider Victorian Government policies in relation to the remuneration of executives employed in prescribed public entities. These include the requirement for employers to bear the cost of any increases to compulsory superannuation contributions for their executives employed under the Standard Executive Employment Contract.

The minimum superannuation entitlements of executives will increase on 1 July 2023 as a result of the following changes:

• the superannuation guarantee percentage will increase from 10.5% to 11%
• the maximum superannuation contribution base will be indexed in line with full-time adult average weekly ordinary time earnings.

The Tribunal received the following submissions which have been published either in full or in a de-identified or redacted form as requested.

Submission 1 - de-identified

PDF 225.65 KB

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Submission 2 - Victorian Planning Authority (Executive Director, People and Performance )

PDF 103.44 KB

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Submission 3 - Victorian Managed Insurance Authority

PDF 99.99 KB

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In accordance with section 24(1) of the Victorian Independent Remuneration Tribunal and Improving Parliament Standards Act 2019 (Vic) (VIRTIPS Act), the Tribunal hereby publishes notice of its intention to make a Determination.

What will the Determination cover?

The Determination will adjust the values of remuneration bands for executives employed in prescribed public entities.

The Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards (Prescribed Public Entities) Regulations 2021 (Vic) specifies the public entities within the scope of the Determination.

Some executives in prescribed public entities are employed under Part 3 of the Public Administration Act 2004 (Vic) (PAA). The remuneration bands for these executives will be adjusted by the Remuneration bands for executives employed in public service bodies (Victoria) Annual Adjustment Determination 2022.

As set out in the Victorian Government’s Public Entity Executive Remuneration Policy (PEER Policy), employers retain the power to set an individual executive’s remuneration within the relevant band.

Submissions

The Tribunal invites submissions from any person or body, including any affected person or class of affected persons, in relation to the proposed Determination.

You may wish to consider the following questions in your submission:

• What level of adjustment to the values of the remuneration bands should the Tribunal consider?
• Which economic and financial indices should the Tribunal consider when adjusting the values of the remuneration bands?
• Are there other matters the Tribunal should consider when making the Determination, in addition to those listed in the VIRTIPS Act?

Please email written submissions to the Tribunal Secretariat at enquiries@remunerationtribunal.vic.gov.au.

If you require assistance to make a submission, please contact the Tribunal Secretariat at enquiries@remunerationtribunal.vic.gov.au.

Submissions have now closed.

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 on the Tribunal’s 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 confidentiality or commercially sensitive information.

The Tribunal may remove identifying information from submissions if published.

Submissions that contain offensive or defamatory comments, or that are outside the scope of the Determination, will not be published.

The Tribunal may receive a request under the Freedom of Information Act 1982 (Vic). Any such request will be determined in accordance with the Freedom of Information Act 1982 (Vic) which contains provisions designed to protect personal information and information given in confidence. Further information can be found at the Office of the Victorian Information Commissioner.

How will the Tribunal make its Determination

Under section 24(2) of the VIRTIPS Act, the Tribunal is required to consider the following matters when making the Determination:

• current and projected economic conditions and trends
• the financial position and fiscal strategy of the State of Victoria
• 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
• submissions received in relation to the Determination.

Current and projected economic conditions and trends

Data from the Australian Bureau of Statistics (ABS) (March 2022) show that Australia’s Gross Domestic Product (GDP) increased by 3.4 per cent in the December quarter 2021 as Victoria, New South Wales and the Australian Capital Territory came out of extended lockdowns. Over the 12 months to December 2021, GDP increased 4.2 per cent. As at February 2022, national and Victorian unemployment rates were 4.0 per cent and 4.2 per cent, respectively (in seasonally adjusted terms). Participation rates were 66.4 per cent (national) and 67.1 per cent (Victoria) in seasonally adjusted terms.

The Federal Budget 2022-23 (March 2022) highlighted the resilience of the Australian economy, noting that ‘conditions are in place for a sustained economic recovery’. The Federal Budget reported the following outlook for the Australian economy:

• real GDP is forecast to grow 4.25 per cent in 2021-22 and 3.5 per cent in 2022‑23
• unemployment rate is expected to reach 3.75 per cent in the September quarter 2022 — the lowest rate in nearly half a century
• annual growth in the Wage Price Index is expected to be 2.75 per cent over 2021-22 and 3.25 per cent over 2022-23.

In his Statement on 5 April 2022, the Governor of the Reserve Bank of Australia, Dr Philip Lowe, similarly observed that the ‘Australian economy remains resilient’ and that ‘spending is picking up following the Omicron setback’. Dr Lowe acknowledged pressure on household budgets from rising prices, while noting that inflation remains lower in Australia than in many other countries. Dr Lowe also noted that while wages growth has increased, it remains at the relatively low rates seen prior to the COVID-19 pandemic (although larger wage increases are occurring in some areas).

The Tribunal notes the following movements in prices and wages in the Victorian economy:

• Consumer Price Index (All Groups) for Melbourne grew by 2.5 per cent between December 2020 and December 2021 — the lowest growth of all capital cities
• Victorian Wage Price Index grew by 2.5 per cent over the 12 months to September 2021 — the highest growth of all mainland states
• average weekly ordinary time earnings for full-time adults in Victoria increased by 2.4 per cent over the 12 months to November 2021.

The 2021/22 Victorian Budget Update (Budget Update), released in December 2021, reported the following economic outlook for Victoria:

• real Gross State Product (GSP) forecast to grow by 2.25 per cent in 2021-22 and by 4.5 per cent in 2022-23
• unemployment rate expected to average 4.5 per cent in 2021-22 and 2022-23
• annual growth in the Victorian Wage Price Index is expected to gradually increase to 3 per cent in 2024-25 and expected to exceed growth in the Melbourne Consumer Price Index over the next few years

Financial position and fiscal strategy of the State of Victoria

The most recent Victorian Auditor-General’s Office Report on the Annual Financial Report of the State of Victoria (November 2021) stated that ‘the COVID-19 pandemic continues to affect the financial performance and position of the state, with longer term consequences for its financial sustainability’. The report noted that revenue remained below, and expenditure well above, pre‑pandemic expectations, and highlighted emerging risks including operating expenditure growth in the general government sector.

The 2021-22 Mid-Year Financial Report (March 2022) reported that the Victorian general government sector recorded an operating deficit of $10.0 billion for the six months to December 2021. The Report estimates that the operating deficit for 2021-22 will be $19.5 billion.

As at 31 December 2021, net debt for the general government sector was $89.6 billion (18.1 per cent of GSP). According to the Budget Update, net debt is forecast to increase to $162.7 billion (27.9 per cent of GSP) by 2024‑25.

The Budget Update reiterated the Victorian Government’s commitment to its four-step fiscal strategy:

• Step 1: creating jobs, reducing unemployment and restoring economic growth
• Step 2: returning to an operating cash surplus
• Step 3: returning to operating surpluses
• Step 4: stabilising debt levels.

Wages Policy and other 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.

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 Premier’s annual remuneration adjustment guideline rate is a salary increase that public sector employers may pass onto executives and senior office holders. In November 2021, the guideline rate for both 2021-22 and 2022-23 was set at 1.5 per cent.

Remuneration policies that apply to prescribed public entity executives are set out in the Victorian Government’s Public Entity Executive Remuneration Policy (PEER Policy) and the Victorian Public Entity Executive Handbook (Executive Handbook).

The PEER Policy sets out the mandatory contractual terms and conditions that must be included in a public entity executive’s contract of employment, including that the executive’s Total Remuneration Package includes:

• base salary
• superannuation contributions
• employment benefits (i.e. non-salary)
• the annual cost to the employer of providing the non-monetary benefits, including any fringe benefits tax payable.

While the Victorian Public Service Commission (VPSC) publishes a standard contract for the employment of public entity executives, its use is not mandatory for public entities. The standard contract states than an executive’s remuneration is to be reviewed on an annual basis.

The superannuation guarantee and maximum superannuation contribution base (MSCB) apply to executives who are members of an accumulation superannuation scheme. The superannuation guarantee is set as a percentage of ‘ordinary time earnings’ and refers to the minimum rate of employer superannuation contributions an employee is entitled to receive. The MSCB acts as a cap on the ‘ordinary time earnings’ used to calculate an employee’s superannuation entitlements — earnings over the MSCB are not included for the purpose of calculating superannuation guarantee entitlements.

The amount of superannuation payable may increase each year as a result of changes to the rate of the superannuation guarantee or as a result of indexation of the MSCB. The Executive Handbook provides that public entity employers whose employees are on the standard contract must bear the cost of such increases in superannuation liabilities (i.e. there should be no reduction in base salary).

The Executive Handbook further states that employers are not to offset the cost of changes to superannuation guarantee contributions by passing on less of an annual remuneration adjustment to an individual executive than they otherwise would have.

The Tribunal’s previous Determination of an annual adjustment to the remuneration bands was consistent with the requirements of the Executive Handbook.

In accordance with section 24(1) of the Victorian Independent Remuneration Tribunal and Improving Parliament Standards Act 2019 (Vic) (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 prescribed public entities (Victoria) Determination No. 01/2020 (Comprehensive Determination).

The Comprehensive Determination was made on 18 December 2020. The Tribunal cannot make an annual adjustment Determination within nine months of this date (section 20(2) of the VIRTIPS Act), that is, before 19 September 2021. The Determination will take effect retrospectively 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.

What will the Determination cover?

The Determination will adjust the values of remuneration bands for executives employed in prescribed public entities.

As set out in the Victorian Government’s Public Entity Executive Remuneration Policy (PEER Policy), employers retain the power to set an individual executive’s remuneration within the relevant band.

The Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards (Prescribed Public Entities) Regulations 2019 (Vic) specifies the public entities within the scope of the Determination.

Some executives in prescribed public entities are employed under Part 3 of the Public Administration Act 2004 (Vic) (PAA). The remuneration bands for those executives will be adjusted by the Remuneration bands for executives employed in public service bodies (Victoria) Annual Adjustment Determination 2021.

Submissions

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?

All written submissions should be emailed to the Tribunal Secretariat at enquiries@remunerationtribunal.vic.gov.au.

Submissions must be made by 5pm on Friday 16 July 2021.

If you require assistance to make a submission, please contact the Tribunal Secretariat by email at enquiries@remunerationtribunal.vic.gov.au.

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 Freedom of Information Act 1982 (Vic). 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 Office of the Victorian Information Commissioner website.

How will the Tribunal make its Determination?

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 economic and financial conditions and trends, and public entity executive employment and remuneration policies, is set out below.

On 27 May 2021, the Acting Premier announced that Victoria would move to ‘circuit breaker’ restrictions. Official estimates of the economic and financial impacts of these restrictions were not available at the time of publication of this notice of intention. In general, there is considerable uncertainty about future conditions, following policy responses to the coronavirus (COVID-19) pandemic.

Current and projected economic trends

The Reserve Bank of Australia’s (RBA) latest Statement on Monetary Policy (May 2021) noted that the Australian economy is continuing to recover strongly from the impacts of the COVID-19 pandemic. The recovery has been supported by favourable health outcomes, the removal of restrictions and substantial fiscal and monetary support. Nonetheless, the RBA noted that the recovery is expected to be uneven as the pandemic continues to weigh on some parts of the economy (e.g. tourism and educational service providers).

Australia’s Gross Domestic Product (GDP) grew by 1.8% over the March quarter 2021, and is now 0.8% higher than its pre-pandemic level. This follows consecutive quarters in which GDP growth exceeded 3.0%, resulting in a 1.1% increase over the 12 months to March 2021. Meanwhile, the national and Victorian unemployment rates decreased to 5.5% in April, down from a peak of 7.5% (recorded in July and June 2020, respectively).

The Victorian Budget 2021/22 (Victorian Budget) reported the following economic outlook for Victoria:

• real Gross State Product (GSP) is estimated to have contracted by 2.0% in 2020-21 (compared to the 4.0% fall forecasted in the previous budget), and is forecast to grow by 6.5% in 2021-22
• the unemployment rate is expected to average 5.75% in 2021-22, before reaching 5.5% in 2022-23.

Regarding movements in wages and prices, the Tribunal notes the following:

• the Consumer Price Index (All Groups) for Melbourne grew by 0.8% between March 2020 and March 2021
• the Victorian Wage Price Index grew by 1.5% between March 2020 and March 2021
• average weekly ordinary time earnings for full-time adults in Victoria increased by 4.4% over the 12 months to November 2020.

Financial position and fiscal strategy of the State of Victoria

The most recent Victorian Auditor-General’s Office Report on the Annual Financial Report of the State of Victoria, 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 Victorian Budget forecast an operating deficit (for the general government sector) of approximately $11.6 billion for 2021-22, with smaller deficits expected in the following years. Net debt is forecast to be $102.1 billion (20.3% of GSP) in 2021-22 and to increase to $156.3 billion (26.8% of GSP) by 2024-25. These forecasts reflect an improvement relative to the previous budget, which the Victorian Budget states is principally due to improvements in the Government’s operating position.

The Victorian Budget also outlined the Victorian Government’s four-step fiscal strategy:

• Step 1: creating jobs, reducing unemployment and restoring economic growth
• Step 2: returning to an operating cash surplus
• Step 3: returning to operating surpluses
• Step 4: stabilising debt levels.

The Victorian Budget includes significant infrastructure spending to support economic recovery, with annual Government infrastructure investment (GII) expected to average $22.5 billion over the budget and forward estimates.

The Government has also announced several efficiency measures for the public sector, as part of its strategy to return to an operating surplus in the medium term. In particular:

• indexation of departments’ base funding will be revised, with different rates to apply to wage and non-wage components
• from 1 January 2022, the guaranteed annual wage increases for public sector employees will be reduced from 2% to 1.5% through the Victorian Government’s Wages Policy (see below).

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 prescribed public entities, 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 until 31 December 2021, is reproduced below.

^{Source: Industrial Relations Victoria, ‘Victorian Government Wages Policy,’ Wages Policy and the Enterprise Bargaining Framework (State Government of Victoria: Melbourne, Victoria, 2019).}

The Victorian Government has announced changes to the Wages Policy that will apply from 1 January 2022. From that date:

• the annual cap on wages and conditions, under Pillar 1 of the Wages Policy, will be adjusted from 2 per cent to 1.5 per cent
• additional changes to allowances and other conditions (not general wages) will continue to be available to address key operational or strategic priorities, where they are fully funded from appropriate offsets, and capped at 0.5 per cent of the salary base per annum
• a limited one-year rollover option with a 2 per cent increase will be available for parties whose current enterprise agreements reach their nominal expiry date in 2022.

Remuneration policies that apply to prescribed public entity executives are set out in the PEER Policy and the Victorian Public Entity Executive Handbook (Handbook).

The PEER Policy sets out mandatory contractual terms and conditions which must be included in an executive’s contract of employment, including that the executive’s Total Remuneration Package consists of:

• base salary
• superannuation contributions
• employment benefits (i.e. non-salary)
• the annual cost to the employer of providing the non-monetary benefits, including any fringe benefits tax payable.

The Victorian Public Service Commission (VPSC) publishes a standard contract for the employment of public entity executives. However, use of the contract is not mandatory for public entities. The standard contract states that the executive’s remuneration is to be reviewed on an annual basis.

The superannuation guarantee and maximum superannuation contribution base (MSCB) apply to executives who are members of an accumulation scheme. The superannuation guarantee is the minimum rate of employer superannuation contributions that an employee is entitled to, set as a percentage of their ‘ordinary time earnings’. The MSCB acts as a cap on the ‘ordinary time earnings‘ that are used to calculate an employee’s superannuation entitlements — earnings over the MSCB are not counted for the purpose of working out entitlements.

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 states that public entity employers whose employees are on the standard contract must bear the cost of such increases in superannuation liabilities.