2. Review of operations
In 2020-21, the Tribunal undertook work in relation to remuneration arrangements for the following occupational groups:
- MPs in Victoria
- Victorian Public Service (VPS) executives employed in public service bodies, namely departments, Administrative Offices (AOs) and the Victorian Public Sector Commission (VPSC)
- executives employed in prescribed public entities in Victoria.
The Tribunal also commenced work on a Determination of allowances payable to Mayors, Deputy Mayors and Councillors in local government in Victoria.
2.1 Members of Parliament
During 2020-21, the Tribunal’s work in relation to MPs comprised:
- a Determination setting out an annual adjustment to the values of salaries and allowances payable to MPs
- a review of superannuation arrangements for existing and former MPs
- a comprehensive review of the Members of Parliament Guidelines governing the purpose and use of work-related parliamentary allowances and the EO&C Budget.
MP Annual Adjustment Determination
Section 18 of the VIRTIPS Act requires the Tribunal to make a determination providing for an annual adjustment to the values set out in its current MP Determination. Section 24 of the VIRTIPS Act specifies that the Tribunal is required to consider a range of economic and financial factors, as well as submissions received, when making a determination.
In June 2021, the Tribunal made the Members of Parliament (Victoria) Annual Adjustment Determination 2021 (MP Annual Adjustment Determination) which took effect on 1 July 2021. The annual adjustment included a:
- 2.5 per cent increase to each of the basic salary, the additional salaries for specified parliamentary office holders, and the expense allowance
- 0.8 per cent increase to each of the electorate allowance, the international travel allowance and the EO&C Budget.
The Tribunal made no adjustment to the parliamentary accommodation sitting allowance, the motor vehicle allowance, or the commercial transport allowance.
The annual adjustment applies to the values of the MP salaries and allowances that had been set in the first comprehensive Members of Parliament (Victoria) Determination No. 01/2019 which took effect in September 2019.
The MP Annual Adjustment Determination, including a Statement of Reasons, is available on the Tribunal’s website.
Review of superannuation arrangements
Section 39 of the VIRTIPS Act specifies that the Tribunal was to review and report on superannuation arrangements for MPs, including potential inequalities or irregularities between superannuation arrangements, by 20 September 2020. This included a requirement that the Tribunal not consider any option that would make any former or existing MP worse off.
The Tribunal delivered its report on superannuation arrangements for MPs to the Minister for Government Services on 18 September 2020.
As part of its review, the Tribunal:
- published an Issues Paper in May 2020, seeking submissions from all parties
- established a consultative committee comprising MPs from across the Parliament of Victoria
- commissioned actuarial modelling to compare the financial benefits to MPs of the ‘New Benefits Scheme’ (a defined benefit scheme closed to new entrants in late 2004) and the current accumulation scheme
- considered how superannuation arrangements for MPs in Victoria compare to superannuation arrangements for other Australians, including MPs in other jurisdictions, and including Victorian public sector employees.
The Tribunal’s report made three recommendations, including that there be no changes to existing superannuation arrangements for MPs, but that transitional support for MPs leaving Parliament be enhanced. In its response to the Tribunal’s review, published in December 2020, the Victorian Government supported all of the Tribunal’s recommendations.
The Tribunal’s review of superannuation arrangements for MPs is available on the Tribunal’s website.
Review of MP Guidelines
In June 2020, the Tribunal commenced a comprehensive review of the Members of Parliament (Victoria) Guidelines No. 02/2019 (MP Guidelines), which govern the use of work-related parliamentary allowances and the EO&C Budget.
The aim of the review was to identify anomalies or areas of ambiguity in the MP Guidelines. The Tribunal published an Issues Paper in June 2020 and invited all parties to make a submission. The Tribunal received four written submissions and four oral submissions.
In November 2020, the Tribunal published a draft of the proposed new MP Guidelines, together with a Consultation Paper, and again invited submissions from all parties. The Tribunal received five written submissions in response to the consultation draft of the MP Guidelines.
In February 2021, the Tribunal made the new Members of Parliament (Victoria) Guidelines No. 01/2021, which replaced the previous MP Guidelines. The new MP Guidelines took effect from 1 May 2021.
The MP Guidelines are available on the Tribunal’s website.
2.2 VPS executives
During 2020‑21, the Tribunal’s work in relation to VPS executives comprised:
- a Determination setting out an annual adjustment to the values of the remuneration bands for executives employed in public service bodies set out in the current VPS Determination
- provision of advice to public service body employers proposing to pay individual executives above the maximum values set in the remuneration bands in the VPS Determination
- commencement of a review of remuneration arrangements for executives in the major transport infrastructure sector.
VPS Annual Adjustment Determination
In May 2020, the Tribunal issued the Remuneration bands for executives employed in public service bodies (Victoria) Determination No. 01/2020 (VPS Determination) as required by section 21 of the VIRTIPS Act.
Section 22 of the VIRTIPS Act requires the Tribunal to make a determination providing for an annual adjustment to the values set in the current VPS Determination. The Tribunal made the Remuneration bands for executives employed in public service bodies (Victoria) Annual Adjustment Determination 2021 (VPS Annual Adjustment Determination) in June 2021. This Determination took effect on 1 July 2021.
Taking into account the factors specified in section 24 of the VIRTIPS Act, the Determination includes:
- a ‘standard rate’ increase of 2.5 per cent to the notional salary component of the remuneration bands
- an additional increase (around $450 per year) to the base of the Senior Executive Service‑1 (SES) band and the AO Head-1 band
- a further adjustment to the remuneration bands equivalent to the increase in executives’ superannuation entitlements which took effect on 1 July 2021.
The VPS Annual Adjustment Determination, including a Statement of Reasons, is available on the Tribunal’s website.
Advice on proposals to pay above the band
Section 37 of the VIRTIPS Act requires that the Tribunal provide advice to public service body employers on proposals to pay an executive above the maximum of the executive’s relevant remuneration band as set by a Determination.
The Tribunal has established a process for public service body employers to apply to the Tribunal for advice on proposals to pay an executive above the relevant remuneration band. This includes the Tribunal publishing the advice it provides to individual employers on the Tribunal’s website, to support greater transparency in relation to remuneration arrangements for executives.
In 2020‑21, the Tribunal provided advice in response to 29 requests from public service body employers to pay executives above the maximum of an executive’s relevant remuneration band.
The 29 requests for advice were:
- received from seven different public service body employers
- related to 82 individual executives.
Of the 82 individual executives (many of whom related to the same public service body):
- 66 were existing executives (appointed to their current roles prior to the making of the Tribunal’s Determination)
- 14 were new executives
- one was an executive re-appointed to an existing role
- one executive received a mid-contract remuneration adjustment.
Request for advice from the Minister
Section 37(3)(a) of the VIRTIPS Act states that the Minister may request the Tribunal to provide advice about any matter relating to remuneration or funding in relation to any specified occupational group. When requested, the Tribunal must provide its advice to the Minister within a reasonable time.
In line with this provision, the Tribunal received a request from the Minister for Government Services to review current remuneration arrangements for executives in the major transport infrastructure sector. The Tribunal has been asked to consider appropriate remuneration in this sector given competition for quality talent in the public and private sectors, and given competing works programs in other jurisdictions. The request for advice was received by the Tribunal in June 2021.
As at 30 June 2021, the Tribunal was in the process of formulating its advice.
2.3 Public entity executives
During 2020-21, the Tribunal’s work in relation to prescribed public entity executives comprised:
- the first comprehensive Determination of the values of remuneration bands for executives employed in prescribed public entities (PE Determination)
- the first set of Guidelines to help public entity employers to place executives within the remuneration bands set by the PE Determination
- a subsequent Determination setting out an annual adjustment to the values of the remuneration bands set out in the current PE Determination
- provision of advice to public service body employers proposing to pay individual executives above the maximum values set in the remuneration bands in the PE Determination
- commencement of a review of remuneration arrangements for public entity executives in the finance sector
- Determinations of the remuneration of CEOs in prescribed public entities in accordance with the Public Entity Executive Remuneration Policy (PEER Policy) (June 2020 to December 2020 only).
Determination of remuneration bands for public entity executives
Section 19 of the VIRTIPS Act requires the Tribunal to make a Determination setting the values of the remuneration bands for executives employed in prescribed public entities. The Victorian Independent Remuneration Tribunal and Improving Parliamentary Standards (Prescribed Public Entities) Regulations 2019 (Vic) prescribes approximately 140 public entities, such as water corporations and TAFEs. The consultation and policy requirements of section 24 of the VIRTIPS Act also apply to the making of these Determinations.
The Tribunal published its notice of intention to make a determination in January 2020, and called for submissions from all parties.
The Tribunal made the Remuneration bands for executives employed in prescribed public entities (Victoria) Determination No. 1/2020 in December 2020 (PE Determination).
The PE Determination set a new executive remuneration framework for executives in prescribed public entities, consisting of three distinct and contiguous Public Entity Senior Executive Service (PESES) remuneration bands for subordinate executives. The minimum and maximum values of each of the remuneration bands are broadly aligned with the minimum and maximum values of the SES bands that apply to executives employed in Victorian public service bodies. One exception is that the base (minimum value) of the PESES-1 band is lower than the base of the SES-1 band. This distinction was made to accommodate the existing remuneration of the CEOs of some small public entities.
Public Entity Guidelines
In accordance with section 36(6) of the VIRTIPS Act, the Tribunal issued guidelines in December 2020 to help prescribed public entity employers place executives within the remuneration bands set by the Tribunal in the PE Determination.
The Prescribed Public Entity Executive Remuneration Guidelines (PE Guidelines) apply to the appointment of new executives in prescribed public entities, and to the appointment of existing executives in prescribed public entities, where the appointment involves a change in the employment contract.
The PE Guidelines provide public entity employers with three guiding principles for making remuneration decisions:
- executive remuneration should be fair and reasonable
- executive remuneration should be competitive
- executive remuneration arrangements should be robust.
The PE Guidelines also list specific factors that prescribed public entity employers should consider when setting the remuneration of executives within the relevant band, including:
- the ‘work value assessment score’ of the role as determined by the Victorian Public Entity Executive Classification Framework (administered by the VPSC)
- the experience, knowledge and capability of the individual executive
- current remuneration of the individual executive
- labour market pressures affecting the position
- remuneration relativities with other executives within the organisation
- relativities with other executives in the same remuneration band
- transitional considerations.
The PE Guidelines are available on the Tribunal’s website.
Public Entity Annual Adjustment Determination
Section 20 of the VIRTIPS Act requires the Tribunal to make a determination providing for an annual adjustment to the values of the remuneration bands set in the current PE Determination. However, the Tribunal cannot make the annual adjustment determination within nine months of the date on which the current determination under section 19 was made (18 December 2020). Therefore, the earliest date the Tribunal may make an annual adjustment determination for prescribed public entity executives is 19 September 2021.
Once made, the annual adjustment determination will take effect retrospectively from 1 July 2021 (section 25(5) of the VIRTIPS Act).
In June 2021, the Tribunal published its notice of intention to make an annual adjustment determination for prescribed public entity executives and called for submissions from all parties. In addition, the Tribunal wrote to prescribed public entity employers to inform them of the notice of intention and to request that executives be directly informed of the notice of intention and the opportunity to make a submission to the Tribunal.
As at 30 June 2021, the Tribunal had received two submissions.
The notice of intention for the making of the PE Annual Adjustment Determination is available on the Tribunal’s website.
Advice on proposals to pay above the band
Section 37 of the VIRTIPS Act requires that the Tribunal provide advice to prescribed public entity employers on proposals to pay an executive above the maximum of the relevant remuneration band set by a PE Determination.
Following the making of the PE Determination in December 2020, the Tribunal developed and published a process for public entity employers to apply to the Tribunal for advice on proposals to pay executives above the relevant remuneration band. As part of this process, the Tribunal publishes its advice to individual employers on the Tribunal’s website to support greater transparency in relation to executive remuneration arrangements.
In 2020‑21, the Tribunal provided advice on ten applications by public entity employers in relation to existing executives who were being paid above the maximum of the newly-created PESES-3 remuneration band specified in the PE Determination. The requests for advice were:
- received from nine different prescribed public entity employers
- related to 12 individual executives (one advice related to three executives from the same prescribed public entity employer).
Request for advice from the Minister
Section 37(3)(a) of the VIRTIPS Act states that the Minister may request the Tribunal to provide advice about any matter relating to remuneration or funding in relation to any specified occupational group. When requested, the Tribunal must provide its advice to the Minister within a reasonable time.
In April 2021, the Minister for Government Services requested that the Tribunal benchmark the base remuneration for 14 specialist investment roles at the Victorian Funds Management Corporation, and at the Treasury Corporation of Victoria.
As at 30 June 2021, the Tribunal was in the process of formulating its advice.
Determinations under the PEER Policy
In July 2019, at the request of the Minister under section 23 of the VIRTIPS Act, the Tribunal assumed responsibility for determining total remuneration packages for CEOs in specified public entities in accordance with the PEER Policy.
This function was the responsibility of the Tribunal until the Remuneration bands for executives employed in prescribed public entities (Victoria) Determination No. 01/2020 was made in December 2020.
The PEER Policy detailed the Victorian Government’s approach to executive remuneration in specified public entities. Among other matters, the PEER Policy provided a:
- framework of five guiding principles for setting public entity executive remuneration
- procedure for public entities to make submissions to the Tribunal to determine remuneration arrangements for CEOs.
In 2020-21, the Tribunal determined the total remuneration packages of six CEOs (or equivalent) of specified public entities. Of these:
- four Determinations related to new appointments of CEOs
- two Determinations related to mid-contract increases to the remuneration of existing CEOs.
The PEER Policy also required that a specified public entity make a submission to the Tribunal to seek its advice if the proposed remuneration of a subordinate executive would:
- exceed 80 per cent of the approved total remuneration package for the CEO of the same public entity
- result in the average total remuneration package of all of the CEO’s direct reports exceeding 70 per cent of the CEO’s total remuneration package.
In 2020-21, the Tribunal provided one advice in relation to the remuneration of a subordinate executive in a specified public entity.
This requirement was removed when the Remuneration bands for executives employed in prescribed public entities (Victoria) Determination No. 01/2020 was made in December 2020.
2.4 Mayors, Deputy Mayors and Councillors
The VIRTIPS Act requires the Tribunal to make a Determination setting the value of the allowances payable to Mayors, Deputy Mayors and Councillors in all 79 Councils in Victoria (Local Government Determination). The Local Government Determination must also provide for Council allowance categories, which may be specified for a Council or a group of Councils.
In making the first Local Government Determination, the Tribunal must comprehensively review existing allowances payable to Mayors, Deputy Mayors and Councillors, and review existing allowance categories under the Local Government Act 1989 (Vic), while taking into account:
- similar allowances for elected members of local government bodies in other states
- allowances for persons elected to other voluntary part-time community bodies (section 23A(5)(a)).
As outlined in section 24 of the VIRTIPS Act, the Tribunal is also required to consider a range of economic and financial factors, and any submissions received, when making the Determination.
On 17 June 2021, the Minister for Local Government requested that the Tribunal make the first Local Government Determination. The Determination will take effect on 18 December 2021 — six months from the day the Tribunal received the Minister’s request.
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