Executive and senior office holders annual remuneration changes

Overview of annual remuneration changes

There are a number of remuneration increases that may apply to executives and senior office holders each year, including:

• The Premier’s annual remuneration adjustment guideline rate
• Changes to the superannuation guarantee
• Changes to the remuneration bands set by the Victorian Independent Remuneration Tribunal

Public service and public entity employers are responsible for funding remuneration increases for the guideline rate, superannuation changes and any increases in remuneration resulting from the Victorian Independent Remuneration Tribunal’s adjustments to the remuneration bands.

Any public sector employer experiencing financial difficulty in funding these increases should raise the matter with their portfolio department.

Employers should ensure that payroll providers process the remuneration increases as soon as reasonably practicable during the 2024-25 financial year.

Individual executives or senior office holders are not required to take further action, unless otherwise advised by their employer or relevant department.

News

The Premier has issued the 2024-25 annual adjustment guideline rate of 3 per cent.

On Day Month 2024 the Premier issued a guideline rate of 3 per cent, effective from 1 July 2024.

The Premier’s annual adjustment guideline rate

The Premier’s annual remuneration adjustment guideline rate is a salary increase that employers may pass onto executives and senior office holders. It is also known as the ‘guideline rate’.

The Premier has issued a guideline rate of 3 per cent for 2024-25. Employers may increase executive and senior office holder salaries up to the guideline rate.

The guideline rate applies from 1 July 2024.

The guideline rate applies to public sector executives, statutory office holders, and public sector board members.

Public sector executives: Departments and public entities should decide whether executives will receive the guideline rate and communicate this decision to each executive and their payroll provider.

Statutory office holders: Departments should support their Ministers to advise their portfolio entities about the guideline rate and ensure that it is passed onto statutory office holders in their portfolio.

Board appointees: An updated version of the remuneration schedules contained in the Board appointment, remuneration and diversity guidance will be published to pass on the guideline rate to board appointees. DPC will also notify those within departments responsible for board appointments on how the guideline rate will be passed on to board appointees.

Is it mandatory to pass on the guideline rate to executives and senior office holders?

No. Employers have a general discretion to increase executive or senior office holder salaries up to the guideline rate, but it is not mandatory.

In determining whether to increase an individual’s salary, employers may wish to consider whether the executive or senior office holder has been appointed to their role, or has received a remuneration increase, within the last six months (i.e. between 1 January 2024 to 30 June 2024).

Executives and senior office holders who commenced on or after 1 July 2024 are not entitled to receive the guideline rate increase for 2024-25.

What part of the total remuneration package (TRP) does the guideline rate apply to?

Employers may increase the salary component of an executive’s TRP by an amount up to the guideline rate.

The ‘salary component’ of the TRP:

• includes all monetary benefits, including any vehicle entitlements and/or fringe benefits tax payable
• does not include superannuation.

Superannuation

Employers are legally required to make compulsory superannuation contributions into an employee’s accumulation fund, expressed as a percentage of the employee’s ordinary time earnings, in accordance with the Superannuation Guarantee (Administration) Act 1992 (Cth). This is called the ‘superannuation guarantee’.

The compulsory superannuation contribution was 11 per cent for 2023-24 and is increasing to 11.5 per cent of an employee’s ordinary time earnings for 2024-25, applicable from 1 July 2024.

The maximum superannuation contribution base (MSCB) is the maximum individual employee earnings on which an employer is required to pay the superannuation guarantee. Employers are not required to pay the superannuation guarantee on earnings above the MSCB. For employees earning below the MSCB, the employer is required to pay the superannuation guarantee on their total ordinary time earnings.

The ATO indexes the MSCB each year. The amount of superannuation payable for executives who are members of superannuation accumulation schemes may increase each year as a result of this indexation.

For 2024-25, the ATO has set the MSCB at $260,280 per annum.

This means that employees on a TRP greater than $290,212.20 ($260,280 + 11.5% superannuation guarantee) are entitled to a $2,533.40 increase to the employer contribution of their superannuation accumulation scheme.

The superannuation guarantee and MSCB do not apply to employees who are members of defined benefits schemes (such as the Emergency Services and State Super Defined Benefits Scheme).

How will the guideline rate interact with changes to the superannuation guarantee?

For executives employed on a standard executive contract, where remuneration is expressed as a TRP, employers should establish the new value of an executive’s base salary by applying the guideline rate to the salary component.

The ‘salary component’ of TRP includes all monetary benefits, including any vehicle and/or fringe benefits tax payable. The ‘salary component’ does not include superannuation.

The new superannuation contribution payable should then be calculated on the new base salary component, up to the MSCB.

For executives employed with disaggregated remuneration packages, for example, where remuneration is expressed as salary plus superannuation, the same process will apply.

Both increases are to be made at the cost to the employer.

Can the required superannuation adjustments be offset by the guideline rate or vice versa?

No. As per clause 7.2(a)(B) in the standard executive contracts, employers bear the cost of increases to both the superannuation guarantee and the annual ATO indexation of the MSCB. This means that the application of the guideline rate and either of the required superannuation adjustments (superannuation guarantee rate increase or MSCB indexation) must be calculated separately. Both changes are applicable from 1 July 2024.

The Victorian Independent Remuneration Tribunal’s remuneration bands

The value of remuneration bands for executives employed in public service bodies and prescribed public entities are set by the Tribunal.

The Tribunal regularly reviews the executive remuneration bands and makes Determinations setting new remuneration bands, which are published on its website.

An executive whose remuneration drops below the base of the band following a Determination made by the Tribunal must have their remuneration increased to the base of the new band in accordance with:

• section 25(4)(a) of the Public Administration Act 2004 for executive employed in public service bodies
• paragraph 5.1 of the PEER Policy for executives employed by public entities.

For further information, please see the Tribunal’s website.

Executives are only entitled to the Tribunal’s annual adjustment to ensure their remuneration remains within the remuneration band set by the Tribunal.

The Tribunal’s remuneration bands do not apply to statutory office holders or public sector board members as they are not within the scope of the Tribunal’s jurisdiction.

For further information and values of the remuneration bands, please see the Tribunal’s website.

Applying the guideline rate, superannuation and remuneration band adjustments

The example calculations below may assist HR practitioners in applying remuneration and superannuation adjustments for 2024-25.

Please note, these calculations are examples only. HR practitioners and payroll providers should consider how the adjustments apply to each individual circumstance.

Executive A: remuneration expressed as TRP, with the current TRP at the base of previous remuneration band

• As at 30 June 2024, an SES-1 executive has a TRP at the base of the relevant band, inclusive of 11 per cent superannuation and other benefits.
• From 1 July 2024, the employer will need to increase the executive’s TRP to the base of the adjusted remuneration band.
• The Premier’s guideline rate provides discretion for an employer to pass on an additional increase to the executive, provided the increase to the salary component is no greater than 3 per cent for 2024-25 (that is, capped at the guideline rate).
  • For this example, the SES-1 executive will not be entitled to receive the guideline rate, as their salary has already been increased by more than 3 per cent due to the Tribunal’s Determination.

The superannuation contribution (11.5 per cent for 2024-25) should then be calculated on the new salary to ensure the employer is complying with the superannuation guarantee.

Executive B: remuneration expressed as TRP, with the current TRP falling below the Tribunal’s relevant adjusted remuneration band from 1 July 2024

• As at 30 June 2024, a SES-1 executive has a TRP slightly above the base of the relevant band, inclusive of 11 per cent superannuation and other benefits.
• From 1 July 2024, the employer will need to increase the executive’s TRP to the base of the adjusted remuneration band.
• The Premier’s guideline rate provides discretion for an employer to pass on an additional increase to the executive, provided the increase to the salary component is no greater than 3 per cent for 2024-25 (that is, capped at the guideline rate).
  • For this example, the SES-1 executive will be entitled to receive the balance of the guideline rate, as their salary has only been increased by 1.1 per cent due to the Tribunal’s AA Determination.
• The new superannuation contribution payable rate (11.5 per cent for 2024-25) should then be calculated on the new salary component.

Executive C: remuneration expressed as TRP within the relevant remuneration band, with a salary component up to the MSCB

• As at 30 June 2024, an SES-1 executive has a TRP of $250,000 inclusive of 11 per cent superannuation and other benefits.
• From 1 July 2024, the employer will have discretion to pass on up to the value of the guideline rate to the salary component (3 per cent for 2024-25). As the executive’s remuneration is within the adjusted bands, they do not receive an increase due to the Tribunal’s AA Determination.
• The legislated increase to the superannuation guarantee (11.5 per cent for 2024-25) is then applied.

Executive D: remuneration expressed as TRP within the relevant remuneration band, with a salary component over the MSCB

• As at 30 June 2024, an executive is classified at SES-3 level and has a TRP of $450,000 inclusive of 11 per cent superannuation and other benefits.
• From 1 July 2024, the employer will have discretion to pass on up to the value of the guideline rate to the salary component (3 per cent for 2024-25). As the executive’s remuneration is within the adjusted bands, they do not receive an increase due to the Tribunal’s AA Determination.
• From 1 July 2024, the employer will need to pass on the following adjustment to superannuation payable up to the MSCB:
  • For executives on a TRP greater than $290,212.20 ($260,280.00 + 11.5 per cent superannuation guarantee), the employer’s contributions to superannuation accumulation schemes should be indexed by $2,533.40 (from $27,399 in 2023/24 to $29,932.20 in 2024/25).

Executive E: remuneration expressed as salary plus superannuation, paid over the relevant remuneration band, with a salary component over the MSCB

• An executive is classified at SES-2 level and has a salary of $460,000 exclusive of 11 per cent superannuation and other benefits as at 30 June 2024.
• Given this executive is paid above the maximum of the SES-2 remuneration band, if an employer proposes to pass on the Premier’s guideline rate, it must seek the Tribunal’s advice on payment above the bands. Further information is provided below.
• From 1 July 2024, the employer will need to pass on the following adjustment to superannuation payable up to the MSCB:
  • For executives on a TRP greater than $290,212.20 ($260,280.00 + 11.5 per cent superannuation guarantee), the employer’s contributions to superannuation accumulation schemes should be indexed by $2,533.40 (from $27,399 in 2023/24 to $29,932.20 in 2024/25).

Payment Above the Band

• Please note, the Tribunal has provided a policy statement on its website, clarifying that employers do not need to seek the Tribunal’s advice if, as a result of complying with statutory superannuation obligations, an executive would be paid above their relevant band. This would be the case for the Example E, outlined above.
• However, the Tribunal’s advice must be sought prior to applying the guideline rate to an executive’s salary, if as a result of applying the adjustment, the executive will be/continue to be paid above their relevant band.
• Further information on how to request the Tribunal’s advice is available on the Tribunal’s website.

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

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