Commonwealth companies Executive Remuneration Reporting Guide for Annual Reports (RMG 139)

Audience

The Commonwealth companies executive remuneration reporting guide for annual reports (the Guide) applies to all Commonwealth companies required to prepare an annual report under the Public Governance, Performance and Accountability Act 2013 (PGPA Act).

Executive remuneration reporting by Commonwealth entities for annual reports is covered by Resource Management Guide No. 138 – Commonwealth entities Executive Remuneration Reporting Guide for Annual Reports.

Key points

  • Commonwealth companies[1] are required to disclose executive remuneration information for key management personnel (KMP) in their annual reports in accordance with sections 28EA to 28EC of the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule). 
  • The PGPA Rule does not affect the reporting of KMP information in company financial statements in accordance with the requirements of the Corporations Act 2001.[2] This Guide provides:
    • information to assist Commonwealth companies to meet the executive remuneration reporting requirements as outlined in the PGPA Rule; and
    • examples of the presentation of the relevant tables and items to be included in the required remuneration disclosures.
 

[1] Subsidiaries of Commonwealth companies are not within the scope of the enhanced executive remuneration reporting requirements.

[2] Section 97 of the PGPA Act sets out the annual report requirements for Commonwealth companies.

Resources

This Guide is available on the Department of Finance website at www.finance.gov.au.

Other relevant publications include:

  • Public Governance, Performance and Accountability Act 2013
  • Public Governance, Performance and Accountability Rule 2014
  • Corporations Act 2001
  • Resource Management Guide No. 126 – Commonwealth Government Business

Enterprises – Governance and Oversight Guidelines

  • Resource Management Guide No. 137 – Annual report for Commonwealth companies
  • Australian Accounting Standard AASB 119 Employee Benefits
  • Australian Accounting Standard AASB 124 Related Party Disclosures

Part 1 – Overview

1. The Parliament and citizens have a strong interest in the proper use and management of public resources, from which Commonwealth executive remuneration is paid.  

2. The PGPA Rule requires all Commonwealth companies to disclose in their annual reports for KMP: 

• Executive remuneration policy and practices, including: 

  • the governance arrangements under which those policies and practices operate; and 
  • the basis on which their remuneration has been determined. 

• Disaggregated remuneration information for each individual that was a KMP during the reporting period. 

3.The PGPA Rule requires the reporting of executive remuneration information for specified employees of Commonwealth companies on an accrual basis. 

4.The PGPA Rule does not specify where within the annual report the executive remuneration information should be reported. Commonwealth companies have the flexibility to decide the best place to disclose the information.  

5.The disclosures required by the PGPA Rule are ones that are ‘required or authorised by or under an Australian law’ for the purposes of the Privacy Act 1988 (see in particular Australian Privacy Principle 6.2(b)). As such, there is no requirement for Commonwealth companies to obtain the permission of the persons covered by the disclosures.  

6. While it is the responsibility of each company to manage the process of gathering and publishing the required disclosures in accordance with their own governance arrangements, it would be expected that the persons covered by the disclosures would be formally advised about the company’s reporting obligations and provided the opportunity to review the information proposed to be reported.  

7. For the purpose of the executive remuneration disclosures, comparative information from previous reporting periods is not required to be reported in a company’s Annual Report.   
 

Definitions

8. Definitions for the purpose of this topic are provided in section 4 of the PGPA Rule and include:

Key management personnel 

 

KMP has the same meaning as defined in AASB 124 Related Party Disclosures[1].

Consistent with this definition, the board of directors of

Commonwealth companies are considered to be Key Management Personnel.

Common examples of other KMP determined by Commonwealth companies in preparing their financial statements in accordance with AASB 124 may include, but is not limited to the following:

  • Chief Executive Officers
  • Deputy Chief Executive Officers
  • Managing Directors
  • Senior Counsel
  • Company secretaries

There should be consistency in the reporting of KMP remuneration between the financial statements and the information reported in the body of the annual report.

Total remuneration

 

The sum of the following (calculated on an accrual basis):

  1. base salary;
  2. bonuses;
  3. other benefits and allowances;
  4. superannuation contributions (made by the employer);
  5. long service leave;
  6. other long-term benefits; and (g) termination benefits.

 

 

[3] Under AASB 124, KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. Commonwealth companies in preparing their annual financial statements would have decided which persons meet the definition of KMP and there should be consistency in reporting of the remuneration of KMP in a company’s annual report.

Part 2 – Policies and Practices Disclosure

9. This section details the disclosure requirements for the policies and practices regarding the remuneration of KMP in company annual reports. 

When disclosing executive remuneration policies and practices information, Commonwealth companies should note the following:

  • These reporting requirements do not diminish, in any way, the current reporting obligations of companies under the Corporations Act 2001.
     
  • The reporting requirements apply to all Commonwealth companies, but the content of the report will vary depending on the nature of the organisation and the instruments used to determine the remuneration of KMP. As such, the reporting undertaken should be fit for purpose. A small Commonwealth company is likely to have different, and less complex, remuneration policies and practises than a large Commonwealth company, and the information presented will reflect those differences.
     
  • Commonwealth companies can reference publicly available information, such as Remuneration Tribunal Determinations or Enterprise Agreements, to further explain policies and practices.

10. Remuneration disclosures must include information on the policies and practices of the company regarding KMP executive remuneration, setting out: 

• the governance arrangements under which the company’s remuneration policies and practices operate; and 

• the basis on which the remuneration of KMP is determined.4  

11. The following paragraphs provide guidance on what should be included to meet the requirement of the PGPA Rule. Appendix 1 provides an illustrative outline which can be used by companies in determining the matters to include in their remuneration disclosures.  

Policies and Practices

12. The framework for determining remuneration is generally set out in policy documents of the company. This information should be disclosed, along with a summary of the policies.  

13. The details of the person or committee that is responsible for approving and monitoring the application of each policy should be disclosed. 

14. For some companies, there may be multiple instruments or policies, depending upon the employment instruments or arrangements for different individuals. For example, nonexecutive Board Members and Chief Executives may be remunerated under a Remuneration Tribunal Determination. 

Governance arrangements

15. Companies must disclose the governance arrangements under which the remuneration policies and practices operate.5

The annual report should clearly identify: 

• the overarching body or person responsible for setting remuneration, and its membership;  

• any committees or management positions that have input
into the setting and monitoring of the remuneration arrangements and amounts; and 

• if benchmarking is used, information on how the benchmarking is used and who conducted the benchmarking. 

16.    Generally the Board is responsible for determining the remuneration policy and the remuneration structure for KMP. In practice, the Board is typically supported by a Remuneration Committee or other mechanism, which makes remuneration recommendations to the Board. These arrangements should be included in the disclosure.  

Basis for determining remuneration

17. In order to understand how KMP are remunerated, information on the remuneration components, including the portion of remuneration that is fixed compared to the portion of remuneration which is ‘at risk’ and subject to performance conditions, should be disclosed.  

18. The disclosures should enable readers to understand: 

• the different remuneration arrangements in place for the different categories of KMP; 

• the portion of remuneration that is fixed; and 

• the portion of remuneration that is ‘at risk’, such as bonuses or other short term incentive programs, and the conditions that apply to this component. 

19. Commonwealth companies should also disclose details of any Remuneration Tribunal Determinations or government policies that the company must comply with in determining how remuneration is structured or set. 

20. The remuneration disclosures could also include an explanation of how the remuneration policies and practices link to the achievement of the organisation’s strategy and objectives. In circumstances where there is an explicit link between remuneration and the company’s performance, this link should be explained. 

Example - ASC Pty Ltd

In the ASC 2018-19 annual report (p 24), ASC identifies its key management personnel (KMP) and outlines its approach to remuneration. ASC reports that remuneration for non-executive directors and the Managing Director are set by the Remuneration Tribunal, and that senior executive remuneration is determined by the ASC Board. ASC also reports that senior executive remuneration comprises fixed and ‘at risk’ components, and outlines how this assists ASC to achieve its purposes.

 

Example Australian Naval Infrastructure
In the Australian Naval Infrastructure (ANI) 2018-19annual report (pp 24-26), ANI provides a succinct discussion of executive remuneration governance arrangements. The annual report identifies that remuneration for non-executive directors is set by the Remuneration Tribunal,and that remuneration of executive KMP reporting to the Managing Director/ChiefExecutive Officer (MD/CEO) is set by the MD/CEO and the ANI Board (the composition of which is discussed on p 10 of the annual report).

The remuneration of the MD/CEO is determined in accordance with Remuneration Tribunal guidance.
The annual report also discloses the different remuneration arrangements in place.
For example, the annual report notes that MD/CEO remuneration comprises fixed and ‘at risk’ short term incentive (STI))(components.The annual report also discusses how the fixed component is set, having regard to market factors, technical expertise ,etc. and external benchmarking by remuneration consultants. It also discusses how the STO component for the MD/CEO and senior executives is determined by the ANI Board.

Example WSA Co Ltd
In the WSA Co Ltd (WSA) 2018-19 annual report
(pp 32-39), WSA identifies its KMP and provides a detailed discussion of executive remuneration governance arrangements.
The annual report identifies WSA’s remuneration principles and objectives, and discusses its remuneration framework (including fixed and ‘at risk’ (short term incentive (STI)) components and how these vary for different cohorts). The annual report also explains the roles and responsibilities of various bodies, such as the Board and the People, Remuneration and Nomination Committee, in executive remuneration, and outlines how its approach to remuneration assists it to achieve its purposes.

 


Example - Australian Rail Track Corporation (ARTC)

In the Australian Rail Track Corporation (ARTC) 2018-19 annual report, ARTC identifies its KMP. The annual report identifies that remuneration for non-executive directors is set by the Remuneration Tribunal, and that remuneration of the Managing Director/Chief ExecutiveOfficer (MD/CEO) is set by the
Remuneration Tribunal and the ARTC Board. The remuneration of the senior executives is set under individual contracts of services, and the
annual report outlines the considerations in the determination of senior executive remuneration and the process for reviewing reward practice.
The annual report also outlines how ARTC’s approach to remuneration assists it to achieve its purposes.

 

[4] Section 28EB(2) PGPA Rule. 
[5] Section 28EB(2)(a) PGPA Rule.

Part 3 – Financial Disclosure Requirements

21. The following outlines the general requirements of the PGPA Rule applicable to the reporting of the financial remuneration information for KMP in annual reports.

Disclosure of executive remuneration on an accrual basis

When preparing the executive remuneration financial information, Commonwealth companies should adopt the following practices:

  • Executive remuneration disclosures must be in accordance with the KMP table at Schedule C of the PGPA Rule. Table columns should not be added or deleted even when there is no information to report. For example, a company may not pay bonuses or termination benefits, but to assist with the consistency of reporting, the bonuses and termination benefits columns should be included in the table reported in the annual report.
     
  • Footnotes should be used to provide additional information and explanation to assist the reader to understand what has been included in the table.
     
  • Remuneration amounts must be calculated on an accrual basis and reported to the nearest dollar amount.  
     
  • Fringe Benefits Tax (FBT) should only be included in calculating total remuneration where FBT is required to be reported on an employee’s payment summary.
     
  • The number of KMP and remuneration amounts presented in the KMP disclosures should align with the KMP information presented in the financial statements. Any differences between the two KMP disclosures, for example because the financial statements are prepared on a consolidated basis, should be explained by way of a footnote.

22. As all remuneration amounts must be calculated on an accrual basis, there will be differences between the total remuneration amount disclosed in the executive remuneration disclosure in the annual report and the amount included on the individual’s 
annual payment summary, which is prepared on a cash basis. Some of these differences will also relate to the inclusion of certain benefits in the executive remuneration disclosure.  

23. Two examples of differences between reporting on an accrual basis and cash payments, are the payment of bonuses and termination payments. These are discussed below: 

• Bonus payments – where a decision is made to pay a person a bonus for a particular period but the bonus is not paid in that reporting period, the bonus would not be included in the person’s annual payment summary for that period. However, despite not being paid, the bonus would still need to be recognised in the calculation of a person’s total remuneration for the relevant reporting period in which the decision was made. It will also be recorded as an obligation in the financial statements. Some companies may also include in their financial statements an estimate of the total bonuses expected to be paid in respect of a reporting period even though decisions about the amounts to be paid to particular individuals have not been made at the time of the preparation of the statements. 
 
In these circumstances no bonus payments will be included in the remuneration disclosures but a note should be included to explain the approach adopted. 

• Termination payments – the approach followed for bonus payments should also be followed for termination payments. That is, where a decision is made in the reporting period to pay an employee a termination payment, the amount should be included in calculating the employee’s total remuneration whether or not  the payment was made in the reporting period.

24. Also, the amounts presented in the executive remuneration KMP table for persons remunerated under Remuneration Tribunal Determinations may differ to the amounts disclosed in the determinations. Differences may relate to timing of when these persons commenced, or the inclusion of accrual information. Companies should include a note in their remuneration disclosures that explains the difference between the remuneration determined by the Remuneration Tribunal and that disclosed in the annual report in accordance with the PGPA Rule. 

Measurement of executive remuneration

25. All executive remuneration is to be calculated and disclosed in accordance with AASB 119 Employee Benefits   (AASB 119) with the exception of superannuation and certain benefits and allowances.  

26. Superannuation is to be measured as follows:  

• individuals in an accumulation superannuation scheme (e.g. PSSap and super choice) – superannuation includes employer superannuation contribution amounts typically located on payslips of individuals (noting this needs to be reported on an accrual basis); and  

• individuals in a defined benefits superannuation scheme (e.g. PSS and CSS) – superannuation includes the relevant Notional Employer Contributions and the Employer Productivity Superannuation Contribution (also known as the Productivity Component).  

27. For the PSS and CSS, the standardised notional employer contribution rates are to be used for the calculation of notional employer contributions. The Department of Finance advises companies of the standardised rates from time to time via Estimates Memoranda.  

28. Any additional lump sum superannuation contributions for the PSS and CSS that are paid by a company should not be included in calculating an employee’s total remuneration as these payments are not payments that are made for the benefit of individual employees.   

29. Other benefits and allowances would include benefits that form part of the individual’s remuneration package. Common examples of benefits and allowances include: car parking and motor vehicle benefits; housing benefits; and health benefits. 
 
30. Fringe Benefit Tax (FBT) should be included in the calculation of total remuneration. FBT should be calculated in the same way as it is calculated for statutory FBT purposes. This means that FBT should only be included in calculating total remuneration where FBT is required to be reported on an employee’s payment summary. 

31. Housing benefits may take a variety of forms. For example, lease costs may be paid directly by an employee and reimbursed by the company or may be paid by an company on behalf of an employee. An employee may also be provided with accommodation at no cost or at a cost that is subsidised by the company. In all cases, the value of the housing benefit to the employee should be included in the calculation of a person’s total remuneration. 

Presentation of remuneration information

32. The executive remuneration information for KMP must be included in annual reports in accordance with the tables set out in clause 1 of Schedule 3 of the PGPA Rule. The table requires the disclosure of total remuneration for the current reporting period in the following four main categories and sub-categories:
 
• Short-term benefits

  • Base salary (including annual leave paid and the net movement in annual leave balance in the current reporting period) 
  • Bonuses payable within 12 months  
  • Other benefits and allowances  


• Post-employment benefits  

  • Superannuation contributions 


• Other long-term benefits

  •  Long service leave (including LSL paid and the net movement in LSL balance in the current reporting period) 
  • Other long-term benefits

• Termination benefits.


33. Annual leave payments should not be separately disclosed in the tables. These payments should be included in calculating ’Short-term benefits’ as a component of 
’Base salary’. The amount of annual leave should equal the number of weeks’ salary paid while working plus the annual leave paid and the movement in the annual leave provision. For example, an employee has an opening annual leave balance of five weeks, accrues four weeks annual leave during the financial year and is paid six weeks annual leave, the amount included in ‘Base salary’ for annual leave would equal four weeks (six weeks annual leave taken less the two week movement in the annual leave provision). The annual leave movement should include any amounts calculated in accordance with the accrual methodology outlined in AASB 119 Employee Benefits.  

34. The amount disclosed for long service leave in ’Other long-term benefits’ should be treated in the same manner as annual leave. The calculation of the movement should factor in the accrual methodology outlined in AASB 119. This takes into account the probability of the employee reaching an unconditional entitlement for LSL and that the amount be discounted to a present value.  

35. Where additional information may assist with a reader’s understanding of the elements of total remuneration disclosed in the various categories, footnotes should be used to provide any additional information. For example, if a portion of an individual’s bonus is deferred for a period greater than 12 months it would be disclosed in other long-term benefits rather than short-term benefits. A footnote should be used to explain that the value of ‘other long-term benefits’ includes a bonus element.  

Example – Australian Naval Infrastructure: Footnote disclosure

The executive remuneration disclosures in the Australian Naval Infrastructure (ANI) 2018– 19 annual report (p 27) include the effective use of footnotes to explain aspects of the executive remuneration table (excerpt not shown).

36. Table 1 below provides further guidance on how common remuneration items should be categorised in accordance with the four main categories and sub-categories identified above.

Table 1: Treatment of common remuneration 

Remuneration item 

Main category

Sub-category 

Salary paid and accrued (including any amounts salary sacrificed)

Short-term benefits

Base salary

Salary paid while on annual leave 

Short-term benefits 

Base salary

Salary paid while on sick leave

Short-term benefits

Base salary

Higher duties allowance

Short-term benefits

Base salary

Salary paid while on long service leave

Other long-term benefits

 

Long service leave

Purchased annual leave[1] 

Short-term benefits

Base salary

Bonus – payable within 12 months 

Short-term benefits

Bonuses

Annual leave provision movement (accrued annual leave less any leave paid during the year)

Short-term benefits

Base salary

Education of children benefits

Short-term benefits

Other benefits and allowances

Motor vehicle and car parking benefits

Short-term benefits

Other benefits and allowances

Remuneration item 

Main category

Sub-category 

Housing benefits and allowances

Short-term benefits

Other benefits and allowances 

Employer superannuation contributions, including productivity component

Post-employment benefits 

Superannuation contributions

Long service leave provision movement (accrued long service leave less leave paid  during the year)

Other long-term benefits 

Long service leave 

Bonus – deferred for more than 12 months 

Other long-term benefits

 

Other long-term benefits 

Annual leave paid on termination 

Annual leave paid out on termination is excluded from the total remuneration amount as the associated leave entitlement has previously been reported.

Long service leave on termination

Long service leave paid out on termination is excluded in line with annual leave.

Upon cessation of employment, including retirement, where the employee has not fulfilled the vesting requirements of long service leave (have not completed the required service period) any leave accrued will be unwound in the current reporting period creating a negative leave expense that should be disclosed in the executive remuneration table. 

For example, an employee terminates on 30 June after three years of service. The accrued leave value for the current year is $10,000 and the prior two years is $20,000. The company would only disclose a negative $20,000 in the relevant executive remuneration table as a result of reversing the prior years’ accumulated leave balance. The current year accrued leave balance of $10,000 has no impact as it is reversed in the same year.

[8] Purchased leave is treated as a short-term benefit because staff have relinquished salary to access additional leave.

37. If a company pays no remuneration to their KMP, the relevant table should not be included in the remuneration disclosures. A note should be included to explain the reason why there is no disclosure of the relevant table.  

Types of employment arrangements

38. In determining which individuals to include in the disclosure tables for KMP consideration must be given to the type of employment arrangements in place.  

Ministers’ remuneration

39. In accordance with AASB 124 Related Party Disclosures, Commonwealth companies are not required to disclose a minister’s remuneration as this will be reported at the whole of government level in the Consolidated Financial Statements. Ministerial remuneration should therefore be excluded from the executive remuneration disclosure.

Part-time arrangements

40. KMP who work part-time and who meet the relevant inclusion criteria are to be included in the disclosures outlined in the PGPA Rule.

Changes to composition of KMP 

41. During the reporting period the composition of the KMP may change due to: 

• internal restructures such as the creation of a new business area, which resulted in an additional KMP; and 

• rolling membership of an executive board, whereby members are replaced periodically. 

42. In these situations, the total remuneration earned by the individual while a KMP during the reporting period is to be included in the relevant tables. It follows that any remuneration received while not a KMP should not be included.  

Acting Arrangements – KMP

43. Companies need to exercise judgement in line with the definition of KMP in AASB 124 when determining whether persons acting as a KMP should be included in the KMP remuneration disclosures. The period of acting may not be a reliable indicator by itself and considerations should include: 

• whether there is any acting arrangements directly preceding a permanent promotion to a KMP position; and/ or 

• roles and responsibilities given to acting personnel (i.e. decisions made by, or involving, the person during the acting period and the significance of those decisions on the financial position, performance and operations of the Commonwealth company); and/ or 

• the length of time the individual spent in the acting arrangement during the reporting period.  

44. Where persons acting are included in remuneration disclosures for KMP, the total remuneration paid to the individual while acting during the reporting period is to be included in the relevant tables. It follows that any remuneration paid while not acting should not be included. 

Promotion during the reporting period

45. Where an individual is promoted to a KMP position during the reporting period, all remuneration earned prior to the promotion is excluded from the KMP calculations for the purpose of this disclosure (unless included due to acting arrangements as above). The impact of the promotion on leave balances that existed prior to the promotion would also be excluded as they represent a movement in the provision arising from past service.  

Transfers between Commonwealth organisations

46. During the reporting period, individuals may transfer between Commonwealth entities and/or companies. In these situations, the total remuneration earned by the individual in the company they are attached to during the reporting period is to be included in the relevant tables. It follows that any remuneration earned while in the other entity or company should not be included.  

47. In addition, assuming the leave balance moves with the individual when they transfer, it should be excluded from the executive remuneration disclosure as the leave balances have been previously recognised by the entity or company they transferred from.  

48. Any adjustment to the leave balance that resulted from the transfer should be excluded in the executive remuneration disclosure, including any uplift in the provision due to changes in salary. For example, an individual transfer between organisation A and B with an annual leave balance of $10,000 and due to salary adjustments relating to the transfer the annual leave balance increases by a further $500. This should be excluded from the executive remuneration disclosure. The long service leave provision movement (accrued long service leave less leave paid during the year) plus any changes in the transferee’s provision following the transfer in the reporting period should be included in the executive remuneration disclosure. 

Secondments

49. The essence of a secondment arrangement is whereby: 

• in the case of an employee of a Commonwealth company, they formally remain an employee of the home employer but are assigned duties in another Commonwealth entity, company, or with a non-Commonwealth employer (host employer); and 

• if the employee is a non-Commonwealth employee, they are directed by their home employer to perform duties in a Commonwealth company while continuing to be an employee of the home employer. 

50. Typically, the home employer remains responsible for total remuneration and nearly all terms and conditions of engagement, although the host employer may, for practical reasons, pay the employee or reimburse the home employer for the costs of the employee. For the purpose of the executive remuneration tables, these amounts are to be reported by the host employer. Where the home employee remains responsible for meeting a portion of the remuneration package of a secondee, the two organisations involved in the secondment arrangement should agree on reporting arrangements to ensure there is no duplication of remuneration reporting. 

51. For KMP the Total Remuneration should reflect: 

• where a formal written agreement for secondment exists, the amount of remuneration in accordance with the formal agreement; or 

• where no formal written agreement for secondment exists, the remuneration details relating to the secondee should be obtained from the home employer. 
 

[6] For the purposes of calculating the required remuneration disclosures on an accruals basis, calculations relating to annual leave and long service leave should be based on the amounts relating to the reporting year only. The company’s finance team should be consulted if there are queries about whether remuneration items are included in the financial statements.

[7] AASB 119, Employee benefits, defines Employee benefits as all forms of consideration given by an entity in exchange for service rendered by employees or for the termination of employment.

[8]  Purchased leave is treated as a short-term benefit because staff have relinquished salary to access additional leave.

Part 4 – Information about remuneration for key management personnel

52. Executive remuneration information for KMP will be presented in a table in accordance with clause 1 of Schedule 3 of the PGPA Rule. 

53. Under AASB 124, reporting entities are already required to disclose in the notes to the financial statements total remuneration of the KMP at the aggregate level, including how it is split between the following four major categories:  

• short-term employee benefits;  

• post-employment benefits;  

• other long-term employee benefits; and

• termination benefits. 

54. The key difference between what is reported in the notes to the financial statements, and what is required under the PGPA Rule for KMP is the level of detail. The financial statement disclosure is on an aggregated basis, whereas the annual report KMP disclosure is required to be on an individual basis. Additional information that must be included in the KMP table includes the: 

• full name of each KMP; and  

• position of the KMP, for example, Board member or Chief Executive Officer. 

55. The total remuneration disclosed in accordance with the PGPA Rule should match the total remuneration disclosed in the notes to the financial statements. 

56. Where the composition of a company’s KMP changes from that disclosed in the previous reporting period, it is good practice to include a note to the KMP table to explain the variation.  

57. Appendix 2 provides an illustrative example of the KMP table for the annual report. 

Part 5 - Exemptions

  1. The Finance Minister has the power to exempt a Commonwealth company from one or more of the executive remuneration reporting requirements.[9] 
  2. The Finance Minister may require the executive remuneration information to which the exemption applies to be provided to a person or body specified in the exemption.[10] For example, the Finance Minister may require the information to be provided to another Minister or a Parliamentary committee.
  3. The exemption is established by a disallowable legislative instrument. The exemption, and any requirement to give the information to a person or body, must be noted in the Commonwealth company’s annual report.[11]  

Exemption process

61. The diagram below outlines the process to be followed in the event a company wishes to seek an exemption from one or more executive remuneration reporting requirements.  

 

 

[9] See section 28EC of the PGPA Rule.

[10] See subsection 28EC (3) of the PGPA Rule.

[11] See subsections 28EC (2) and (4) of the PGPA Rule.

Appendix 1 – Executive Remuneration Disclosures Illustrative Outline

The following illustrative outline is provided as an example of the content of the remuneration disclosures in a Commonwealth company’s Annual Report. Commonwealth companies should tailor the remuneration information so that it is fit-for-purpose but still incorporates the minimum information required by the PGPA Rule. 

The information can be presented as text, charts or tables, or a combination of these.

The financial information disclosures (covered in Parts 3 of this Guide) should be incorporated into the remuneration disclosures as this will aid the reader to understand the information presented. Appendix 2 provides an example of the KMP executive remuneration table.

The following matters could be expected to be included in the disclosures.

Introduction

The purpose of the disclosures is to set out the policies and practices that apply to the remuneration of KMP.

Remuneration policiesand practices

This section should reference any legislation, administrative instruments, determinations or government policies that are relevant in determining the company’s KMP remuneration. It should also cover any benchmarking that is used to determine KMP remuneration, and information on who has conducted the benchmarking.  Items that could be included (noting this list is not exhaustive) are:

  • Remuneration Tribunal Determinations and policies of the company, as they apply to each category of person or employee covered by the disclosures;
     
  • the decision-maker for decisions under the policy;
  • the elements of remuneration paid to persons who are KMP, such as fixed and at risk remuneration;
     
  • any incentive payments, or ‘at risk’ payments such as bonuses, which are linked to performance should be reported in this section. It could include a link to the annual performance statements highlighting the company’s performance information against which the individuals or groups of employees are assessed, and whether it was met; and
     
  • for those companies that do not have a direct link between organisational performance and individual remuneration, the report could include how performance is managed within the organisation, and how it is linked to remuneration progression.

Remuneration governance arrangements

This section should outline the governance arrangements in place to support the setting and monitoring of the remuneration arrangements, including the name of any remuneration committee and the membership of that committee.

Appendix 2 – KMP Illustrative Example

The following is an illustrative example of how the KMP note would be presented. During the reporting period ended 30 June 20X1, Company X had four executives who meet the definition of key management personnel. Their names and the length of term as KMP are summarised below:

Name

Position

Term as KMP

Rachael [Surname]

Chief Executive Officer (CEO)

Full year

Suraj [Surname]

Deputy CEO

Full year

Greg [Surname]

Chief Financial Officer (CFO)

Full year – Terminated on 30 June 20X1

Dave [Surname]

Chief Operating Officer (COO)1

Part-year – Appointed 1/03/20X1

1 The COO was a newly created position during the year with a single occupant of this role.

In the notes to the financial statements for the period ending 30 June 20X1, Company X disclosed the following KMP expenses:

Note X: Key management personnel remuneration for the reporting period

20X1
$

 

 

Short-term employee benefits:

 

   Base Salary

1,233,000

   Bonus

113,000

   Other benefits and allowances[1]

20,000

Total short-term employee benefits

1,366,000

 

 

  Superannuation

70,597

Total post-employment employee benefits

70,597

 

 

Other long-term benefits

 

   Long service leave

20,680

Total other long-term benefits

20,680

 

 

Termination benefits

50,000

 

 

Total key management personnel remuneration

1,507,277

In accordance with the PGPA Rule, this information now needs to be further disaggregated in the annual report as follows:

 

 

 

Short-term benefits

Post-employment benefits

Other long-term benefits

Termination Benefits

Total remuneration

Name

Position title

Base salary

Bonuses

Other benefits and allowances

Superannuation contributions

Long service leave

Other long-term benefits

 

 

Rachael [Surname]

CEO

445,000

45,000

10,000

20,049

7,500

-

-

527,549

Suraj [Surname]

Deputy CEO

340,000

35,000

10,000

20,049

5,840

-

-

410,889

Greg [Surname]

CFO

330,000

33,000

-

20,049

5,500

-

50,000

438,549

Dave [Surname]

COO

118,000

-

-

10,450

1,840

-

-

130,290

Total

 

1,233,000

113,000

20,000

70,597

20,680

-

50,000

1,507,277

[12] Includes $20,000 for car parking.


Did you find this content useful?