Commonwealth entities Executive Remuneration Reporting Guide for Annual Reports (RMG 138)

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 has been amended to improve the transparency of Commonwealth executive remuneration arrangements and to standardise how the remuneration of KMP, senior executives and other highly paid staff is disclosed by entities in annual reports. 
3. These reporting requirements replace the previous web-based reporting on executive remuneration.
4. The PGPA Rule requires all Commonwealth entities to disclose in their annual reports, for KMP, senior executives and other highly paid staff:
    
   • 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.
   • Executive remuneration financial information, outlining:
     • disaggregated remuneration information for each individual that was a KMP during the reporting period; and
     • average remuneration information by band for senior executives and other highly paid staff during the reporting period.
5. The executive remuneration information is required to be reported on an accrual basis. 
6. The PGPA Rule does not specify where executive remuneration information should be reported in an entity’s annual report. Commonwealth entities have the flexibility to decide the best place to disclose the information. For example, non-corporate Commonwealth entities may choose to present the executive remuneration tables in the ‘Information on management and accountability’ section. 
7. 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 entities to obtain the permission of the persons covered by the disclosures. 
8. While it is the responsibility of each entity 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, particularly KMP who are required to be individually identified, would be formally advised about the entity’s reporting obligations and provided the opportunity to review the information proposed to be reported. 
9. The amendment to the PGPA Rule does not modify the PGPA Act reporting requirements for the inclusion of KMP information in Commonwealth entity annual financial statements.
10. For the purpose of the executive remuneration disclosures, comparative information from previous reporting periods is not required to be reported in an entity’s Annual Report.  
     

Definitions

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

12. This section details the disclosure requirements for the policies and practices regarding the remuneration of KMP, senior executives and other highly paid staff in entity annual reports.

13. Remuneration disclosures must include information on the policies and practices of the entity regarding the remuneration of key management personnel, senior executives and other highly paid staff, setting out:
    • the governance arrangements under which the entity’s remuneration policies and practices operate; and
    • the basis on which the remuneration of KMP, senior executives and other highly paid staff are determined.
14. 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 entities in determining the matters to include in their remuneration disclosures. 

Governance arrangements under which policies and practices operate

Governance arrangements

15. Entities must disclose the governance arrangements under which the remuneration policies and practices operate. 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 who conducted the benchmarking.
       
16. For some entities, the Board is responsible for determining the remuneration policy and the remuneration structure for KMP’s, senior executives and other highly paid staff. In practice, the Board is typically supported by a Remuneration Committee, or other arrangement, which makes remuneration recommendations to the Board. For other entities, it may be a decision of the leadership group of the entity. This may include the Chief Executive Officer and other senior managers. These arrangements should be included in the disclosures. 

Policies and practices

17. The framework for determining remuneration is generally set out in policy documents of the entity or at a high level in an entity’s enabling legislation. This information should be disclosed, along with a summary of the policies. 
     
18. The details of the person, committee or Board that is responsible for approving and monitoring the application of each policy should also be disclosed.
     
19. For some entities, there may be multiple policies, depending upon the employment instruments or arrangements for different individuals or groups of officials. For example:
    • non-executive Board Members, Secretaries and Heads of entities are generally remunerated in accordance with a Remuneration Tribunal Determination; 
       
    • senior executives may be remunerated in accordance with common law contracts that can reference relevant provisions of the entity’s Enterprise Agreement and/or policies of the entity. At a minimum, the disclosure should include the policy for determining the senior executives’ remuneration; and
       
    • other highly paid staff may be remunerated under an Enterprise Agreement, with an Individual Flexibility Arrangement which provide additional remuneration benefits. At a minimum, the disclosure should include the policy for determining how any flexible provisions in the instruments or arrangements are applied to officials. 

Basis for determining remuneration

20. In order to understand how KMP, senior executives and other highly paid staff are remunerated, information on the remuneration components, including the portion of remuneration that is fixed compared to the portion which is ‘at risk’ and subject to performance conditions, should be disclosed. 
     
21. The disclosures should enable readers to understand:
    • the different remuneration arrangements in place for the different categories of officials;
       
    • 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.
       
22. Commonwealth entities should also disclose details of any legislation or government policies that the entity must comply with in determining how remuneration is structured or set (for example, remuneration being set by the Remuneration Tribunal).
     
23. 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 entity’s performance, this link should be explained. 

24. The following outlines the general requirements of the PGPA Rule applicable to the reporting of the financial remuneration information for KMP, senior executives and other highly paid staff in entity annual reports.

Disclosure of executive remuneration on an accrual basis

25. As all remuneration amounts must be calculated on an accrual basis⁸, there will be differences between the total remuneration amount disclosed in the executive remuneration disclosure in the annual report and the amount included on an 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, and the omission of deployment-related allowances from the disclosures.
     
26. 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 entities 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.      
       
27. Also, the amounts presented in the executive remuneration tables for persons remunerated under Remuneration Tribunal Determinations may differ to the amounts disclosed in the determinations. Differences may relate to the timing of when the official started or the inclusion of accrual information. Entities 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

28. All executive remuneration is to be calculated and disclosed in accordance with AASB 119 Employee Benefits⁹ (AASB 119) with the exception of superannuation and certain benefits and allowances. 
    
    Superannuation
     
29. 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). 
       
30. 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 entities of the standardised rates from time to time via Estimates Memoranda. 
     
31. Any additional lump sum superannuation contributions for the PSS and CSS that are paid by an entity 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.  
    
    Other benefits and allowances
     
32. Other benefits and allowances would include benefits that form part of the individual’s remuneration package with the exception of deployment-related allowances that are not to be included in the total remuneration of an official. Common examples of benefits and allowances include: car parking and motor vehicle benefits; housing benefits; and health benefits.
    
    Fringe benefits tax (FBT)
     
33. Where a benefit (including salary sacrifice arrangements) results in a reportable fringe benefit amount (RFBA) for the employee, the Total Remuneration should include the taxable value and the FBT paid.
     
34. Where the benefit does not result in a reportable fringe benefit amount for the employee, the Total Remuneration should only include the taxable value of the benefit.
     
35. By way of example:

• where an employee salary packages a motor vehicle and the benefit is included as a RFBA on their income statement, and the salary packaging arrangement requires the entity to pay FBT to the Australian Taxation Office, the employee’s Total Remuneration should include the taxable value of the benefit plus the FBT payable by the entity.
• where an employee receives a car parking benefit and it is not included as an RFBA on their income statement, the employee’s Total Remuneration should only include the taxable value of the benefit.

         Housing benefits

36. Housing benefits may take a variety of forms. For example, lease costs may be paid directly by an employee and reimbursed by the entity or may be paid by an entity 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 entity. 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

37. The executive remuneration information must be included in annual reports in accordance with the tables set out in clauses 1, 2 and 3 of Schedule 3 of the PGPA Rule. These tables require 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 
38. Termination benefits.

The treatment of particular types of benefits is discussed below.

Annual leave

39. 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 official 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.

Long service leave

40. 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 official reaching an unconditional entitlement for LSL and that the amount be discounted to a present value. Entities can either use an actuarial assessment or the shorthand method outlined in RMG 125.

Overseas housing benefits and allowances

41. In view of the potential for total remuneration to be distorted by the inclusion of overseas housing benefits and allowances in the subcategory ‘Other benefits and allowances’, entities have the discretion to separately disclose these benefits and allowances in the manner set out at Appendix 5. 

Footnotes to provide additional information 

42. 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. 

43. 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 items

44. When reporting remuneration information in accordance with Schedule 3 of the PGPA Rule, any total remuneration bands that do not contain remuneration details of officials may be excluded from the respective tables. For example an entity may not have any senior executives in the $245,001 - $270,000 remuneration band and therefore may exclude this band from the senior executives table.
     
45. Total remuneration bands must not be varied or combined even when there is a small number of employees in a particular band. 
     
46. If an entity pays no remuneration to one or more of the three categories of officials (Key Management Personnel, Senior Executives and Other Highly Paid Staff), the relevant table(s) 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(s).  

Types of employment arrangements

47. In determining which individuals to include in the disclosure tables for KMP, senior executives and other highly paid staff, consideration must be given to the type of employment arrangements in place. 

Ministers’ remuneration

48. In accordance with AASB 124 Related Party Disclosures, Commonwealth entities 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 disclosures.

Part-time arrangements

49. KMP, senior executives and other highly paid staff 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 

50. During the reporting period the composition of the KMP may change due to:
    • Machinery of Government changes which resulted in the transfer in or out of functions and the associated KMP;
       
    • internal restructures such as the creation of a new business area due to a government policy, which resulted in an additional KMP; and
       
    • rolling membership of an executive board, whereby independent members are replaced periodically.
       
51. 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

52. Entities 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 entity); and/ or
       
    • the length of time the individual spent in the acting arrangement during the reporting period. 
       
53. 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

Acting Arrangements – Senior executives

54. As with acting KMP, entities should exercise judgement when determining what acting arrangements should be included in the disclosures for senior executive remuneration. The matters entities should consider are similar to those for acting KMP. Entities should use a footnote to explain the policy used to decide on when acting arrangements are to be included.
     
55. Where persons acting are included in senior executive disclosures, 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

56. 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. 
     
57. Where an individual is promoted to a senior executive position during the reporting period, remuneration earned prior to the promotion is excluded from the total remuneration calculations for the purpose of this disclosure. As with KMP, the impact of the promotion on leave balances would also be excluded from the remuneration disclosures.
     
58. There may be a situation whereby an individual’s remuneration details could be included in a number of the tables during the reporting period. For example, during the reporting period a senior executive may act in a KMP position for three months. The total remuneration for the three months would be included in the KMP table, while the remaining nine months of total remuneration would be included in the senior executive disclosure.

Transfers between Commonwealth entities

59. During the reporting period, individuals may transfer between Commonwealth entities. In these situations, the total remuneration earned by the individual in the entity 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 should not be included. 
     
60. 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 they transferred from. 
     
61. 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 entity 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

62. The essence of a secondment arrangement is whereby:
    •  in the case of an official of a Commonwealth entity, they formally remain an official of the home entity but are assigned duties in another Commonwealth entity, or with an outside employer (host employer); and
       
    • if the employee is a non-Commonwealth entity employee, they are directed by their home employer to perform duties in a Commonwealth entity while continuing to be an employee of the home employer.
       
63. 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 person or reimburse the home Commonwealth entity for the costs of the secondee. For the purpose of the executive remuneration tables, these amounts are to be reported by the host employer. Where the home employer remains responsible for meeting a portion of the remuneration package of a secondee, the two entities involved in the secondment arrangement should agree on reporting arrangements to ensure there is no duplication of remuneration reporting.
     
64. For KMP, senior executives and other highly paid staff on secondment, 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 Commonwealth entity.

Machinery of Government changes

65. As a general rule, the entities that gain functions through Machinery of Government changes are responsible for the reporting of executive remuneration for the full reporting period. For example, that means that those entities that gained functions with effect from 1 February 2020 are required to include executive remuneration information for those employees transferred to their entities for the entire reporting period (i.e. 1 July 2019 to 30 June 2020). 
     
66. While it is the responsibility of the accountable authority to determine how best to report on an entity’s remuneration policies and practices (see Part 2 of this Guide), it would not be expected that a gaining entity would report in any detail on the remuneration policies and practices of abolished entities or on those policies and practices that related to those employees transferred as a result of MOG changes. An exception could be if these policies and practices resulted in substantively different remuneration arrangements compared with those of the gaining entity.  
     

67. KMP information will be presented in a table in accordance with clause 1 of Schedule 3 of the PGPA Rule.
     
68. 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 benefits; 
    • post-employment benefits; 
    • other long-term benefits; and
    • termination benefits.
       
69. 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 disclosure is required to be on an individual basis. Additional information that must be included in the table includes the:
     
    • full name of the KMP; and 
    • position of the KMP, for example, Accountable Authority or Chief Executive Officer.  
       
70. The total remuneration disclosed in accordance with the PGPA Rule should match the total remuneration disclosed in the notes to the financial statements.
     
71. Where the composition of an entity’s KMP changes from that disclosed in the previous reporting period, it is good practice for a note to the KMP table to be included to explain the variation. 

Determining the composition of Key Management Personnel

72. As outlined in the ‘Definitions’ section above, KMP has the same meaning as defined in AASB 124 Related Party Disclosures.
     
73. The following questions may assist entities to determine the people to be reported as KMP:

74. If an entity answers ‘Yes’ to all or most of these questions, it supports the inclusion of the relevant person as a KMP for the purposes of executive remuneration reporting in the entity’s annual report. In particular, it is expected that the Accountable Authority and each member of the governing board would be reported as KMP. 
     
75. Appendix 2 provides an example of the KMP table for the annual report.
     

76. Senior executives’ remuneration information must be presented in accordance with the table at clause 2 of Schedule 3 of the PGPA Rule.
     
77. This table reports the average total remuneration of senior executives who received remuneration during the reporting period. 
     
78. The information is presented in bands of $25,000 increments or, in the situation where the total remuneration for a senior executive(s) is below the $220,000 threshold, the person’s average total remuneration will be included in the Total Remuneration band $0 - $220,000.
     
79. The senior executives table requires the presentation of the following information:
     
    1. the number of senior executives who receive remuneration during the reporting period; and
        
    2. the average total remuneration information split between the four major categories, with further disaggregation at the sub-category level. Guidance on the categories is provided in the general requirements above.
        
80. The average figures presented in each of the total remuneration bands are based on the total amount for the relevant category divided by the number of senior executives in each band.
     
81. Entities have the discretion to remove a band or skip a band because no information exists for that band. Bands must not be aggregated or otherwise varied. 
     
82. Appendix 3 provides an example of the senior executives’ remuneration table. 

83. Other highly paid staff remuneration information will be presented in accordance with the table at clause 3 of Schedule 3 of the PGPA Rule.
     
84. This table reports the average total remuneration of other highly paid staff who received remuneration above the threshold remuneration amount during the reporting period. 
     
85. The threshold remuneration amount of $220,000 applies for reporting periods that begin on or after 29 June 2018 and end on or before 30 June 2019. In later financial years, the threshold remuneration amount is adjusted based on an indexation factor outlined in the PGPA Rule. The Department of Finance will provide advice of any new threshold (generally around March of the relevant reporting period), following the release of the relevant Wage Price Index data by the Australian Bureau of Statistics. For the 2019-20 reporting period, the threshold remuneration amount is $225,000.
     
86. The remuneration information must be presented in total remuneration bands of $25,000 commencing from $220,000, adjusted as required by the application of the indexation factor.
     
87. For the 2019-20 reporting period, the first total remuneration band for the other highly paid staff table will be $225,001 - $245,000. This reflects the change in the threshold remuneration amount due to indexation. 
     
88. The table requires the presentation of the following information:
     
    1. the number of other highly paid staff during the reporting period; and
        
    2. the average total remuneration information split between the four major categories, with further disaggregation at the sub-category level. Guidance on the categories is provided in the general requirements above.
        
89. The average figures presented in each of the bands are based on the total amount for the relevant category divided by the number of other highly paid staff in each band.
     
90. Entities have the discretion to remove a band or skip a band because no information exists for that band. Bands must not be aggregated or otherwise varied. 
     
91. Appendix 4 provides an example of the other highly paid staff table.

92. The Finance Minister has the power to exempt a Commonwealth entity from one or more of the executive remuneration reporting requirements.¹¹
     
93. 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.¹² For example, the Finance Minister may require the information to be provided to another Minister or a Parliamentary committee.
     
94. 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 entity’s annual report.¹³  
     
95. The diagram below outlines the process to be followed in the event an entity wishes to seek an exemption from one or more executive remuneration reporting requirements.

_{[11] See section 17of the PGPA Rule.}

_{[12] See subsection 17CE (3) of the PGPA Rule.}

_{[13] See subsections 17CE (2) and (4) of the PGPA Rule.}

The following are illustrative examples of the content of the remuneration disclosures in a Commonwealth entity’s Annual Report. Commonwealth entities 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 to 5 of this Guide) should be incorporated into the remuneration disclosures as this will aid the reader to understand the information presented. The example tables in Appendices 2, 3 and 4 apply to all entity types.

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

Introduction

The categories of officials covered by the disclosures (KMP, senior executives, and other highly paid staff).

Remuneration policies and practices

This section should reference any applicable Remuneration Tribunal Determinations, Australian Public Service Commission policies and guidance, Enterprise Agreement clauses and any legislation, administrative instruments or policies that are relevant in determining the entity’s policies and practices. It should also cover any benchmarking that is used to determine executive remuneration, and information on who has conducted the benchmarking.  Items that could be included (noting this list is not exhaustive) are:

• policies of the entity as they apply to each category of official covered by the report;
   
• decision maker for decisions under the policy;

• the elements of remuneration paid to the reported groups such as fixed remuneration;
   
• any incentive payments, or bonuses, linked to performance should be reported in this section. It could include a link to the annual performance statements highlighting the entity’s performance information against which the individuals or groups of officials are assessed, and whether it was met; and
   
• for those entities 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 (for example, how increases in fixed remuneration are determined such as pay increments).

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.

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

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, Entity X disclosed the following KMP expenses:

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

The following examples (examples 1 to 3) are for illustrative purposes and demonstrate how the underlying data for senior executives was prepared under this guidance. The underlying data used should not be disclosed with the remuneration disclosure.

Each example builds on the previous example, adding an additional person with circumstances commonly found by entities completing this disclosure. The examples reference the underlying data used to compile the table, which is not a requirement of the disclosure. For example, see notes ^(a) and ^(b) in the table below. 

Example 1

During the reporting period ended 30 June 20X1, Entity X had two senior executives, Mary and Bob.

• Mary worked full time for the entire financial year. Her annual salary is $245,000. In the reporting period Mary took 5 weeks annual leave ($24,000) and a period of long service leave ($15,000). She accrued 4 weeks annual leave (of $19,000) and a period of long service leave (of $5,000)[1]. Mary’s reportable base salary during the reporting period is $225,000, which comprises: ($206,000 salary while working plus $24,000 of annual leave taken plus the net movement in the annual leave provision (4 weeks accrual of $19,000 less leave paid of $24,000). Mary also earned a bonus of $9,000 for 20X1 and her employer superannuation contribution was $35,000. Mary’s total remuneration for the purpose of the senior executive remuneration table is $274,000 ($225,000 plus $9,000 plus $35,000 plus $5,000[2]) putting her in the $270,001 - $295,000 remuneration band.
   
• Bob is part-time (0.7 full time equivalent) and worked for the entire reporting period. His part-time annual salary is $133,000 based on a full-time annual salary of $190,000. Like Mary, Bob accrued four weeks annual leave ($10,000) and accrued a period of long service leave ($2,500). During the year Bob took one week’s annual leave ($7,500). Bob’s reportable base salary is $135,500 for the reporting period, which comprises: $125,500 salary while working plus annual leave taken ($7,500) and the net movement in the annual leave provision ($10,000 less $7,500). Bob also earned a bonus of $3,000 for 20X1 and his employer superannuation contribution was $21,000. Bob’s total remuneration for the purpose of the senior executive remuneration table is $162,000 ($135,500 plus $3,000 plus $21,000 plus $2,500) putting him in the $0 - $220,000 remuneration band.

Entity X would present the following senior executive table in its annual report for 20X0/20X1 in accordance with the PGPA Rule.

Example 2

In this example, Entity X had three senior executives during the reporting period ended 30 June 20X1. This example builds on Example 1 and includes Vijay, who was acting as a senior executive during the reporting period.

c. Vijay acted as a senior executive from 1 August 20X0 to 31 October 20X0 while his manager was seconded to another role. Vijay’s annual salary while acting was $215,000, which meant he was paid $53,750 while acting in a senior executive role. Vijay didn’t take any leave while acting and in this period accrued annual leave of $4,500 and long service of $1,000. Vijay’s reportable base salary for the reporting period is $58,250 which comprises: $53,250 salary while working plus $4,500 being the net movement in the annual leave provision. His employer superannuation contribution for the period of acting was $8,000. Vijay’s total remuneration for the purpose of the senior executive table while acting is therefore $67,250 ($58,250 plus $8,000 plus $1,000) putting him in the $0 - $220,000 remuneration band.

The average amounts for the relevant category are based on the number of senior executives within the relevant band, not the full time equivalent.  As such, while Bob was part time and Vijay was acting for a period within the year, the average is calculated based on the two staff members. The following shows how the average base salary for Bob and Vijay, whose total remuneration was within the $0 - $220,000 remuneration band, is calculated:

Entity X would present the following senior executive table in its annual report for 20X0/20X1 in accordance with the PGPA Rule.

Example 3

In this example, Entity X had four senior executives during the reporting period ended 30 June 20X1. This example builds on Example 2 and includes an additional senior executive, Chi, who spent a period of time as a KMP.

d. Chi was in the role of a senior executive for the first seven months of the year, until she moved into a KMP role for the remainder of the reporting year. She was paid $315,000 for the full reporting year, of which $183,750 was paid before she moved into the KMP role. Chi was paid $10,000 for annual leave taken before changing roles. Chi accrued four weeks annual leave and one week long service leave consistent with the other senior executives, pro-rated for her time as a senior executive, which equates to $16,000 for annual leave and $3,500 for long service. She also received employer superannuation contributions of $24,000. As part of Chi’s package, she also received a housing benefit of $10,000. Chi’s reportable base salary for the reporting period is $189,750 which comprises: $173,750 she received in salary while working plus $10,000 for the annual leave taken, plus $6,000 being the net movement in the annual leave provision ($16,000 less $10,000). Chi’s total remuneration for the purpose of the senior executive table while in the senior executive role is $227,250 ($189,750 plus $10,000 plus $24,000 plus $3,500) putting Chi in the $220,001 - $245,000 remuneration band.

As Chi is included in the KMP table for the period that she qualified for that classification, her remuneration for the period as a KMP is excluded from the senior executive table.

Entity X would present the following senior executive table in its annual report for 20X0/20X1 in accordance with the PGPA Rule.

The following example is for illustrative purposes and demonstrate how the underlying data for other highly paid staff was prepared under this guidance. The examples reference the underlying data used to compile the table, which is not a requirement of the disclosure. For example see the notes ^(a) to ^(c) in the example below.

Example

During the reporting period ended 30 June 20X1 Entity X had three other highly paid staff – Tom, Jo-Ann and Davina.

1. Tom is full time and worked for the entire reporting period. His annual salary was $190,000. He accrued four weeks annual leave ($15,000) and a period of long service leave ($4,000). Tom was paid $5,000 for annual leave taken. Tom’s reportable base salary is $200,000 which comprises: $185,000 he received while working plus $5,000 annual leave taken during the year plus the net movement in the annual leave provision ($15,000 in accrued annual leave less $5,000 annual leave taken). Tom’s employer superannuation contributions were $30,000. Tom’s total remuneration for the purpose of the other highly paid staff table is $234,000 ($200,000 plus $30,000 plus $4,000) putting Tom in the $220,001 - $245,000 reporting band.
    
2. Jo-Ann is part-time (0.8 full time equivalent) and worked for the entire reporting period. Her pro-rata annual salary is $185,000 based on a full-time annual salary of $231,250. Jo-Ann accrued three weeks annual leave ($17,000) and a period of long service leave ($4,000).      Jo-Ann was paid $20,000 for annual leave taken. Jo-Ann is also entitled to a retention bonus of $7,500 per annum if she stays with Entity X for five years.  Jo-Ann’s employer superannuation contributions for the year were $31,000. Jo-Ann’s reportable base salary is $200,000 which comprises: $183,000 she received while working plus $20,000 annual leave taken during the year plus the net movement in the annual leave provision ($17,000 accrued annual leave less $20,000 annual leave taken). Jo-Ann’s total remuneration for the purpose of the other highly paid staff table is $242,500 ($200,000 plus $31,000 plus $7,500 plus $4,000) putting Jo-Ann in the $220,001 - $245,000 reporting band.
    
3. Davina is full time and worked for the entire reporting period. Her annual salary was $215,000. She accrued four weeks annual leave ($17,000) and a period of long service leave ($5,000). Davina was paid $22,000 for annual leave taken. Davina was also provided with a housing benefit of $10,000 and employer superannuation contributions of $35,000. Davina’s reportable base salary is $210,000 which comprises: $193,000 she received while working plus $22,000 leave taken during the year plus the movement in the annual leave provision ($17,000 accrued annual leave less $22,000 in annual leave taken). Davina’s total remuneration for the purpose of the other highly paid staff table is $260,000 ($210,000 plus $35,000 plus $10,000 plus $5,000) putting her in the $245,001 - $270,000 reporting band.

The average amounts for the relevant category are based on the number of other highly paid staff within the relevant band.  The following shows how the average base salary for the two other highly paid staff (Tom and Jo-Ann), whose total remuneration was within the $220,000 - $245,000 remuneration band, is calculated. Davina is reported in the $245,001 - $270,000 band.

Entity X would present the following other highly paid staff table in its annual report for 20X0/20X1 in accordance with the PGPA Rule. Note that the first total remuneration band in the table below ($225,001 - $245,000) reflects the updated threshold remuneration amount for the 2019-20 reporting period.

The following table illustrates how overseas housing benefits and allowances can be disclosed as a separate component of ‘Other benefits and allowances’ and as a separate component of Total remuneration. Entities should only adopt this additional disclosure where the reporting of total remuneration is distorted in view of the quantum and/or nature of these particular benefits and allowances. An example footnote to support the disclosure is also provided below.

a) Other short term benefits and allowances include overseas housing allowance and benefits paid on behalf of APS staff posted overseas. These staff are remunerated in accordance with [relevant remuneration framework] that is designed to compensate for the differences in locations in such matters as the cost of living, the cost of accommodation and the security environment.           

[Name of entity] provides accommodation for staff and their families while posted overseas. While staff benefit from these arrangements, they do not receive direct remuneration for rental costs and the value of the accommodation allowances is determined by the location of each posting rather than the work or personal circumstances of individual staff. The value of housing allowances reported in the table above generally reflects the high property costs in many of the overseas locations where staff are posted.

In these circumstances the total value of an individual staff member’s total remuneration is impacted by the value of the overseas housing benefits and allowances paid on behalf of the staff member and the table above is reported to enable a fuller understanding of the extent of this impact while still reporting the total remuneration of each relevant staff member as required by the disclosure requirements of the PGPA Rule.