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

Audience

The Commonwealth entities Executive Remuneration Reporting Guide for Annual Reports (the Guide) applies to all Commonwealth entities required to prepare an annual report under the Public Governance, Performance and Accountability Act 2013 (PGPA Act).

Executive remuneration reporting by Commonwealth companies for annual reports is covered by Resource Management Guide No.139 – Commonwealth companies Executive Remuneration Reporting Guide for Annual Reports.

Key points

  • Commonwealth entities[1] are required to disclose executive remuneration information in their annual reports in accordance with the Public Governance, Performance and Accountability Rule 2014[2] (PGPA Rule). Subdivision C of Part 2-3 of the PGPA Rule sets out the executive remuneration disclosure requirements for Commonwealth entities.
  • Commonwealth entities are required to present remuneration information for key management personnel (KMP), senior executives and other highly paid staff. The reporting of executive remuneration information in an entity’s annual report is applicable to reporting periods that begin on or after 29 June 2018.
  • The PGPA Rule does not affect the reporting of KMP information in entity financial statements in accordance with section 42 of the PGPA Act.[3]
  • This Guide provides:
    • information to assist Commonwealth entities 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] Section 10 of the PGPA Act defines Commonwealth entities. Subsidiaries of Commonwealth entities are not Commonwealth companies and therefore are not within the scope of the enhanced executive remuneration reporting requirements.

[2] Incorporating the Public Governance, Performance and Accountability Amendment (Reporting Executive Remuneration) Rules 2019.

[3] Under section 42 of the PGPA Act, Commonwealth entities must prepare annual financial statements in accordance with the Australian Accounting Standards and any other requirements prescribed by the rules.

Resources

This Guide is available on the Department of Finance website.

Other relevant publications include:

  • Public Governance, Performance and Accountability Act 2013
  • Public Governance, Performance and Accountability Rule 2014
  • Public Governance, Performance and Accountability (Financial Reporting) Rule 2015
  • Corporations Act 2001
  • Resource Management Guide No. 125 – Commonwealth Entities Financial Statements Guide[1]
  • Resource Management Guide No. 126 – Commonwealth Government Business Enterprises – Governance and Oversight Guidelines
  • Resource Management Guide No. 135 – Annual report for non-corporate Commonwealth entities
  • Resource Management Guide No. 136 – Annual report for corporate Commonwealth entities
  • Australian Accounting Standard AASB 119 Employee Benefits
  • Australian Accounting Standard AASB 124 Related Party Disclosures
 

[1] The Commonwealth Entities Financial Statements Guide No.125 will be updated to reflect the revised treatment of annual leave and long service leave for the purposes of an entity’s financial statements.

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 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. These reporting requirements will replace the web-based reporting on executive remuneration.
  3. 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.
  1. The PGPA Rule requires the reporting of executive remuneration information for specified officials of Commonwealth entities on an accrual basis.
  2. The PGPA Rule does not dictate where within an entity’s annual report the executive remuneration information should be reported. 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.[1]
  3. 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.
  4. 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.
  5. The amendment to the PGPA Rule does not modify the PGPA Act reporting requirements for KMP information in Commonwealth entity annual financial statements.
  6. 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

  1. 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]

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

Non-corporate Commonwealth entities

  • Secretaries of Departments of State
  • Other Accountable Authorities or heads of entities
  • Executive Board members
  • Chief Operating Officer
  • Direct reports to the Secretary/Chief Executive.

Corporate Commonwealth entities

  • Non-executive Board Members
  • Chief Executive Officers
  • Deputy Chief Executive Officers
  • Senior Counsel
  • Group General Manager/Group Managing Director.

Senior executives

Any of the following who are not KMP:

(a) an official with a classification in Groups 9 to 11 of the table in Schedule 1 to the Public Service Classification Rules 2000; or

(b) an official with a position equivalent to an official covered by paragraph (a). For corporate Commonwealth entities that do not employ staff under the Public Service Act 1999, this would include an official other than a KMP who is responsible for making decisions, or having substantial input into decisions, that affect the operations of an entity; and

(c) an officer of the Australian Defence Force with a rank equivalent to a classification covered by paragraph (a). This would include Commodores, Brigadiers, and Air Commodores, and all officers of a higher rank.[2]

Other highly paid staff

Officials of a Commonwealth entity:

(a) who are neither KMP nor senior executives; and

(b) whose total remuneration exceeds the threshold remuneration amount for the reporting period.

Threshold remuneration amount

The threshold remuneration amount for a reporting period is:

(a) for a reporting period that begins on or after 29 June 2018 and ends on or before 30 June 2019—$220,000; or

(b) for a reporting period that begins on or after 1 July 2019—the amount worked out using the following formula rounded to the nearest multiple of $5,000:

$220,000 x Indexation factor[3] for the financial year

In later financial years, the threshold remuneration amount for other highly paid staff will be adjusted, based on an indexation factor. The Department of Finance will advise on any required changes to the remuneration threshold.

Total remuneration

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

(a) base salary;

(b) bonuses;

(c) other benefits and allowances;

(d) superannuation contributions (made by the employer);

(e) long service leave;

(f) other long‑term benefits; and

(g) termination benefits.

Section 4 of the PGPA Rule states that ‘total remuneration’ does not include any allowance paid because a person is deployed (but not posted) overseas.  

Total remuneration band

The total remuneration band for senior executives is:

(a) if the total remuneration for a member of the entity’s senior executives for the reporting period is $220,000 or less—the band $0 to $220,000; or

(b) if the total remuneration for a member of the entity’s senior executives for the reporting period is more than $220,000—the band of one or more increments of $25,000 above $220,000 into which the remuneration falls.

The total remuneration band for other highly paid staff is a band of one or more increments of $25,000 above $220,000 into which the total remuneration for a member of the entity’s other highly paid staff falls.

[1] 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 entities 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 an entity’s annual report.

[2] http://www.defence.gov.au/PayAndConditions/ADF/chapter-1/Part-4/default.asp provides further details on Australian Defence Force equivalent rankings and classifications.

[3]  The Indexation factor is detailed at subsection 4A (2) of the PGPA Rule.

[1]  See PGPA Rule, section 17AG.

Part 2 – Policies and Practices Disclosure

  1. The following details the disclosure requirements for executive remuneration policies and practices in place to determine the remuneration of KMP, senior executives and other highly paid staff in entity annual reports.

Disclosure of executive remuneration policies and practices

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

  • These reporting requirements do not diminish, in any way, any reporting obligations under an entity’s enabling legislation.
  • The reporting requirements apply to all Commonwealth entities, but the content of the report will vary depending on the nature of the entity and the instruments used to remunerate KMP, senior executives and other highly paid staff. As such, the reporting undertaken should be fit for purpose. A small, non-corporate entity is likely to have different, and less complex, remuneration policies and practises than a large corporate Commonwealth entity, and the information presented will reflect those differences.

For example, a large, complex Commonwealth entity is likely to have well-established governance processes oversighting remuneration setting across the breadth of the organisation that are an integral part of the entity’s governing Board arrangements and remuneration arrangements, reflecting the market in which the entity operates. In contrast, a small, non-corporate entity with only a small number of KMP and senior executives, and whose officials are employed under the Public Service Act 1999, is likely to have less complex remuneration policies and practices.

  • Commonwealth entities can reference publicly available information, such as Remuneration Tribunal Determinations or Enterprise Agreements, to further explain their policies and practices.
  1. Remuneration disclosures must include information on:
  • the governance arrangements under which the entity’s remuneration policies and practices are set; and
  • the basis on which the remuneration of KMP, senior executives and other highly paid staff are determined.
  1. Commonwealth entities can choose to disaggregate this disclosure by KMP, senior executives and other high paid staff, or by any categorisation that will provide the reader with sufficient information to understand how executive remuneration is governed and the basis on which remuneration is determined.
  2. Paragraphs 15 to 23 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.

Policies and Practices

  1. 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.
  2. The details of the person, committee or Board that is responsible for approving and monitoring the application of each policy should be disclosed.
  3. 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 may be remunerated under a Remuneration Tribunal Determination;
  • senior executives may be remunerated through a common law contract that references elements of the entity Enterprise Agreement and polices of the entity. At a minimum, the disclosure should include the policy for determining the senior executives remuneration; and
  • some 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

  1. 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.
  2. 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.
  1. 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).
  2. 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.

Governance arrangements

  1. For each Commonwealth entity, the arrangements for governance under which the remuneration policies and practices operate should be disclosed. 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.
  1. 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 mechanism, 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.

Part 3 – Financial Disclosure Requirements

  1. 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

When preparing the executive remuneration financial information, Commonwealth entities should adopt the following principles:

  • The 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;
  • The calculation of the amounts and the columns used to present the remuneration of senior executives and other highly paid staff should align with how the KMP disclosure is prepared, noting that amounts are presented by remuneration band and average by the number of individuals within the band; and
  • Footnotes can be used to provide additional information and explanations assist the reader to understand what has been included.
  1. For the purposes of disclosing executive remuneration amounts, comprising remuneration of KMP, senior executives and other highly paid staff under the PGPA Rule, all amounts must be calculated on an accrual basis.[1]
  2. This means 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.
  3. For example, 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.
  4. 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

  1. All executive remuneration is to be calculated and disclosed in accordance with AASB 119 Employee Benefits[2]  (AASB 119) with the exception of superannuation and certain benefits and allowances.
  2. Superannuation is to be measured as follows:
  • individuals in a defined superannuation contribution scheme (e.g. PSSap and super choice) – superannuation includes superannuation contribution amounts typically located on payslips of individuals (noting this needs to be reported on an accrual basis); and
  • individuals in a defined superannuation benefit scheme (e.g. PSS and CSS) – superannuation includes the relevant Notional Employer Contribution Rate (ECR) amount and the Employer Productivity Superannuation Contribution (also known as the Productivity Component).
  1. 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. Any related fringe benefit tax should be included in the calculation of total remuneration.

Presentation of remuneration information

  1. 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
  • Termination benefits.
  1. Annual leave does not need to be separately disclosed in the tables. It will be disclosed as a ’Short-term benefit’ in the ’Base salary’ column. The amount included for the reporting period equals 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.
  2. 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.
  3. Where additional information may assist with a reader’s understanding of the elements of Total Remuneration disclosed in the various categories, a footnote should be added. 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.
  4. 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

Remuneration item

Main category

Sub-category

Salary paid and accrued (including 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[3]

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

Housing benefits

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 disclosures.

Upon cessation of employment, including retirement, where the official 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 official 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 entity 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.

  1. When reporting remuneration information in accordance with Schedule 3 of the PGPA Rule, 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 could exclude this band accordingly.
  2. 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

  1. 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

  1. 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

  1. KMPs, 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 

  1. 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.
  1. 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

  1. 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.
  1. 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

  1. 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.
  2. 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

  1. 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.
  2. 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.
  3. 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

  1. 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.
  2. 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.
  3. 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

  1. 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.
  1. 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 host 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.
  2. 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.

[1]  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. Your entity’s Finance team should be consulted if there are queries about whether remuneration items are included in the financial statements.

[2]  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.

[3] 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

  1. KMP information will be presented in a table in accordance with clause 1 of Schedule 3 of the PGPA Rule.
  2. 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.
  1. The key difference between what is already being 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 would be included in the table includes:
  • full name of the KMP; and
  • position of the KMP, for example, Chief Executive Officer.
  1. The total remuneration disclosed in accordance with the PGPA Rule should match the total remuneration disclosed in the notes to the financial statements.
  2. Appendix 2 provides an example of the KMP table for the annual report.

Part 5 – Information about remuneration for senior executives

  1. Senior executives’ remuneration information will be presented in a table in accordance with clause 2 of Schedule 3 of the PGPA Rule.
  2. This table reports the average total remuneration of senior executives who received remuneration during the reporting period.
  3. The information is presented in bandings of $25,000 increments or, in the situation where the total remuneration for a senior executive is below the $220,000 threshold, the reporting band will be $0 - $220,000.
  4. The 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.
  5. The average figures presented in each of the bands are based on the total amount for the relevant category divided by the number of senior executives in the band.
  6. Discretion exists to remove a band or skip a band because no information exists for that band.
  7. Appendix 3 provides an example of the senior executives’ remuneration table.

Part 6 – Information about remuneration for other highly paid staff

  1. Other highly paid staff remuneration information will be presented in a table in accordance with clause 3 of Schedule 3 of the PGPA Rule.
  2. This table reports the average total remuneration of other highly paid staff who received remuneration above the threshold remuneration amount during the reporting period.
  3. 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 will be adjusted based on an indexation factor outlined in the PGPA Rule. The Department of Finance will advise of the new threshold (generally around September of the relevant reporting period), following the release of the Wage Price Index data from the Australian Bureau of Statistics.
  4. The information is presented in bandings of $25,000 commencing from $220,000.
  5. 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.
  6. 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 the band.
  7. Discretion exists to remove a band or skip a band because no information exists for that band.
  8. Appendix 4 provides an example of the other highly paid staff table.

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 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.

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, 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:

Name

Position

Term as KMP

Rachael [Surname]

Secretary/Chief Executive Officer (CEO)

Full year

Suraj [Surname]

Deputy Secretary/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, Entity X disclosed the following KMP expenses:

Note X: Key management personnel remuneration for the reporting period

20X1
$

 

 

Short-term benefits:

 

   Base Salary

1,233,000

   Bonus

113,000

   Other benefits and allowances[1]

20,000

Total short-term benefits

1,366,000

 

 

  Superannuation

70,597

Total post-employment 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]

Secretary/

CEO

445,000

45,000

10,000

20,049

7,500

-

-

527,549

Suraj [Surname]

Deputy Secretary/ 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

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

Appendix 3 – Senior Executives Illustrative Example

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.

  1. 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.
  2. 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.

 

 

 

Short-term benefits

Post-employment benefits

Other long-term benefits

Termination Benefits

Total Remuneration

Remuneration Band

 

Number of Senior Executives

Average Base salary

($)

Average Bonuses

($)

Average Other benefits and allowances

($)

Average Superannuation contributions

($)

Average Long service leave

($)

Average Other long-term benefits

($)

Average Termination Benefits

($)

Average total remuneration

($)

$0 – $220,000

1 (b)

135,500

3,000

-

21,000

   2,500

-

-

162,000

$270,001 - $295,000

1 (a)

225,000

9,000

-

35,000

5,000[3]

-

-

274,000

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.

  1. 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:

Senior Executives

Base Salary
 ($)

Bonus
($)

Other Benefits and Allowances
($)

Superannuation Contributions
($)

Long Service Leave
($)

Total
($)

Bob

135,500

3,000

-

21,000

2,500

162,000

Vijay

58,250

-

-

8,000

1,000

67,250

Total

193,750

3,000

-

29,000

3,500

229,250

Average based on number of staff

96,875

1,500

-

14,500

1,750

114,625

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

 

 

 

Short-term benefits

Post-employment benefits

Other long-term benefits

Termination Benefits

Total Remuneration

Remuneration Band

 

Number of Senior Executives

Average Base salary

($)

Average Bonuses

($)

Average Other benefits and allowances

($)

Average Superannuation contributions

($)

Average Long service leave

($)

Average Other long-term benefits

($)

Average Termination Benefits

($)

Average total remuneration

($)

$0 – $220,000

     2 (b) (c )

96,875

1,500

-

14,500

1,750

-

-

114,625

$270,001 - $295,000

1 (a)

225,000

9,000

-

35,000

5,000

-

-

274,000

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.

  1. 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.

 

 

 

Short-term benefits

Post-employment benefits

Other long-term benefits

Termination Benefits

Total Remuneration

Remuneration Band

 

Number of Senior Executives

Average Base salary

($)

Average Bonuses

($)

Average Other benefits and allowances

($)

Average Superannuation contributions

($)

Average Long service leave

($)

Average Other long-term benefits

($)

Average Termination Benefits

($)

Average total remuneration

($)

$0 – $220,000

     2 (b) (c )

96,875

1,500

-

14,500

1,750

-

-

114,625

$220,001 - $245,000

1 (d)

189,750

-

10,000

24,000

3,500

-

-

227,250

$270,001 - $295,000

1 (a)

225,000

9,000

-

40,000

5,000

-

-

274,000

[1] The amount of $5000 is a notional amount based on Mary’s entitlement as per the accrual methodology outlined in AASB 119.

[2] The $5,000 included in Mary’s total remuneration (disclosed in the ‘Average long service leave’ column under the ‘Other Long-term benefits’ heading) equals the long service leave taken of $15,000 plus the negative movement in the long service leave provision of $10,000.

[3] The $5,000 disclosed for long service leave equals the leave taken of $15,000 plus the negative movement in the long service leave provision of $10,000.

Appendix 4 – Other Highly Paid Staff Illustrative Example

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.

Other Highly Paid Staff

Base Salary
 ($)

Bonus
($)

Other Benefits and Allowances
($)

Superannuation Contributions
($)

Long Service Leave
($)

Total
($)

Tom

200,000

-

-

30,000

4,000

234,000

Jo-Ann

200,000

7,500

-

31,000

4,000

242,500

Total

400,000

7,500

-

61,000

8,000

476,500

Average based on number of staff

200,000

3,750

-

30,500

4,000

238,250

Entity X would present the following other highly paid staff table in its annual report for 20X0/20X1 in accordance with the PGPA Rule.

 

 

 

Short-term benefits

Post-employment benefits

Other long-term benefits

Termination Benefits

Total Remuneration

Remuneration Band

 

Number of Other Highly Paid Staff

Average Base salary

($)

Average Bonuses

($)

Average Other benefits and allowances

($)

Average Superannuation contributions

($)

Average Long service leave

($)

Average Other long-term benefits

($)

Average Termination Benefits

($)

Average total remuneration

($)

$220,001 - $245,000

    2 (a) (c )

200,000

3,750

-

30,500

4,000

-

-

238,250

$245,001 - $270,000

1 (b)

210,000

-

10,000

35,000

5,000

-

-

260,000


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