For FY19 the GCEO&MD and senior executive remuneration arrangements are comprised of two key remuneration components:
Fixed annual remuneration (FAR); and
The Board aims to ensure that the mix of FAR and STI is appropriate and that a suitable portion of remuneration remains “at risk” to ensure that the GCEO&MD and senior executives are only rewarded when delivering performance that is aligned to the Australia Post strategy.
The variable, at risk component of target remuneration, is 41 per cent for both the GCEO&MD and senior executives.
The Target STI opportunity is 70 per cent of FAR for the GCEO&MD and senior executives as at 30 June 2019. The maximum STI, at risk component of remuneration is 100 per cent of FAR for the GCEO&MD and senior executives.
Fixed annual remuneration
FAR aims to reward the GCEO&MD and senior executives for executing the core requirements of their role. FAR generally includes base salary, benefits and entitlements received in cash, superannuation and any salary sacrificed items.
FAR is reviewed annually with adjustments generally effective for the GCEO&MD from 1 November and senior executives from the beginning of the first pay period of December (payroll period starting 28 November 2019).
GCEO&MD FY19 remuneration
The Government has determined that the Australia Post GCEO&MD’s remuneration should be set by the Remuneration Tribunal.
The Remuneration Tribunal is an independent statutory authority established under the Remuneration Tribunal Act 1973. The Remuneration Tribunal’s role is to determine, report on and provide advice about remuneration, including allowances and entitlements for office holders within its jurisdiction.
The Australia Post GCEO&MD position was classified by the Remuneration Tribunal as a Principal Executive Officer (PEO) Band E which falls within the Tribunal’s remit.
In June 2018 the Remuneration Tribunal determined that the Reference Rates within its jurisdiction increase by 2 per cent effective 1 July 2018. This includes Australia Post GCEO&MD being classified a PEO Band E. The Reference rate increased to $1,428,000.
On appointment, and the immediate 12 months following, the Board may not set remuneration above the Reference Rate. From the first anniversary of appointment the Board of Australia Post has the discretion to determine remuneration within the band from 10 per cent below the Reference Rate to 5 per cent above the Reference Rate.
The Board, consistent with the Remuneration Tribunal’s reference rate increase and general provisions, approved an increase in the GCEO&MD’s Total Remuneration (Base salary plus Superannuation). The increase was applied in two tranches.
Total Remuneration (FAR) increased to $1,428,000 effective 1 July 2018; and
Total Remuneration (FAR) increased to $1,478,000 effective 1 November 2018.
The Remuneration Tribunal also confirmed performance pay incentive arrangements for the GCEO&MD with a Target STI potential of 70 per cent of FAR and a STI maximum potential of 100 per cent of FAR. The Board of Australia Post is responsible for determining the performance of the GCEO&MD and determining any incentive outcomes. For FY19 the GCEO&MD performance was be assessed against the Enterprise Scorecard (see Section 6 for further details).
KMP and senior executive FY19 remuneration
FAR is positioned competitively to attract, motivate and retain senior executives and reflect the individual’s responsibilities, skills, performance, qualification and experience. Reviews are informed by a range of internal and external factors including market comparative remuneration benchmarking to roles in companies of similar size, revenue and complexity, other Government Business Enterprises’ remuneration positioning, any changes in role and responsibility, previous salary adjustments, community expectations and internal relativities.
At the beginning of FY19, the GCEO&MD made a number of changes to the size and remit of various senior executive roles, which resulted in the Board applying associated adjustments to those senior executives’ FAR to align with the future direction and strategy of Australia Post.
The FY19 STI has been designed to provide a framework that rewards for delivering performance and value creation for Australia Post. The plan recognizes the varying contributions of each business unit and enables differentiation in remuneration outcomes based on individual leadership and safety management. The STI scheme is an “at risk” annual incentive opportunity where
an STI payment may be awarded subject to the achievement of relevant individual, team, strategic and enterprise KPIs.
Senior executives’ STI opportunities are communicated as STI Target (the potential award available if target performance is achieved) or STI Maximum (the maximum potential award available).
In FY19, the senior executive STI outcomes align to both individual, business unit and enterprise performance. The key measures that determine a STI outcome for senior executives for FY19 include:
Enterprise financial performance
Business unit financial performance
Business unit strategic KPIs
Leadership and safety management.
The STI target opportunity for senior executives is communicated as a percentage of FAR. Senior executives have the opportunity to receive a STI Target award of up to 70 per cent of their FAR and, in circumstances where performance has significantly exceeded target, may receive up to 100 per cent of FAR (STI Maximum).
At the end of the financial year the Nomination & Remuneration Committee reviews the performance of each senior executive. The Nomination & Remuneration Committee then recommends to the Board individual STI awards. Participants who have a FAR of $400,000 or more as at 30 June of the performance cycle will have 25 per cent of their total target and stretch incentive deferred for 12 months (to September 2020). The deferred amount is subject to review and clawback by the Board at its absolute discretion.
The past two years have delivered a 33 per cent reduction in the total remuneration outcomes payable to the Senior Executives of Australia Post, from $18,491,167 in FY17 to $12,357,392 in FY19. This reduction is reflective of the new remuneration framework implemented by Australia Post in FY18, which saw the removal of the Long Term Incentives (LTI) Plan and the STI Maximum potential being capped at 100 per cent of FAR.
Other highly paid employee FY19 remuneration
Remuneration packages are designed to reward employees for the skills and experience they bring to their role. Dependent on an employee’s role, the remuneration package is comprised of an appropriate mix of fixed and variable remuneration components typically consisting of the following:
FAR: comprising fixed base salary and superannuation; and
STI opportunity: both a target and stretch opportunity as a percentage of FAR.
To inform Australia Post in setting market competitive and sustainable remuneration budgets and ensure employees are being rewarded fairly and equitably for their role, FAR is regularly benchmarked to multiple sources of information including external market surveys.
When considering remuneration benchmarking and grade, Australia Post typically considers:
Mercer IPE job methodology as the standard approach for job sizing roles
The responsibilities and accountabilities of the role
Internal relativities and external market survey data and movements.
Remuneration benchmarking is conducted relative to a series of external remuneration surveys purchased from Mercer, Aon Hewitt and Korn Ferry as the content of each external market survey focuses more on a specific industry sector.
Based on the information considered and listed above, FAR recommendations are formulated relative to FAR remuneration ranges. FAR ranges are set based on Mercer Position Class and are
calculated using aggregated median market data for all relevant roles in that positon class.
Remuneration packages are reviewed on an individual basis on appointment, on promotion or during the annual remuneration review. New entrants to the enterprise are typically positioned up to the midpoint to provide an opportunity to progress within the band once they’re proven in role. During the annual review process a recommendation on the FAR increase is based on an individual’s position in range and their performance outcome and this is provided to the Manager for decision. STI amounts are determined on the employee’s employment type, grade and performance rating.
Annually the Board is asked to review and approve the budget for the fixed remuneration review budget for contract level employees.