Senior Executive Service employees—incentive to retire

Last updated: 01 Dec 2016

This page is: current

cuts through red tape image Overview

  1. An Agency Head can offer a Senior Executive Service (SES) employee an incentive to retire. The offering of incentives to retire to senior officials is sensitive and should be handled with due care and caution.
  2. Section 37 of the Public Service Act 1999 (PS Act) allows an agency head to make an offer in writing to a SES employee.  The Agency Head is required to notify the SES employee in writing that they will become entitled to a specified payment if the employee retires within a specified time.
  3. The offer of an incentive to retire is not an entitlement.  An incentive to retire is not to be used as a reward for long service.  It may be offered where:
    1. the employee is excess to requirements; or
    2. the employee no longer has the skills required to perform at their SES classification.
  4. If an incentive offer is not accepted by the employee, an agency head may take other management action. An agency head may:
    1. redeploy the employee at the same or lower classification, or
    2. terminate the employment under section 29 of the PS Act. This could be done, for example, on the grounds that the employee is excess to requirements or has not performed satisfactorily.
  5. Section 38 of the PS Act requires a certificate from the Australian Public Service Commissioner (Commissioner) before an agency head can terminate the employment of an SES employee pursuant to section 29.
  6. A balance needs to be struck between an offer that gives the employee sufficient incentive and the requirement to ensure the proper use of public money.  Public confidence in the administration of the Australian Public Service may be damaged if an incentive to retire is out of step with community expectations.

Supporting an employee to make a decision about an offer

  1. It is good practice to help the employee make an informed decision by ensuring they have relevant information. This may include financial advice and career counselling. Agencies will need to ensure that any relevant terms in the employee's employment contract are met.

Incentive amount

  1. As a general rule, the standard non-SES redundancy formula of two weeks' pay per year of service, to a maximum of 48 weeks, is an appropriate reference point. Agency heads are to consult the Commissioner where a payment in excess of 48 weeks is contemplated.
  2. Service which counts for severance benefit purposes is defined in Clauses 24.7 to 24.10 of the Australian Public Service Enterprise Award 2015.
  3. In circumstances where the employee has long service and has reached minimum retirement age it is expected that a 50 per cent discount to the amount calculated using the above formula would be applied. The discount recognises that employees who have reached minimum retirement age will generally have access to significant Commonwealth-funded superannuation benefits on retirement.
  4. Where an employee has short service, it may be appropriate to enhance the standard payment in order to provide sufficient incentive to retire. Any enhancements to the standard formula are to be modest.
  5. The amount paid as the incentive cannot be less than that prescribed in the National Employment Standards (NES) at section 119(2) of the Fair Work Act 2009.

Salary for Incentive Purposes

  1. The employee's base salary is to be used when calculating the incentive to retire amount. It is inappropriate to include payments relating to motor vehicle allowances, performance pay, bonuses or other allowances.

Payment in Lieu of Notice

  1. Where it is not possible to provide adequate notice of termination of employment, or the agency head does not require the employee to work through the notice period, a payment in lieu of notice may be appropriate in addition to the incentive amount. Section 117(3) of the FW Act defines the notice period.
  2. Salary for payment in lieu purposes includes all entitlements the employer would have been liable to pay if the employee had worked through the notice period.

Re-engagement of a Section 37 Recipient

  1. Employees who retire with an incentive are subject to the same limitations on re-engagement as non-SES employees who leave the Australian Public Service voluntarily with a redundancy payment. These limitations are found in section 48 of the Australian Public Service Commissioner's Directions 2016.

SES cap

  1. Where an SES employee has retired under section 37 of the PS Act, consideration must be given to an adjustment to the agency's SES cap. It is expected that the SES cap will be reduced where an SES role is abolished. If the role is still required, there is generally no reduction in SES cap.

Templates

  1. Templates for offering an incentive payment to an employee and an acceptance letter are at Appendix A and Appendix B respectively.

Further information

  1. Agencies may contact the Staffing Policy team in the APSC for further information. The team can be contacted at staffingpolicy@apsc.gov.au or by telephone at (02) 6202 3857.

Appendix A – Retirement with an incentive – Sample letter of offer

Sensitive: Personal

[SES NAME]
[Address]

Dear [SES NAME]

I refer to our recent discussions concerning the options available to you regarding redeployment within this agency and the Australian Public Service (APS) more generally and the possibility of your retirement under section 37 of the Public Service Act 1999.

Under the provisions of section 37(1) of the Public Service Act 1999, I hereby give you notice that if you retire from the APS between today's date and no later than [DATE], you will be entitled to be paid a specified amount of $[INCENTIVE PAYMENT AMOUNT].

If you retire during the specified period, you will be deemed for all purposes to have been retired involuntarily from the APS as provided in section 37(2)(b) of the PS Act.

In accepting this offer please be aware that section 48 of the Australian Public Service Commissioner's Directions 2016, which deals with the engagement of persons who have received a redundancy benefit, has the effect of preventing a person who has accepted a specified amount under section 37 being engaged as an ongoing APS employee or as an SES employee for a certain period. In your case, this period has been calculated as [XX] weeks.

If you require clarification of any aspect of this offer, please contact [name], [phone number].

In order to proceed please advise in writing that these arrangements are acceptable to you.

Yours sincerely

 [AGENCY HEAD]
 [DATE]

 

Appendix B – Retirement with an incentive – Sample letter of acceptance

Sensitive: Personal

[AGENCY HEAD] [DEPARTMENT] [ADDRESS]

Dear [AGENCY HEAD]

I refer to your letter of [DATE] concerning retirement under section 37 of the Public Service Act 1999 and advise that the arrangements outlined therein are acceptable to me.

I understand that in accepting this offer of a payment as an incentive to retire I will become ineligible for engagement as an APS employee or as an SES employee for a period of [XX] weeks from the date of my retirement.

I will retire on [DATE].

Yours sincerely

[SES NAME]
[DATE]