CHAPTER 4
Consequential Reform
Dislocation benefit
4.1 A parliamentary career can be disruptive to a parliamentarian's working
life, particularly when a parliamentarian has to leave office involuntarily.
The Committee was told that in addition to providing for retirement, the
PCSS also makes provision for 'retrenchment' (leaving office involuntarily,
for example by loss of an election or party pre-selection).
4.2 The Committee's suggested reforms should reduce the current potential
for inequitable benefits among members, and should also assist in containing
costs. This section considers a consequential reform to the PCSS should
the PCSS be changed so as to focus on retirement provision: the introduction
of a dislocation benefit for parliamentarians.
4.3 The Committee was told that currently the PCSS is attempting to perform
too many functions. Dr FitzGerald said that:
It seems to me ... that the scheme is attempting to do too many
things. It has got aspects which appear to be covering not only the
needs of parliamentarians who go through to retiring age and then retire,
but also to have something of the character of a severance pay arrangement.
[1]
4.4 Dr FitzGerald went on to say that one of the PCSS' costliest features
is:
... giving the same pension to a relatively young member ...
regardless of age which is quite unusual. The purpose that aspect appears
to be intending to serve [severance payment] might be better met some
other way [2]
4.5 Mr Ray Stevens also identified the PCSS' multiple objectives as a
source of difficulty. In his view, one of the important original objectives
of the PCSS was to make provision for early loss of office. [3]
He said:
I think one of the problems, if you like, with the Commonwealth
parliamentary scheme is that its original objective was not restricted
to providing for retirement. [4]
4.6 The issue of a dislocation benefit was raised in submissions. The
Parliamentary Retiring Allowances Trust submitted that consideration should
be given, separately to superannuation, to a benefit for 'short-serving
members to re-establish themselves in non-parliamentary employment on
defeat at an election (or in pre-selection)'. [5]
4.7 While appreciating that the risk of loss of office (which follows
from electors' democratic right to choose representatives) is an inevitable
aspect of parliamentary life, the Committee notes the use of redundancy
payments in the wider community in respect of comparable situations. Mr
Stevens told the Committee that:
... in the private sector, the problem of somebody appointed
for a period losing their job unexpectedly in the short term would normally
be handled by means of a retrenchment payment. [6]
4.8 Similarly, Dr FitzGerald advised that the 'standard approach for
dealing with that [unexpected loss of employment] in the rest of the community
is redundancy pay arrangements'. [7]
4.9 The Committee understands that current severance benefits for Australian
Public Service (APS) officers covered by the APS General Employment Conditions
Award (GECA), which covers officers below the SES levels, are:
- a sum equal to two weeks salary for each completed year of service,
plus a pro rata payment for completed months of service since the last
completed year of service (GECA clause 11.4.7); and
- there is also a notice period, which is frequently taken as payment
instead of notice, of 28 days or (in the case of employees over the
age of 45 with at least five years continuous service) five weeks (see
GECA clauses 11.4.4-11.4.6).
4.10 SES officers employed permanently (rather than on a fixed-term basis,
see below), may receive a severance benefit at the discretion of the Public
Service Commissioner under section 76R of the Public Service Act 1922.
It is apparently usual for regard to be had to GECA in determining such
a benefit.
4.11 SES officers employed for a fixed term who are made redundant receive
may also receive a severance benefit at the discretion of the Public Service
Commissioner under section 76R of the Public Service Act 1922.
4.12 Both permanent and fixed-term SES officers who are made redundant
also receive financial counselling and out-placement counselling. [8]
The extent of counselling services provided to individual officers varies
on a case-by-case basis, depending on the officer's circumstances, and
the practices of different agencies. The Committee understands that financial
counselling and out-placement counselling are widely accepted forms of
assistance to senior public sector executives who are made redundant,
and are also used in the private sector.
4.13 The two parliamentarians who gave oral evidence during the inquiry,
Mr Robert McClelland and Mr Wilson Tuckey, supported the concept of a
dislocation payment. On a personal note, Mr McClelland MP said that the
availability of a payment should he lose office was crucial to his decision
to stand for Parliament:
Prior to entering Parliament I was a partner in a legal firm
having served in that firm for some 14 years. The decision to terminate
my legal career and enter Parliament was one which was not taken lightly.
Obviously a number of factors were considered but paramount was the
extent of disruption which would be caused to my family not only as
a result of absences but also in terms of financial security.... The
fact that I would have access to at least some funding [from access
to unpreserved parliamentary superannuation] at the end of my Parliamentary
career was therefore crucial in my decision to enter Parliament. [9]
4.14 As noted at the start of Chapter 3, a portion of the payment to
which Mr McClelland referred will be diminished as a result of the Government's
decision to introduce new preservation rules, if he continues in office
after 1 July 1999.
4.15 The Committee notes that the introduction of a dislocation benefit
for parliamentarians is opposed by some people. Mr Peter Szalay, a member
of the public, argued against such a benefit, as follows:
From my perspective as a private citizen and an elector and an
employed person, that [the loss of office in a double dissolution election]
is one of the risks I would see associated with a personal choice [of
vocation] made by the member of parliament concerned. [10]
4.16 It was put to the Committee that there is currently a general degree
of uncertainty in relation to employment, and that therefore parliamentarians
did not merit any advantageous treatment relative to the general community
in respect of this uncertainty. It was also argued that parliamentary
office is, in fact, more secure than many or even most forms of employment.
4.17 Mr Jim Collins, a member of the public, submitted with respect to
the justification of parliamentary superannuation levels on the basis
of the uncertainty of parliamentary office, that:
If such an argument had some credibility in the past, it is most
certainly not the case in the current economical [sic] climate. There
would be few, if any, private sector employees who now enjoy the luxury
of guaranteed full time permanent employment, and few, if any, older
employees 50 years and older, who would feel confident of finding employment
should they loose [sic] their job. [11]
4.18 Mr Don Brown, a member of the public having a background in superannuation
and financial services, said that it was now normal in the general community
for people to have several medium term jobs, or careers, over their worklife.
[12] Mr Brown submitted that:
...it is no longer valid to provide a pension to a parliamentarian,
or any other person, after 8 years of service because of supposed difficulty
in finding another role. This is a difficulty which faces most of the
community. [13]
4.19 Mr Szalay submitted that parliamentary employment is more secure
than the employment of most ordinary employees, as parliamentarians are
not subject to 'arbitrary dismissal or retrenchment at any point in time'
unlike ordinary employees. [14]
4.20 Mr Paul Raffaele, Roving Editor of the Reader's Digest, told the
Committee that:
4.21 The Committee notes these opposing views and considers that a dislocation
benefit, and financial counselling and out-placement counselling for former
parliamentarians, should be matters for consideration for the Remuneration
Tribunal. The Tribunal should take into account the disruption of involuntary
termination to parliamentarians' working lives, and the fact that that
such arrangements are common in the general community. A dislocation benefit
would, as Mr McClelland MP expressed it, 'assist with the transition back
into private life'. [16]
Future determination of parliamentary remuneration
4.22 The question of which body should have responsibility for determining
parliamentary benefits, including the proposed involuntary termination
benefit, is important at the current time, and would have even greater
importance if a total remuneration package approach were to be adopted
in the future.
4.23 The Remuneration Tribunal currently deals with the electorate allowance
and other benefits for members and office holders of Parliament. The Remuneration
Tribunal does not deal with parliamentary salary (which is adjusted pursuant
to statute by reference to a public service pay level), nor with parliamentary
superannuation (see Chapter 1). However, the Remuneration Tribunal does
have expertise in these fields, as it has in 'the course of carrying out
its duties on remuneration and allowances ... examined and commented on
the impact on remuneration of present superannuation arrangements'. [17]
4.24 Senator Kernot told the Committee, speaking in relation to the proposed
dislocation benefit, that:
I would be very happy for the Remuneration Tribunal to pick up
other areas [in addition to its current responsibilities].... we need
to grapple with the wider issue of appropriate remuneration overall;
that is why the Remuneration Tribunal is better placed to do it. [18]
4.25 The Committee is of the view that the Remuneration Tribunal may
be the most suitable body to consider the form which a dislocation benefit
should take, and to determine the amount of such a benefit if it is established
.
4.26 Given the suggestions in evidence that there should be no access
to benefits before age 55, the Committee believes that the Remuneration
Tribunal should consider establishing a dislocation benefit, independent
of the PCSS, for all parliamentarians who retire involuntarily.
4.27 People can spend a lot of money and time fighting elections. The
Committee considers that there should be a benefit provided for those
who enter parliament at an early age and are subsequently defeated. In
particular, the Committee believes there should be some recognition for
those affected by the volatilities of marginal seats, especially as these
people may well be of that special quality which it is clearly in the
public interest to attract into Parliament.
[Return to Table of Contents]
Footnotes
[1] Evidence, Dr Vincent FitzGerald,
p. 153.
[2] Evidence, Dr Vincent FitzGerald,
pp. 153-154.
[3] Evidence, Mr Ray Stevens, pp. 159,
160. On the establishment of the PCSS see paragraph 1.3 above.
[4] Evidence, Mr Ray Stevens, p. 159.
[5] Submission No. 43, Parliamentary
Retiring Allowances Trust, p. 4.
[6] Evidence, Mr Ray Stevens, p. 160.
[7] Evidence, Dr Vincent FitzGerald,
p. 157.
[8] Out-placement counselling is a service,
provided by professional consultants, whereby an employee who has been
made redundant is assisted to find new employment.
[9] Submission No. 24, Mr McClelland
MP, p. 1.
[10] Evidence, Mr Peter Szalay,
p. 190.
[11] Submission No. 7, Mr J.
Collins, p. 1.
[12] Submission No. 11, Mr D.
Brown, p. 1.
[13] Submission No. 11, Mr D.
Brown, p. 1.
[14] Submission No. 18, Mr Peter
Szalay, p. 2.
[15] Evidence, Mr Paul Raffaele,
p. 106..
[16] Evidence, Mr Robert McClelland
MP, p. 139.
[17] For this quotation, and
the foregoing information on the Remuneration Tribunal's functions, see
Submission No. 45, Remuneration Tribunal, p. 1.
[18] Evidence, Senator Cheryl
Kernot, p. 180.
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