Remuneration Policy

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1. Purpose

This Policy sets out how [Organisation] designs, governs, determines, adjusts, defers, pays and discloses remuneration. Its purpose is to make sure that remuneration:

2. Scope and application

This Policy covers all forms of remuneration, regardless of where, or from whom, it is sourced (CPS 511 para 20(q)), including fixed pay, superannuation, allowances and benefits, short- and long-term variable remuneration, commissions and sales incentives, retention, sign-on and severance payments. It applies to every person who is (CPS 511 para 22(b)):

2.1 Commencement of CPS 511

The current CPS 511 was made by determination No. 3 of 2023 and commenced on 1 January 2024, replacing the 2021 version. CPS 511 first applied to SFI ADIs (and groups headed by them) on 1 January 2023; to SFI general insurers, life companies, private health insurers and RSE licensees on 1 July 2023; and to all other APRA-regulated entities on 1 January 2024 (para 10). The disclosure requirements apply from an entity's first full financial year commencing on or after 1 January 2024 (para 11). CPS 511 does not apply to variable remuneration where the opportunity to earn it arose before the relevant commencement date (para 12).

3. Key definitions

These definitions are taken from CPS 511 para 20 and are used in the same way throughout this Policy and the RiskFA Consequence Management Framework.

4. Objectives of the remuneration framework

[Organisation]'s remuneration framework must (CPS 511 para 21; para 74 for non-SFIs):

5. Governance

5.1 The Board

• The Board is ultimately responsible for the remuneration framework and its effective application (CPS 511 paras 23, 76).
• The Board approves this Policy (paras 24, 77).
• The Board approves variable remuneration outcomes for persons in specified roles: individually for senior managers and executive directors, and on a cohort basis for highly paid material risk-takers, other material risk-takers and risk and financial control personnel (paras 52, 87).
• The Board retains overriding discretion at each decision point to adjust variable remuneration downwards, to nil if appropriate (para 33(c)).

5.2 Board Remuneration Committee (required for SFIs)

For SFIs, CPS 511 requires the Board to establish a Board Remuneration Committee (paras 25–32). CPS 511 does not require a Board Remuneration Committee for non-SFIs; a non-SFI may still choose to have one, and should check CPS 510 / SPS 510 and any group requirements.

5.3 Roles and responsibilities

6. Remuneration structure

7. Variable remuneration design

Every variable remuneration arrangement must be designed to meet the objectives in section 4 and must incorporate (CPS 511 para 33; para 78 for non-SFIs):

7.1 Material weight to non-financial measures

• For SFIs, the determination of each component of performance-related variable remuneration must give material weight to non-financial measures (CPS 511 para 34(a)). CPS 511 does not prescribe a percentage; [Organisation] sets non-financial measures at [at least X%] of each scorecard and explains its approach in its disclosures (Table 1 rows 9 and 12).
• No component of variable remuneration may be entirely dependent on share price performance or profitability (CPS 511 footnote 12 to para 34).
• Non-financial measures include, for example, risk and compliance outcomes, audit and regulatory findings, customer outcomes and complaints, conduct, culture and people measures, and progress on remediation. They must be measurable, evidence-based and capable of reducing the outcome, not only increasing it.
• Each component of variable remuneration must be adjusted downwards, potentially to nil, for adverse risk and conduct outcomes based on clearly defined risk criteria (para 34(b)).

7.2 Conflicts of interest

[Organisation] must take appropriate steps to assess and mitigate conflicts of interest in the design of its remuneration arrangements, including conflicts arising from service contracts (CPS 511 paras 40, 83). Every new or materially changed plan is reviewed by [Risk and Compliance] for conflicts, including the risk that it rewards outcomes that harm customers, before approval. Appendix C is the design checklist.

8. Performance assessment and scorecards

• Every eligible person has a scorecard that sets out financial and non-financial objectives and the expected behaviours, agreed at the start of the performance period.
• Risk and conduct gateway. A person found to have engaged in misconduct, or rated [Unsatisfactory] on risk and behaviour, receives no variable remuneration for the year unless the [Board Remuneration Committee] decides otherwise for recorded reasons.
• Risk and conduct modifier. After the scorecard result is calculated, a modifier of [0% to 100%] is applied, based on the person's risk and conduct assessment and the outcomes in their area of responsibility. The modifier can only reduce the outcome.
• Pool adjustment. Variable remuneration pools for the organisation and each business unit are adjusted for risk outcomes, on the CRO's assessment, before individual awards are made.
• Link to consequence management. Variable remuneration outcomes must link to and be supported by the performance management system, the [Code of Conduct] and the RiskFA Consequence Management Framework (CPS 511 para 46, SFIs; good practice for non-SFIs). Every substantiated conduct matter is considered in the next remuneration decision.
• Calibration. Outcomes are calibrated across business units and checked for consistency and bias before approval.

9. Risk and conduct adjustment: malus, clawback and in-period adjustment

9.1 Adjustment criteria

[Organisation] applies its variable remuneration adjustment tools when any of the following criteria are met (CPS 511 para 37; para 80 for non-SFIs). These are minimum criteria; [Organisation] may add others.

9.2 Adjustment rules

• When any criterion is met, [Organisation] must take reasonable steps to adjust variable remuneration downwards. The total downward adjustment must be proportionate to the severity of the risk and conduct outcome (CPS 511 paras 38, 81). The RiskFA Consequence Management Framework (Appendix A) sets the normal ranges.
• Malus applies to every person's variable remuneration arrangement (CPS 511 paras 35, 79).
• Clawback (SFIs). The variable remuneration of every senior manager, executive director and highly paid material risk-taker must be subject to clawback for at least two years from the date of payment or vesting, whether or not the person's employment or engagement has ended (CPS 511 para 36). [Organisation] applies a clawback period of [two years / longer].
• Clawback (non-SFIs). Clawback must be included where appropriate (CPS 511 para 78(c)). [Organisation] applies clawback to [senior managers and executive directors] for [two years] from payment or vesting.
• No vesting during an investigation. Where a person is under investigation for any of the criteria in section 9.1, their variable remuneration must not vest until the investigation is closed (CPS 511 paras 39, 82). The same hold applies to payment of unpaid awards.
• Adjustments may be applied to individuals, to teams, or collectively to the executive or a business unit pool where a failure is shared.
• Adjustments are applied in this order unless the Board decides otherwise: in-period adjustment of the current year's award; malus of unvested deferred awards; clawback of paid or vested awards.
• Every plan rule, offer letter and award notice must state that awards are subject to this Policy, Board discretion, in-period adjustment, malus and (where it applies) clawback.

9.3 Decision process

1. Trigger. A potential trigger is identified through the RiskFA Consequence Management Framework, incident and issue reporting, audit or regulator findings, or the CRO's risk assessment.
2. Assessment. The CRO and Chief People Officer assess whether a criterion is met, the people accountable, and their culpability, using Appendix B.
3. Recommendation. Management recommends the tool and amount to the [Board Remuneration Committee], with the Board Risk Committee's input.
4. Decision. The Board Remuneration Committee decides or recommends to the Board, in line with section 5.
5. Implementation and record. [Reward] applies the adjustment, notifies the person in writing with reasons, records it, and reports it for disclosure (CPS 511 paras 72–73).

10. Deferral

10.1 CPS 511 deferral (SFIs)

An SFI must defer variable remuneration as follows (CPS 511 para 41):

10.2 Non-SFIs

CPS 511 does not mandate deferral for non-SFIs, except that a foreign ADI, Category C insurer or EFLIC above the SFI asset threshold must defer the variable remuneration of highly paid material risk-takers as in section 10.1 (para 84). Non-SFIs must still design payout and vesting schedules that are sensitive to the time horizon of risk (para 78(b)). Accountable entities must also meet FAR (section 11).

10.3 Leavers and acceleration

• [Organisation] must not accelerate the vesting of unvested variable remuneration for a person in a specified role who has left, except in the specific exceptions in this Policy, which are limited to death, serious incapacity, serious disability and serious illness (CPS 511 paras 47, 86 and footnotes 13, 23).
• Unvested variable remuneration that a leaver keeps is subject to the same vesting conditions, malus and clawback as for current employees.
• [Treatment of good and bad leavers, for example: resignation forfeits unvested awards; redundancy keeps a pro rata portion on the original schedule.]

11. FAR deferred remuneration and how it interacts with CPS 511

Accountable entities under FAR must, for each accountable person (FAR s25(1)):

12. Payment, vesting and remuneration outcomes

• Variable remuneration outcomes must align with performance and risk outcomes and reflect the appropriate use of the adjustment tools (CPS 511 paras 44, 85).
• An SFI may pay or vest variable remuneration only if doing so supports the framework objectives, and is justified by the effectiveness of risk management of the entity and the relevant business unit, and by the performance of the person, the business unit and the entity (para 45). Before each vesting date, the CRO confirms there is no known matter that should prevent vesting, and People and Culture confirms there is no open investigation (para 39).
• Outcomes for specified roles are approved as set out in section 5 (paras 50–52, 87).

13. Remuneration for risk and financial control personnel

The variable remuneration arrangements for risk and financial control personnel (risk management, compliance, internal audit, financial control and actuarial control) must (CPS 511 para 53):

14. Sales incentives, conflicted remuneration and frontline staff

14.1 Financial product advice: conflicted remuneration

An AFS licensee and its representatives must not accept conflicted remuneration: any benefit, monetary or non-monetary, given to a licensee or representative who provides financial product advice to retail clients that, because of its nature or the circumstances in which it is given, could reasonably be expected to influence the choice of financial product recommended or the advice given, other than a benefit given by the retail client (Corporations Act 2001 s963A).

14.2 Mortgage brokers: best interests duty and conflicted remuneration

• A credit licensee that is a mortgage broker, and its credit representatives, must act in the best interests of the consumer in relation to credit assistance and, where there is a conflict, give priority to the consumer's interests (National Consumer Credit Protection Act 2009 ss 158LA, 158LB, 158LE, 158LF).
• Conflicted remuneration is any benefit given to a licensee or representative who provides credit assistance (or acts as an intermediary) that could reasonably be expected to influence the credit assistance provided, or whether or how they act as an intermediary (s158N). Where the licensee or representative is a mortgage broker or mortgage intermediary, licensees and credit representatives must not accept it, and employers, credit providers and mortgage intermediaries must not give it, in the circumstances prescribed by the regulations (ss 158NB–158NF). [General Counsel] must confirm the prescribed circumstances in the National Consumer Credit Protection Regulations 2010.
• [Organisation] reviews broker, aggregator and lender payment arrangements, and its own staff incentives in mortgage broking, against these rules.

14.3 Banking frontline staff (industry practice)

The Australian Banking Association's Retail Banking Remuneration Review, conducted by Stephen Sedgwick AO (final report 2017, with a final implementation review published in 2021), recommended that banks remove the direct link between sales and variable rewards for retail frontline staff and their managers and assess performance on whole-of-role measures. This is an industry commitment, not a legal requirement. [Organisation] applies it as follows:

14.4 Third-party service providers

Where third parties (for example brokers, introducers, distributors, advisers or outsourced sales teams) are paid by [Organisation], their compensation arrangements are assessed for material conflicts with the framework objectives, and the conflicts are mitigated through contract terms, monitoring and the right to adjust payments (CPS 511 para 22(c)). Material arrangements are reported to the [Board Remuneration Committee] [annually].

15. Prohibited practices

Except where permitted by law, [Organisation] must not pay remuneration through vehicles or methods that undermine the effect or intent of CPS 511 (paras 61, 89). In particular:

16. Link to the Consequence Management Framework

This Policy and the RiskFA Consequence Management Framework work together:

17. Disclosure

17.1 CPS 511 public disclosure

• [Organisation] must make clear, comprehensive, meaningful, consistent and comparable public disclosure on its remuneration framework and practices (CPS 511 paras 63, 91).
• Disclosures are published on [Organisation]'s website, as a standalone document or clearly identified within other disclosures (paras 64, 92), for each full financial year (paras 65, 93).
• They are published as soon as possible after [Organisation] lodges its annual financial statements with ASIC, and no more than six months after the end of the financial year (paras 66, 94).
• SFIs disclose qualitative information on the framework (Table 1) and quantitative information on remuneration outcomes (Table 2), special payments (Table 3) and deferred and adjusted variable remuneration (Table 4). Tables 2, 3 and 4 must be disclosed in a machine-readable format such as CSV (para 64). A cohort of fewer than five people (other than the CEO) need not be disclosed (para 67(b)).
• Non-SFIs disclose qualitative information on governance, the design and structure of the framework, and the remuneration policy, including how consequence management is applied (paras 96–98). APRA may require a non-SFI to make the quantitative disclosures (para 95).
• Within a group, an APRA-regulated entity need not disclose separately if the Head of the group discloses on a Level 2 or Level 3 basis, unless APRA determines otherwise (para 7).

17.2 Listed companies: remuneration report

• A listed company's directors' report must include a separately identified remuneration report covering, among other things, Board policy for the remuneration of key management personnel and its relationship to company performance (Corporations Act 2001 s300A).
• A resolution to adopt the remuneration report must be put to the vote at the AGM; the vote is advisory only (s250R(2)–(3)).
• If at least 25% of votes cast are against the report at two consecutive AGMs, a spill resolution must be put at the second AGM; if it passes, a spill meeting must be held within 90 days after it is passed (ss 250U, 250V, 250W(2)).

18. Review of the remuneration framework

• [Organisation] reviews compliance of the remuneration framework with CPS 511 at least annually (CPS 511 para 54, SFIs).
• The effectiveness of the framework is comprehensively reviewed at least every three years by operationally independent, appropriately experienced and competent persons (para 55, SFIs). The review assesses compliance with the framework objectives, whether the framework operates as intended, whether its design is fit for purpose, and the alignment of remuneration outcomes with performance and risk outcomes (para 57).
• Results are documented and reported to the [Board Remuneration Committee] in a timely way, and the Committee ensures findings are addressed (para 56).
• Where there is a material change to size, business mix or complexity, [Organisation] considers whether the framework needs to be amended or reviewed at that time (para 58).
• Non-SFIs are not subject to paras 54–58, but should review the framework at least [every two to three years] as good practice.

19. Records

• [Reward] keeps records of scorecards, risk and conduct assessments, CRO input, Committee and Board decisions, adjustments, deferral and vesting, leaver treatment and special payments, for at least [7 years].
• Records are sufficient to support the CPS 511 disclosures, FAR notifications and the annual compliance review.
• Personal information is handled under the [Privacy Policy].

20. Compliance with this Policy

Breaches of this Policy, including paying or vesting remuneration without the required approvals or adjustments, are recorded as incidents under the RiskFA Incident & Issues Management Standard, assessed for regulatory notification, and managed under the RiskFA Consequence Management Framework. Exceptions to this Policy require the approval of the [Board Remuneration Committee] and must never breach CPS 511, FAR or the law.

21. Related documents

• the RiskFA Consequence Management Framework, [Code of Conduct] and [Performance Management Policy]
• the RiskFA Risk Management Framework, the RiskFA Risk Appetite Statement and [Incident & Issues Management Standard]
• [Board Remuneration Committee Charter], [Securities Trading Policy], [FAR Accountability Policy] and [Fit and Proper Policy]
• [Variable remuneration plan rules] and [Annual remuneration disclosures]
• APRA: CPS 511 Remuneration and CPG 511 Remuneration; CPS 510 / SPS 510 Governance; CPS 220 / SPS 220 Risk Management
• FAR: Financial Accountability Regime Act 2023; APRA and ASIC, Financial Accountability Regime: Information for accountable entities (July 2024; ASIC RG 279)
• Corporations Act 2001 Part 7.7A Division 4 and ss 250R, 250U–250W, 300A; National Consumer Credit Protection Act 2009 Part 3-5A; Fair Work Act 2009
• Australian Banking Association, Retail Banking Remuneration Review (Sedgwick, 2017) and final implementation review (2021)

Appendix A. CPS 511 requirement map

Use this map to show where each CPS 511 requirement is met. Paragraph numbers are from CPS 511 (determination No. 3 of 2023). 'All' means SFIs and non-SFIs.

Appendix B. Variable remuneration adjustment decision template

Appendix C. Scorecard and plan design checklist

• The plan supports the remuneration framework objectives (section 4) and the business plan, strategy and risk appetite.
• Non-financial measures carry material weight, are evidence-based, and include risk, compliance, customer and conduct outcomes (SFIs: CPS 511 para 34(a)).
• No component depends entirely on share price performance or profitability (CPS 511 footnote 12).
• Measures cannot be met by taking risk outside appetite or by harming customers; each measure has been tested for unintended incentives.
• A risk and conduct gateway and a downward-only modifier apply.
• Board discretion, in-period adjustment, malus and (where required) clawback are written into the plan rules and offer documents.
• Payout and vesting schedules reflect the time horizon of the risks the role takes.
• Deferral meets CPS 511 (SFIs) and FAR (accountable persons), whichever is stricter for each person.
• No acceleration of vesting for leavers except death, serious incapacity, serious disability or serious illness.
• Risk and financial control personnel are measured on their function, not on the business they control.
• Frontline incentives are whole-of-role, with no direct link to sales volumes, and comply with the conflicted remuneration bans where they apply.
• Third-party compensation arrangements have been assessed for conflicts.
• No hedging and no indemnity or insurance against adjustments.
• Outcomes can be calculated, evidenced and disclosed (CPS 511 Tables 1–4 for SFIs; paras 96–98 for non-SFIs).
• Risk and Compliance have reviewed the plan, and the Board Remuneration Committee (or the Board) has approved it.