Circular No 2004/4: Payments in special circumstances under section 73 of the Public Service Act 1999

Please note: This document is for reference purposes only and is no longer considered by the APS Commission to be current.

It may contain good practice advice and/or advice on the transitional arrangements between the 1922 and 1999 Public Service Acts.

The purpose of this circular is to advise Australian Public Service (APS) agencies on:

the provisions of section 73 of the Public Service Act 1999 (PS Act) in relation to the making of special payments; and
new reporting requirements relating to section 73 payments.

2. This circular replaces Public Service Act Implementation Advice No. 30, dated 3 December 1999 and APS Commission Circular 2003/1, dated 1 April 2003 and has been prepared in consultation with the Department of Finance and Administration (Finance).

Scope of section 73 of the PS Act

3. Section 73 of the PS Act allows the Public Service Minister to authorise the making of payments to a person in special circumstances that relate to, or arise out of:

the payee's employment by the Commonwealth; or
another person's employment by the Commonwealth.

4. The Prime Minister, as Public Service Minister, has delegated to APS Agency Heads his power to authorise the making of payments under section 73 of the PS Act. It is important to note, however, that Agency Heads can only exercise this power personally—it is not able to be sub-delegated.

5. Under the terms of section 73 of the PS Act:

Payments may be specific amounts or periodical payments and may be authorised even though the payments would not otherwise be authorised by law or required to meet a legal liability.
An authorisation cannot be made if it would involve, or would be likely to involve, a total amount of more than $100,000.
Conditions can be attached to any payment that is authorised and if a condition is breached, the payment will be able to be recovered by the Commonwealth in a court of competent jurisdiction.
It is suggested that legal advice be sought if conditions are to be attached to any such payment.

6. The provisions set out in section 73 of the PS Act are broadly similar to those contained in section 33 of the Financial Management and Accountability Act 1997 (FMA Act) which makes provision for act of grace payments. Advice on act of grace payments is available on Finance's website at: http://www.finance.gov.au/finframework/fc_2006_05.html.

This circular advises that payments in special circumstances relating to APS employment matters should be made under section 73 of the PS Act, rather than the act of grace provisions of the FMA Act.

Appropriations

7. Under subsection 73(6) of the PS Act, 'payments under this section are to be made out of money appropriated by the Parliament for the purposes of this section'.

8. Since the 1999-2000 financial year, Appropriation Acts have made provision for broad, outcome-based appropriations rather than one-line appropriations. As section 73 payments are made because of some special circumstance relating to a person's Commonwealth employment, it is considered that they can be made from an agency's general appropriation covering the purposes of the payment.

9. However, consideration is being given to clarifying the current arrangements in the light of a recent audit by the Australian National Audit Office (ANAO) on Compensation and Debt Relief in Special Circumstances (Audit Report No 35, 2003-04).

Reporting requirements

10. PS Act Implementation Advice No.30 suggested that Agency Heads:

maintain a suitable register of section 73 payments each year; and
ensure that payments made under section 73 of the Act during the financial year are reported in the annual financial statements of the agency concerned.

11. As a result of the recommendations contained in ANAO Audit Report No. 35, 2003-04, the Financial Management and Accountability Orders (Financial Statements for reporting periods ending on or after 30 June 2004) have been amended to require agencies' financial statements to include a note that shows the number and aggregate amount of any payments made under section 73 of the PS Act during each reporting period. Nil returns must also be reported. For further information see http://www.finance.gov.au/ace/fmo_s_2003-2004.html.

Considerations relevant to the exercise of the discretion to make special payments

12. Section 73 of the PS Act refers to the making of payments because of special circumstances that relate to, or arise out of, the payee's employment or another person's employment by the Commonwealth.

13. The very nature of 'special circumstances' requires that the circumstances of each case be taken into consideration in determining whether to authorise payment under section 73, and also indicates that the section would be used only in a limited number of instances. As with the exercise of all powers under the PS Act, an Agency Head will need to have regard to the PS Act framework, in particular the APS Values, in deciding whether to authorise a section 73 payment. Section 44 of the FMA Act, which requires the efficient, effective and ethical use of Commonwealth resources, will also be a relevant consideration for those APS agencies covered by the FMA Act.

14. Without taking away from the need for decision-makers to consider the circumstances of each case, the following broad guidelines are provided to assist decision-makers' considerations:

A payment under section 73 might be made where the particular circumstances of a case lead to the publicly defensible conclusion that there is a moral obligation on the Commonwealth to make the payment.
Payments under section 73 would not generally be appropriate in order to establish a scheme of payments to shore up program or legislative deficiencies. In these circumstances, the expected solution would be to remedy the program or legislative deficiencies.
Care must be taken by decision-makers to consider the precedent effect of authorising a payment. That is, whether the payment will extend beyond what are properly regarded as special circumstances.
If a claim in relation to Commonwealth employment is made on the basis of a legal liability, it would generally be more appropriate for the claim to be considered under the Commonwealth policy on settling claims against the Commonwealth which is set out in Appendix C of the Attorney-General's Legal Service Directions, Directions on Handling Monetary Claims (issued under the Judiciary Act 1903), which are available on the Attorney-General's Department's website at http://law.gov.au/Archived/agd/olsc/Legal_Services_Directions.htm.
If legal proceedings (including potential legal proceedings) are instituted against an employee for a work-related incident it would normally be appropriate for a request for assistance for legal expenses to be considered under the relevant Commonwealth policy which is set out in Appendix E of the Attorney-General's Legal Services Directions, Directions on Assistance to Commonwealth Employees for Legal Proceedings, which are available on the Attorney-General's Department's website at http://law.gov.au/Archived/agd/olsc/Legal_Services_Directions.htm.
Similarly, in circumstances where detriment has been caused by the defective administration of a Commonwealth agency, payments under the scheme for 'Compensation for detriment caused by defective administration' may be more appropriate. Finance Circular 2001/1 includes details of this scheme – see http://www.finance.gov.au/finframework/finance_circular_no__2001_01.html.
Where there is not a clear case of defective administration or legal liability, however, and the Agency Head considers that special circumstances exist, payment might be authorised under section 73 of the PS Act.

Use of the provision in redundancy situations

15. In the APS Commission's view, particular care should be taken if an Agency Head is contemplating using the power under section 73 of the PS Act to 'top up' the redundancy payment owed to an excess employee under an agency's certified agreement or under an individual Australian Workplace Agreement.

16. The Government's Policy Parameters for Agreement Making in the APS require that agreements are to include compulsory redeployment, reduction and retrenchment provisions, with any changes not to enhance existing redundancy arrangements. The use of a section 73 payment in these circumstances is likely to contravene the Government's intentions as set out in the policy parameters.

17. It should be noted that there is provision under the Policy Parameters for an agency Minister, in consultation with the Minister Assisting the Prime Minister for the Public Service, to approve separate financial incentives to resolve major organisational change. If it is considered that the standard redundancy entitlements are inadequate to deal with a particular situation, it might be more appropriate to seek the necessary approval under these arrangements, rather than supplement an employee's entitlements by way of a section 73 payment. Further information on the criteria that agencies will need to satisfy when seeking the necessary ministerial approval for a separate financial incentive in these circumstances is included in the Supporting Guidance for the Policy Parameters, which are available at http://www.workplace.gov.au.

Further information

18. Further information is available from the APS Commission's Employment Policy Adviceline—by phone on (02) 6202 3859 or e-mail employmentadvice@apsc.gov.au. It may be appropriate for more complex or sensitive queries to be dealt with in writing.

David Bohn
Group Manager
Policy and Employment Group

October 2004