We are a relatively new business which has grown quite rapidly in recent times and we are now looking to formalise how we pay our staff. Can you please advise on how we can determine what the appropriate salary or wage rates are for our employees?
There are a number of ways in which an organisation can determine what rates to pay their employees. This will depend on a number of factors, including whether the employee is covered by a specific industrial instrument, such as a modern award or enterprise agreement (which will regulate the employment relationship and rates of pay), or whether in fact the employee is award/agreement free and has no such regulation.
Most professional employees and managers are award free; however there are some exceptions to this rule: professional engineers, professional scientists, architects and IT professionals are covered by the Professional Employees Award. Senior managers in the financial services sector may also be covered by the Banking, Finance and Insurance Award.
For those that are award covered, there are numerous resources on the Fair Work Ombudsman website, such as pay and conditions guides and other tools to assist in determining the appropriate rate of pay for the duties being performed.
For more information, please contact the Fair Work Ombudsman.
For award/agreement free employees (this will be the majority of professional employees) the methods of determining salary and wage levels include:
- Job ranking – ranking each role within an organisation against each other usually according to level of job difficulty
- Point System – a quantitativeapproach to determining pay by deciding on the factors which are compensable and then ascertaining which of these factors is present in the relevant jobs
- Market Comparison – establishing rates according to what competing organizations or other organizations within the same industry pay their employees. Salary surveys are generally the most effective ways to ascertain industry specific pay rates. Generally a benchmark will be set on a particular job based on information gained from the salary surveys
- Performance related – incentive pay for individuals that rewards employees based on the idea that there are different levels of contribution across an organization
- Skills related – paying an employee for the level of skill they have including depth of skill, type of skills and capabilities that they have and are able to utilize