Remuneration

• We have a number of employees working under different modern awards. How can I be sure that I am paying them correctly, especially when overtime and penalty rates are involved?
• We are looking at introducing salary packaging as a benefit to employees. What things do we need to consider?
• What is salary packaging?
• 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?
• What is the difference between a salary and wages?
• We have accidentally overpaid someone for the last 3 months, are we able to get the amount in overpayment back?
• Where do I access information on industry salary levels?

We have a number of employees working under different modern awards. How can I be sure that I am paying them correctly, especially when overtime and penalty rates are involved?

The Fair Work Ombudsman’s website has a section devoted to pay. It includes an application used for determining rates as well as deciphering award wages. Please visit the following link www.fairwork.gov.au

Please also refer to the Pay section of the Fair Work Ombudsman website for more frequently asked questions relating to remuneration and associated issues.

We are looking at introducing salary packaging as a benefit to employees. What things do we need to consider?

When introducing a salary packaging option to employees, there are a number of steps you will need to take to ensure the process is well implemented. Some things to consider are:

• Have a clear understanding of current remuneration and benefit arrangements offered by the organisation
• Discuss the possible introduction with the tax and/or finance team in your organisation to get their advice and support
• Develop a fully costed proposal that outlines the positives and negatives of introducing remuneration packaging including benefits to be offered, how the administration will be handled and a detailed communication program
• Seek approval from senior management for program introduction
• Find a suitable outsourced provider to handle the administrative processes (if applicable)
• Work through the communications program and ensure employees understand the issues associated with remuneration packaging

What is salary packaging?

Salary packaging offers employees the flexibility to structure their remuneration in a way that reduces the amount of tax they pay with limited cost increases for the employer.

For more information, please refer to our information sheet and checklist on salary packaging.

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

What is the difference between a salary and wages?

Wages are generally paid on an hourly basis. The amount paid per period changes based on the number of hours worked and whether overtime or penalty rates are included.

A salary is an annual amount commonly paid either fortnightly or monthly. In most instances the salary amount does not change even if the hours worked in a particular week vary.

We have accidentally overpaid someone for the last 3 months, are we able to get the amount in overpayment back?

If an overpayment has occurred, in order to deduct any amount from an employee, you must ensure that written consent is given by the employee. The only deductions that can legally be made from an employee are those pertaining to PAYE income tax deductions. Employers need to mindful that there are special rules regarding the deduction or withholding of monies from workers’ wages.

When notifying employees of overpayments, or where an employee does not consent to a deduction being made, it is a good practice to explain that an administrative error has taken place in processing their pay but, as a sign of good faith, these amounts will not be recouped. Employees should however, be notified that their rate of pay will be reduced to reflect the correct amount in future pay cycles. It is often useful to point to the particular source of wage information applicable to them (e.g. modern award, enterprise agreement, contract of employment etc.) to assist in explaining the correct rate of pay.

Where do I access information on industry salary levels?

Remuneration packages should be benchmarked against external market rates as well as internal rates which are paid to those employed at the same level within the organisation.

To establish what the market rates are for specific job roles there are two main sources of information:

• Recruitment agencies
• Published salary guides.

A recruitment agency can provide advice about current market rates. Even if your organisation does not use a recruitment agency, they still may be willing to provide suitable information, particularly if they are interested in establishing a relationship with your organisation.

There are a number of salary guides freely available online. Particularly useful guides are those provided by some of the larger recruitment organisations. They will provide a snapshot of salaries and employment market trends across Australia in a number of industries. The guides are designed to assist with decision making by providing a market overview, as well as the salaries companies have paid for positions across Australia within the preceding 12 months.