Your easy guide to paying employees
Types of pay and rates
Gross pay — also sometimes called “gross wage”— refers to an employee’s compensation without deductions for taxes and other obligations.
Net pay — or “take-home pay”— is an employee’s total income after all deductions from their pay slip.
In Australia, there is a defined adult rate minimum wage for workers aged 21 and older. The only way that an employer can pay less than the minimum wage is if they have junior employees under the age of 21, their employees are in a registered training arrangement like an apprenticeship, or they’re on a supported wage.
The junior rate is the minimum wage for workers under 21. It is usually defined in the employees’ industry or occupation award or agreement and is a percentage of the adult rate. For example, an 18 year old may be entitled to 70% of the adult pay rate. If there aren’t junior rates specified in the award or agreement, then the adult rate applies.
What entitlements and wages are available to employees?
Factors like an employee’s age, industry, qualifications, work duties and responsibilities impact their wages and entitlements.
National employment standards (NES)
There are 11 NES entitlements, which are the minimum entitlements that companies need to provide to all employees:
maximum weekly hours
requests for flexible working arrangements
parental leave or related entitlements
offers and requests to transition to permanent employment from casual employment
compassionate leave, personal and carer’s leave and unpaid family and domestic violence leave
long service leave
community service leave
notice of termination and redundancy pay
Awards are legal documents that detail the minimum pay rates and employment conditions for those working in that sector. They can apply to both employers and employees, depending on the industry, and there are more than 100 industry or occupation awards that cover the majority of employees in Australia.
An employer may have more than one type of award. For example:
Clean and Green is a small business that offers both housecleaning and landscaping. The Cleaning Services Award would cover the cleaning staff, and the Gardening and Landscaping Services Award would cover the landscapers.
Enterprise agreements are similar to awards, but they apply to a specific business or businesses, superseding any award agreement that is currently in place.
An employer and two or more employees can create an enterprise agreement to address the needs of the business and the employees. The Fair Work Commission assesses all agreements to make sure they comply with the Fair Work Act 2009.
The rate of pay under the enterprise agreement can’t be less than under the relevant award or the national minimum wage.
All Australian employees are entitled to the minimum wage, including penalty rates and allowances, that their industry or occupation award details. This pay rate may be higher than the National Minimum Wage. The minimum wage is gross pay, before any deductions are made.
In Australia, employees have the right to share information about their pay and employment terms and conditions and ask other employees about their pay and employment terms too.
Employees also have the right to not share pay and employment information, and to keep this information private if they choose.
6 tips for determining employee pay rates
1. Research industry standards
It’s always a good idea to research industry standards and the market rate. Remember, not only do you need to meet Fair Work Act requirements but you also want to offer competitive salaries to attract top talent. This process is an important part of making sure you’re ready for your first hire.
Make sure you refer to the award that’s relevant to your industry and occupation and investigate what other similar companies are currently paying for like roles. You can conduct research online and talk to other managers in your industry to ask what pay they offer for similar positions.
2. Find out a candidate’s pay expectations
After you’ve discussed the position’s salary and benefits with the candidate, find out if this meets their salary expectations. If a candidate hopes for a higher salary than you can afford, remember that you may be able to sweeten the deal with additional benefits like more time off or remote-work options.
3. Consider experience
Consider the level of experience you want and need for the role. Top talent is highly experienced, but that experience may cost you more than you can afford.
4. Determine the cost of benefits
Employee benefits also play an important role in employee cost. This includes mandatory benefits like superannuation, paid time off, and insurances as well as additional expenses like training and equipment costs.
5. Stay up to date with changes in employment laws
Check out small business resources to help you manage your employer obligations. Find out about record keeping and wage requirements, award wage rates and allowances via the Fair Work Ombudsman site.
You can also subscribe to News Updates to make sure you don’t miss any important changes.
6. Seek professional advice
If you’re still unsure what to pay your staff, turn to the pros! Payroll officer, HR specialists and business consultants can all offer invaluable insight.
How to pay employees
Employers need to pay their employees the correct amount, on time, while meeting regulatory compliance requirements. They’ll need to consider the following:
Companies distribute payslips to employees within 1 working day of every payday through either paper or electronic means.
Payroll taxes are state or territory taxes on a company’s taxable employee wages and are required once the sum of the employee wages reaches a certain threshold. Using automated payroll taxation software can keep you compliant and prevent errors.
Single Touch Payroll (STP) Reporting
Under Single Touch Payroll reporting, employers need to report their employees’ salaries and wages, superannuation contributions, and pay-as-you-go (PAYG) withholding to the ATO. With STP-enabled payroll or accounting software, employers can report this information automatically to the ATO each time they process payroll.
Employers must keep all wage and time records for 7 years. These records must be in English and readily accessible for Fair Work Inspector review.
Manage your payroll with MYOB
When you’ve decided what to pay your employees, the next step is to work out how you’re going to do it and remain compliant with your tax and reporting obligations. This is where MYOB comes in, with software to automate your payroll so it’s always up to date, compliant, on time and accurate.
Free up more time to concentrate on what you do best, while having confidence that your payroll is one less thing to worry about. What’s more, with the MYOB business management platform you can add on new modules and capabilities across all your core workflows - customers, employees, supply chain, projects, finance, accounting and tax - so you’re future ready as your business needs evolve.
At MYOB, we have you covered. Try FREE for 30 days.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.