Overtime rates

Wage & Pay

Commission

Commission work pays employees based on the number of products or services they sell in a given time period. Commission pay is designed to motivate employees and reward outstanding performance especially in marketing and sales. Definition Commission pay can make up an employee’s whole wage or be paid as an extra incentive on top of their base wage or salary. How often an employee is paid commission depends on the terms of their employment agreement and the relevant Modern Award. An employee can only be paid exclusively on commission when an Award, Enterprise Agreement or other registered agreement states the employee can be paid this way. For information on commission-only payments, refer to the relevant award to understand how this type of payment works for employees. In some commission work (insurance for example) it’s common for salespeople to earn a residual commission (an ongoing series of payments) from clients who stay with the company and make repeat purchases. This is a powerful incentive for employees to stay with the company and saves money on recruitment costs. Sales Commission A sales based commission is an individual negotiation between the employee and the employer. As such, unless prescribed by an Award or Agreement, the parties can negotiate terms on a contractual basis with no minimum or maximum payment structure. Nevertheless, it is important to remember a sales based commission should be sufficient enough to motivate employees and help retain top salespeople whilst remaining in the business’ best financial interests. Should an employee be engaged on a commission-only basis that is permitted by an Award/agreement, it is important to ensure any sales commission agreement satisfies that Award/agreement. Types of Commission Based Jobs Almost every business needs people who can convincingly sell products and services. From cosmetics to new cars and telecommunication, the demand for experienced and enthusiastic salespeople is ongoing. Commission based jobs vary based on the industry and role of the salesperson. Some businesses sell directly to consumers, while others sell to other businesses. These jobs can involve selling face-to-face, cold-calling over the phone, or making sales presentations to high-profile corporate clients. Benefits of Commission Work Employees who are motivated and driven to succeed can reap many benefits from a commission based job. The biggest advantage for an employee on a commission arrangement is being in control of how much you can earn. Whether they already have a base wage or salary, the desire to earn more is a powerful motivator. For employers, it’s easier to monitor the performance of top salespeople and those who are underperforming. Highly motivated salespeople can greatly increase profits for the company and develop long-term relationships with clients who provide repeat business. A tailored and well-drafted commission agreement ensures the employee will only receive the financial benefit subject to high performance. This structure will assist in eliminating the burden of having to overpay less capable employees. For advice on understanding commission pay and your obligations as a business owner, contact our team today.

Wage & Pay

Overpayments

Overpayments are a common issue that many employers in Australia struggle with. Keeping track of staff payments and salaries can be challenging if you do not have access to expert help and support. In this guide, we discuss the overpayment of wages and the process of fixing this error for employers. Overpayments Overpayment of wages can happen when an employer: Mistakenly believes an employee is entitled to the pay. Because of a payroll error. You can fix overpayments if you follow the due process. You can talk to your employee if an overpayment of wages has been made. An arrangement can be made about repayment and noted in writing. Fixing overpayments Getting your money back if you happen to overpay an employee is not always easy. Even if you made a simple clerical error, or misinterpreted an award or agreement, there is a legal process to follow. You can deduct pay if an agreement, award, law, court order, or the Fair Work Commission (FWC) allows it. But if the deductions are for your benefit, they may be unlawful. If your employee then refuses to agree to repay the money, you will have to get a court order. The courts usually say recovery is available if you can show a mistake was made that led to overpayment. Recovery is not possible if the payment was intentionally made, or the employee has already used the money in good faith. Your best option to get the money back is to make an arrangement acceptable to you and your employee where you deduct small amounts from their pay overtime. Always have a clear policy on overpayments in the employment contract and employee handbook, which says employees must report overpayments to their manager immediately. If your employee agrees to repay the money, a written agreement should be made which sets out: Reason for overpayment. Amount of money overpaid. Way repayments will be made. Frequency of repayment (if agreed to repay in instalments) Repayment amount Once the employer has agreed to repay the overpayment, the repayment amount needs to be determined. The repayment amount is not necessarily the overpaid amount. Repayment period If you and the employee become aware of the overpayment within the same financial year, then the employee would repay the net pay. The net pay is the amount that the employee has actually received which does not include any withheld amounts for tax. The employee can decide to pay it in the same or next financial year. If the overpayment is noticed in the following financial year, then the employee would repay the gross pay. The gross pay is the total amount that the employee has been paid, including withheld tax. If the repayment affects the income tax amount for any of the previous 2 years of the employee, then they can request an income tax return. Managing payments and wages Keeping track of payments and wages is crucial as it will help you avoid mistakes such as overpayments. Our team has supported thousands of business owners in Australia with wage information to ensure they correctly pay their employees. For free initial advice on wages and modern awards, contact the expert Peninsula team. This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.

Wage & Pay

Remuneration

You may use different terms or words when discussing payments associated with jobs. Some of the common terms we often hear include salary, wages, pay, and remuneration. Employers in Australia need to be aware of these terms, their meanings, and their differences. It is crucial that they understand their responsibilities and how each term covers a different aspect of payment. Understanding these terms is important as it will help you avoid underpayments, and any potential penalties associated with underpayments. In this guide we explain remuneration, what is a remuneration package, and the key differences between remuneration and salaries for employees. Remuneration In Australia, it has different meanings in different states when it comes to worker’s compensation or premium calculation. For example, in New South Wales, the 1987 Act says, generally, a payment to a worker is ‘remuneration’ if it is made to, or for the benefit of the worker. Remuneration is any type of compensation or pay for providing services. The term includes pay in the form of a salary, wage or commission, but can also incorporate non-monetary incentives and allowances such as a company car, medical plan, accommodation, or meals. Competitive remuneration can assist in attracting top quality candidates and make existing staff happier and more productive. Extra allowances like bonuses and holidays can incentivise performance and retain key staff for longer as well as attracting more talented employees. To ensure alignment, it is recommended businesses develop a remuneration policy. This policy could incorporate an outline of the guiding principles that decide how the company compensates staff and provide clarity in terms of current market rates, as well as superannuation, minimum entitlements, and any extra benefits. Remuneration Package Remuneration packages are based on a mutual agreement between the employer and employee. For this reason, employers are reasonably free to structure remuneration packages as they see fit if the employee agrees. However, the package must also satisfy the minimum pay and conditions of employment under the National Employment Standards (NES) contained in the Fair Work Act 2009 or the minimum wage under the applicable Modern Award or enterprise agreement covering your employee for the employee’s classification. It should also meet any additional requirements in the employment contract. The remuneration package should be structured according to the employee’s role and responsibilities, industry standards, and the current market rate for similar positions, taking into consideration the location of work and any skill shortages within the industry. Below are the most common types of remuneration and their meanings. Commission Pay Employees on a commission agreement are paid according to their results, generally the amount they sell. Employees are generally partially or additionally compensated by commission payments. An employee can be paid on a commission only basis when an employee is award free, or an award or enterprise agreement allows an employee to be paid this way. An employer is usually free to structure incentive-based commission payments as they wish to encourage high performance, however employees must earn at least the national minimum wage or the award minimum rate for their classification. Commonly, sales-based commission will maintain strict criteria of a minimum number of sales or value of deals, and once achieved engage a commission payment of a fixed amount or percentage of value. Piece Rates A piece rate is where an employee gets paid for every piece, item or task completed. Each job, hour or other unit is paid separately, rather than periodically. For example, the ‘piece’ could be the amount of fruit picked or the number of items packed in a certain period of time. Piece rates are typically paid instead of an hourly, daily or weekly wage – but there are exceptions in some industries. Piecework agreements must be in writing and set out the pay rate per piece and how results are measured. If there is no formal agreement, the employee is not considered a piece worker and must get the national minimum hourly or weekly rate according to their applicable Award. An employee can only be paid via piece rates if their Modern Award or Enterprise Agreement allows for this method of payment, in which case they must earn at least the minimum award rate for the job they do, or if the employee is Award-free then they must receive at least the national minimum wage. Remuneration Bonuses and Incentives Depending on the company remuneration policy and employment contracts, some employees may receive a bonus. These bonuses can be rewarded to an individual for good performance or the whole team after a particularly successful project, quarter, or year. Businesses may offer a range of cash and non-cash incentives. These incentives are designed to reward employees who go above and beyond the expectations of their role. Good incentives not only help employees feel valued and motivated – they can boost employee satisfaction and performance over the long-term. What Is The Difference Between Remuneration, Wage And Salary? Remuneration Remuneration is a broader term that covers both salary and wages. Remuneration is all the compensation an employee receives for services rendered, both monetary and non-monetary. A wage is a rate of pay affixed to the amount of hours worked, generally a short period of time such as per hour, or per day. A salary is a fixed regular payment, usually monthly or annually, agreed upon in an employment contract, however it is not affixed to the number of hours performed and can incorporate additional entitlements such as overtime, penalty rates and loadings. Wages Remuneration in the form of wages must ensure the employee base hourly or weekly rate is equal to or greater than the National Minimum Wage or the minimum rate of pay mandated under an employee’s applicable modern award or registered agreement for the job that they do. An employment contract can stipulate a higher rate of pay. Where a Modern Award applies to a wage employee, in addition to the base rate of pay for working their ordinary hours they may be entitled to overtime pay, penalty rates, loadings and allowances, depending on the job they do and when they work and how they are engaged by the business. Salaries A salary describes a regular and fixed payment that you provide an employee. Salaries are paid either once a month, fortnightly, or weekly, but it is often expressed as an annual amount. The frequency of the salary is mentioned in the employment contract. A salary is also subject to change if an employee receives a promotion or reduces their hours. Employees will not usually receive additional remuneration benefits such as overtime pay or penalty rates. However, it is important to remember a salaried employee is still required to receive all the same entitlements as a wage worker under the NES or applicable Modern Award or enterprise agreement for the job they do. This will mean if the employee works excessive hours, the salary package must be of equivalent or greater value than the sum they would have received under the applicable Modern Award or enterprise agreement for the hours they worked, at the time they worked them. A base salary refers to the amount earned by an employee before any additional payments are added or necessary deductions are made. A salary package refers to an agreed amount between employer and employee that consists of the employee’s salary and one or more additional benefits such as share options, allowances, incentives, or bonuses. Before accepting a salary offer, employees can negotiate on remuneration and other policies in their contract. These negotiations can extend beyond the base salary and cover discussions about work arrangements, benefits, and other amenities. Salary agreements should be recorded in writing, and identify which entitlements are included in the payment. The employer should reconcile the agreement annually with the amount the employee would have earned under the award or enterprise agreement for the hours worked. Unlock HR and WHS support with Peninsula Employers have a legal obligation to pay their employees correctly and efficiently. Failure to do this can result in severe penalties. If you need help understanding remuneration and remuneration packages, Peninsula has resources such as factsheets, documents, and webinars designed for your needs. Peninsula offers customised support, advice, and resources for Aussie SMEs and employers. Get access to 24/7 advice and support when you become a client with Peninsula. From recruitment to health and safety, we can provide guidance for every issue. Call us on 1300933819 today.

Wage & Pay

Shift penalties and overtime

Many businesses rely on shift workers to keep things running seamlessly 24 hours a day, 7 days a week. Some roles that may involve shift work include customer service, hospitality, healthcare, and security. What is shift work? Shift work in Australia is defined as work outside of ‘ordinary hours of work as defined in an award, registered agreement, or employment contract.’ Depending upon the operations of the business, shifts may be arranged in any number of different ways. It is not uncommon to observe shifts being arranged as follows: Morning shift. Night shift. Afternoon shift. Weekend shift. These schedules may be fixed (the employee is expected to work the same schedule each week) or variable (the employee is expected to work a rotating schedule of different shifts at different times of the day). They may also be required to be available to work upon request at any time of day (on-call). The nature of the schedule – and what an award, agreement, or contract deems as ‘ordinary hours’ – may affect the type of penalties an employee receives, including annual leave loading. Who are shift workers? According to Australian legislation, under the Fair Work Act 2009, an employee is considered to be a shift worker if they: Work for a business where shifts are rostered 24-hours a day, seven days a week Are regularly rostered to work those shifts Regularly work Sundays and public holidays Employees defined as a ‘shiftworker’ in the applicable Modern Award or Enterprise Agreement Shift workers have different annual leave entitlements than regular employees. Shift penalties Many awards and agreements in Australia provide shift workers with increased pay rates. The increased pay rates are referred to as shift penalties, penalty rates or shift loading. Whether or not a penalty will be applied and how it will be applied depends on the modern award, enterprise agreement, or employment contract. Some workplace arrangements may affect the payment of penalty rates. Employees may be entitled to penalty rates when working particular hours or days. This can include: Public holidays. Weekends. Overtime. Early morning shifts. Late night shifts. Night shift penalty rates Whether night shift workers are entitled to penalty rates depends on how a ‘night shift’ is defined in the award or agreement. Employers should refer to their respective award or registered agreement for clarity on night shift penalty rates. Some employees get paid a permanent night shift loading if they always work night shifts. Allowances An allowance is an extra payment made to employees who do certain tasks or use their own tools at work or work in hazardous conditions or incur an expense for doing their job. Depending on the nature of the work, employers may also need to include allowances to reimburse shift workers for additional expenses incurred during their employment – such as meals, travel, and accommodation. Specific allowances or penalty rates depend on the award, agreement, or industrial instrument that applies. Employees may be eligible for allowances in circumstances where they: Use their own vehicle for work Spend time travelling for work Need to wear special clothing at work Work in an environment that may damage their clothes or footwear They might also be required to give shift workers additional breaks, which might be paid. Overtime rates Overtime refers to work performed outside of ordinary hours. The spread of ordinary hours should be reflected in the respective award, registered agreement, or employment contracts. The spread of ordinary hours is the times of the day the ordinary hours can be worked. Overtime can include: Work done beyond their maximum daily or weekly ordinary hours of work. Outside a part-time employee’s agreed number of hours. Outside the spread of ordinary hours. As the rate of pay for overtime may differ depending on when it is worked, the applicable rate should also be specified. Full-time employees are typically considered to be working overtime if they work beyond 38 hours for the week. While this is conventionally the understanding of ‘overtime’, there may still be variations depending on the nature of the job and modern award, which may specify the maximum ordinary hours an employee can work per day and times within which the employee can work those ordinary hours, in which case any time worked outside those hours may be payable as overtime. You can only request or require your employees to work more than their maximum weekly hours where the additional hours are reasonable. Your employees can refuse any overtime that unreasonably exceeds maximum weekly hours. Please note that you also need to manage fatigue and other health and safety issues when requesting overtime. Some agreements may allow employees to take paid time off instead of receiving overtime pay. This is commonly known as ‘time off in lieu.’ If employers opt for this approach, it needs to be established in writing with the employee’s consent and meet any award requirements. Peninsula can help you understand shift penalties and overtime in your business and industry. Call 1300761935 for advice. This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.

What are overtime rates?

Overtime and penalty rates

When do overtime rates apply?

Time off instead of overtime

Reasonable overtime

Simplify your HR and WHS with Peninsula

Have a question?

Related Guide Articles

Commission

Overpayments

Remuneration

Shift penalties and overtime

Related Guide Articles

Commission

Overpayments

Remuneration

Do you have any questions regarding Wage & Pay?