Pro Rata Salary

Payroll

Gross pay

When an employee receives a pay slip, it will normally include a figure indicating their ‘gross pay’. Gross pay refers to an employee’s total taxable income for a pay period before any deductions are made. Income tax, Medicare and Social Security contributions, as well as health insurance, superannuation, and any other deductions are not accounted for when an employee’s gross pay is calculated. What is the difference between gross pay and net pay? As well as gross pay, an employee’s ‘net pay’ will also appear on their slip. While gross pay shows the amount the employee has earned before any deductions, net pay reflects the amount the employee will receive after deductions are made. Net pay is almost always a lower figure, reflecting the amount that will be paid into the employee’s bank account. For this reason, net pay is often referred to as ‘take home pay’. Examples of gross pay and net pay If an employee’s annual salary is $120,000, then their yearly gross pay is $120,000 and their monthly gross pay is $10,000. Supposing the same employee paid $29,476 in income tax (calculated based on the current tax rate for this salary), as well as a further $6,524 in superannuation and other contributions, their total deductions will be $35,000. After these deductions are made from the employee’s gross pay ($120,00 minus $35,000), they will be left with a net pay of $85,000. What deductions are taken from gross pay? Mandatory income tax is normally the largest deduction taken from an employee’s gross pay. Australian employers are responsible for deducting tax and sending it to the Australian Taxation Office (ATO). Anybody who is self-employed needs to calculate their own tax return, set the money aside and pay it directly to the ATO. It’s also compulsory that employers deduct 2% from an employee’s gross pay for Medicare. Further deductions may also be agreed on between an employer and employee, including superannuation and health insurance contributions. Are employers allowed to make deductions? Employers are legally obligated to make income tax and Medicare deductions from an employee’s pay. Beyond this, an employer can only deduct money if: The employee agrees in writing and it’s principally for their benefit The employee has outstanding court ordered payments The deduction is allowed by a law or by the Fair Work Commission The deduction is allowed under the employee’s Modern Award The deduction is allowed under the employee’s registered agreement, which the employee has signed and agreed to An employee’s written agreement must be genuine, and they can’t be forced by an employer into agreeing to any deductions. It’s important to note that deductions should be shown on the employee’s pay slip, as well as their time and wages records. Calculating gross pay If you’re an employee and you want to calculate your gross pay, you can use the information included in your latest pay slip. The calculation you need to make will vary depending on whether you are paid an annual salary or hourly wage. How to calculate gross pay for an annual salary The salary recorded in your employment contract will be your official annual gross pay. You can also figure this out by referring to a pay slip. If your pay slip shows a gross monthly pay of $6,000, then you simply multiply this amount by the twelve months of the year (6,000 X 12 = 72,000). Your gross annual pay is $72,000. Similarly, your annual salary divided by twelve gives you your monthly gross pay. If you receive any bonuses, financial benefits or commissions, you’ll need to add these too. If you earn $72,000 as a base annual salary, but you’re also paid $5,000 in bonuses for the year, your gross annual pay is $77,000. How to calculate gross pay for an hourly wage If you earn an hourly rate of pay and you’re unsure of how many hours you’ll work annually, it’s easiest to wait until the end of the year and calculate it then. If you work set hours each week, you can calculate your gross annual pay yourself in advance. If you work 20 hours a week at an hourly rate $20, your weekly gross pay is $400, your monthly gross pay is $1,600, and your gross annual pay is $19,200. Remember – if you take any unpaid days off in the year, you’ll need to deduct the pay from your gross pay. Similarly, if you receive a pay rise or take on any additional shifts, you’ll need to recalculate the rest of the year with the new pay rate or increased number of hours included. What is gross salary? Gross salary refers to the total amount an employer regularly pays to an employee, normally expressed an annual sum that is divided into fortnightly or monthly payments. When an employee starts a new job or receives a pay rise, their gross salary will be agreed upon and laid out in an employment contract. Much like gross pay, gross salary is an employee’s income before taxes and any other contributions are deducted. Net salary refers to an employee’s take home salary after deductions are made. Importance of gross salary As an employer, it’s vital you have an accurate understanding of each employee’s gross salary. Gross salary is used to calculate the percentage of an employee’s pay you should withhold for taxes, while it can also be used to calculate an employee’s redundancy pay entitlements. Businesses also rely on gross salary information when budgeting and financial planning. By knowing their total labor costs, employers can allocate financial resources effectively and make informed decisions about expenses, investments, and future growth opportunities. As an employee, the gross salary an employer offers will be crucial when deciding whether or not to accept a job offer. Gross salary is also important to employees because it is used by creditors when they review loan applications. What is gross income? Gross income includes an employee’s gross salary, as well as any: Tips Commissions Bonuses Financial benefits Dividends Capital gains Pension payments Gross annual income refers to all of the above, combined into a yearly sum. If you’re an Australian employer struggling with wages and pay, call our advice line on 1300750491 to get all your questions answered. 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.

Payroll

Apprentice pay

For small business owners or employers in Australia, hiring apprentices can be a great way to get younger talent. It also benefits apprentices as they can develop skills and gain experience to boost their professional careers. Apprentices get access to apprentice wages, certificates, and professional recognition. Understanding apprentice pay can be complicated for business owners. In this guide, we will discuss who qualifies as an apprentice, Australian apprentice wages, and knowing different types of apprentices e.g. mature-age apprentices and mature-age apprenticeship wage. Apprenticeship An apprenticeship is a structured training arrangement of usually three- or four-years duration. The training involves practical experience at a company with on-the-job training and off-the-job training with a Registered Training Organisation (RTO). An apprentice is an employee hired to learn a particular trade or profession while completing studies to become a qualified tradesperson. Some examples of trades where apprentices are common are electricians, plumbers, and hairdressers. An apprentice must have a training contract with their employer to qualify for apprentice pay rates or wages. The training contract sets out terms and conditions relating to training and supervision. The apprentice must also attend a registered training organisation (RTO), such as a TAFE or trade school for assessment and additional off-the- job-training. The training contract and a training plan prepared by the RTO must be approved and registered with an appropriate State or Territory Training Authority (STA).  As the training contract usually only focuses on training obligations, it might be useful to have a separate employment contract to address employment-specific matters. Apprentices get the same entitlements as other employees, such as annual leave, sick leave, public holidays, and breaks. Special apprentice minimum pay and conditions may apply, and employers must understand the specific rules of their industry award, as well as the training contract and employment contract. Australian apprentice wages Paying an apprentice may not be as simple as paying other employees. This is because the rate of pay is based on several different factors and considerations, which may include: Industry award Occupation award Age Terms and conditions of the registered training agreement Length/duration of the apprenticeship (e.g. three- or four-year apprenticeship) Prior learning (i.e. how much training the apprentice has already completed) Schooling (whether or not the employee is still attending school) Qualification type e.g. Certificate III Whether or not the employee completed year 12 and when How these factors impact the apprentice’s wage will ultimately be decided by the provisions of the relevant industry award or instrument. Mature age apprenticeship wages Also known as an adult apprentice, a mature-age apprentice is anyone 21 years or older. Hiring an experienced adult apprentice can be good for business. To compensate for any prior experience an adult apprentice may bring, the minimum award pay rates is usually higher than that of their juniors. Discussions about the adult apprentice wage, availability, and special conditions can be carried out between the apprentice and employer with help from an authorised training provider. Pay rates for traineeships The pay and conditions for most trainees are decided by the Miscellaneous Award. They also receive other entitlements from the occupation or industry award that applies to them. These entitlements may include overtime, penalty rates, and allowances. Trainees fall into three categories: Full-time trainee: A full-time trainee is employed under a training contract and will work 38 hours per week.  Part-time trainee: A traineeship can sometimes be completed part-time. The employee and employer need to agree on the duration of the part-time training contract. This must be checked with the relevant state or territory training authority.  School-based trainee: A school-based traineeship is done while someone is still in high school. This means an employee can stay in high school and simultaneously train for a work-related qualification.  Pay increases during an apprenticeship During an apprenticeship, the apprentice will naturally learn new skills and become more competent. When an apprentice progresses to the next level of their apprenticeship, they are usually entitled to increased minimum pay rates. Modes of progression will usually be outlined in the applicable industrial instrument. In most cases, progression is: Time-based – that is, the apprentice moves up to the next pay level after they have worked a certain amount of time (usually 12 months); and/or Competency-based – when the apprentice has attained the required skills to advance to the next stage of their apprenticeship (this can occur before the completion of the above period). How an apprentice completes the training depends on the employer, as long as the requirements of the training contract and the terms of the training agreement are met. Progress is dependent upon the assessment of competency by the relevant RTO. Completion of apprenticeship Once the apprentice has completed their training and earned their trade certificate, their minimum pay rate must be raised beyond that of an apprentice to that for a trade-qualified employee. The applicable minimum wage will be determined by the relevant occupation or industry award. Understand wages for Australian apprentices, minimum pay rates and how they apply to your business, with Peninsula's tailored advice and documents. Call us on 1300761935 to learn more. 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.

Payroll

Know your back pay obligations

Back pay is the payment of monies owed to an employee that were not paid by an employer in a previous pay period. For example, if an employee’s wages were underpaid due to a payroll error or oversight, the payment of the outstanding amount in a future pay period is referred to as back payment. Why do employees get back pay? An honest day’s work should always be fairly paid. However, employees entitled to back pay will have been underpaid, or completely unpaid, by a current or previous employer. Common reasons for back pay include: Payroll and accounting errors Unpaid overtime, leave, bonuses or commission Minimum wage violations Do employers have to make back payments? In short, absolutely. Employers must issue back pay whenever they underpay an employee’s wages. It makes no difference if the underpayment was intentional or not, the employer must pay the full amount of back pay owed. If an employer does not make back payments, they may be in violation of wages and pay laws provided by the Fair Work Act 2009. This could lead to a legal case and financial penalties. Avoiding underpayments An employer may not realise they have underpaid wages until the employee raises the matter, or the Fair Work Ombudsman performs an audit. Here are a few practical tips that will help you avoid underpayment: ✔ Be sure you are paying your employees correctly by regularly reviewing their wages against the relevant industrial instrument and/or the national minimum wage. ✔ Make sure you keep up to date with any pay increases or award changes. For example, the annual minimum wage increases usually come into effect from the first full pay period on or after 1 July each year. ✔ Ensure all your workers are employed under the correct award and at the appropriate classification level for the job they do. ✔ Remember the employee’s classification level or pay rate may change, or they may be entitled to receive loadings or allowances as they gain more experience, complete further training, or are promoted to higher levels of seniority. ✔ It’s also important to consider that a junior or apprentice pay rate may increase for different reasons, including age, time served and competency. Calculating back pay There are five steps to follow when accurately calculating back pay: Figure out when the employee was underpaid and how long for. This is called the underpayment period. Next, check the employee’s wages records for that period to establish how much the employee was actually paid. This is the gross amount the employee was paid for the underpayment period before tax. Work out how much the affected employee should have been paid in wages for the underpayment period. Check any other entitlements owing for the period separately, and check whether you need to pay any additional tax or superannuation. Combine the real wages and all paid entitlements owed. Then subtract the total amount paid to the employee for the underpayment period – the difference is the amount of back pay owed. Finally, be sure to discuss the underpayment with the employee. Explain what led to the underpayment, what you have done to fix it, how you have calculated the amount of back pay, and when the employee will receive it. Pay slips and record keeping As part of their wages and pay obligations, employers should keep accurate payroll records, and give all employees pay slips documenting: The pay period The gross and net amount paid The number of hours worked (if an hourly pay rate applies) Penalty and overtime payments Loadings, allowances or other entitlements Any deductions for that period Additionally, the Fair Work Act 2009 also demands that employers keep wage and time records for at least 7 years. Get wages and pay advice you can trust If you need trustworthy advice about wages and pay, our free advice line is available to all Australian business owners. Call 1300750491 today to get all your questions answered. 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.

Payroll

Casual Loading

Casual loading is additional payment made on top of a casual employee’s fixed hourly wage. Usually, casual loading is 25%, however an Award or Enterprise Agreement (EA) may have a different amount. Casual employees receive a higher rate of pay to compensate for the fact that they do not receive all the same paid entitlements as a permanent employee, such as annual leave or personal leave. How to a calculate casual loading rate To calculate the casual loading rate, you must multiply the hourly rate of a permanent employee by the percentage of the casual loading rate, as stated in the relevant modern award or enterprise agreement. For example, if a casual worker is paid the national minimum wage (from 1 July 2025) of $24.95 per hour, and their Award or Enterprise Agreement stipulates a casual loading rate of 25%, the calculation would be as follows: $24.95 (permanent hourly wage) + $6.23(25% of the permanent hourly wage) = $31.18 (total hourly wage) Casual employment obligations As an employer, it is important to be fully aware of your workers’ casual employment rights, including the potential impact of a minimum wage increase. While paying your casual workers the correct wage is vital, you should also be aware of other aspects of your casual employment contract. Below are a few of the areas that employers should be aware of in relation to casual employment rights: Hours of work Casual workers are not guaranteed a set number of hours per work, and they may be required to work irregular hours. This means you can ask a casual worker to work with a shorter notice period, within reason. On the other hand, casual employees are not obligated to agree to the work each time. However, if they do agree to come into work, you may have to pay them for a minimum number of hours even if they have worked less. This is called a minimum engagement period and is stipulated in the Award or Enterprise Agreement. Additional pay for hours worked Like full-time and part-time employees, casuals are also entitled to receive additional payment when they work on public holidays, weekends, and additional hours. Depending on when a casual employee works, they could receive penalty rates or overtime rates. Payment of overtime and penalties for casuals will vary based on the Award or Agreement. For example, some employees may be entitled to be paid a total of 250% of their hourly rate including casual loading if they work on a public holiday. This amount may be more or less for those covered by a different Award or Enterprise Agreement. Although rates tables have been added to most awards to help you find the right pay it is still complex. We can help you with calculating overtime pay for your casual employees. Personal Leave and Annual Leave Casual employees are not entitled to paid leave, like personal or annual leave, including annual leave loading. However, they are entitled to a range of unpaid forms of leave, such as unpaid carer’s leave and unpaid compassionate leave. Some casual workers may be entitled to long service leave depending on your state or territory laws. Termination notice In most cases, you do not have to give a minimum amount of notice when you terminate a casual employee. Similarly, in most cases, a casual employee does not have to give notice when they resign. There are, however, exceptions in some Awards, Enterprise Agreements, and casual Employment Contracts. Casual conversion Casual Conversion is another entitlement that some casuals have that now forms part of the National Employment Standards (NES). In short, if certain conditions are met, an employer has to either offer a casual employee the opportunity to go permanent, or the casual employee has the right to request that their employment type be converted to full-time or part-time. The specific rights depend on the size of the business and will also be impacted by whether or not the relevant employee is covered by an award. Streamline your HR and WHS Need to hire casual employees? Wonder what your obligations are? Peninsula provides tailored employment contracts based on your needs and responsibilities. Call us on 1300750491 to learn how we can help you. Please note that we cannot guarantee or accept any liability for the accuracy, reliability, currency, or completeness of the information available in this guide. When considering the information available about awards or pay rates, you should contact employment relations experts. Alternatively, you may wish to get independent advice from a legal professional based on your circumstances.

Payroll

Creating an expense policy

Business owners and employers need to keep track of several things including their employees, performances, and even finances within the business. This includes employee expenses and related costs that may arise in the workplace. Employees can claim expenses in certain situations and depending on their role and nature of work. It is vital to have a clearly communicated and documented expenses policy and process, so employees are aware of their duties and expense limit. Your employees are entitled to be reimbursed, as long as their spending falls within the policy. In this best practice guide for Aussie employers, we outline what is an expense policy, things to include in an expense policy, and related factors. Peninsula has worked with thousands of businesses in Australia, supporting them in matters of employment relations and workplace health and safety. Employee expense policy Your employees can claim expenses in established situations, depending on their role and nature of work. Having an employee expense policy is standard practice and good for your employees as well. It helps them understand the expectations around reimbursement, expenses, and filing invoices. The employee expense policy should explain documentation, approval processes, and define both reimbursable and non-reimbursable expenses. In your employee handbook or induction process, explain the expense policy, the way to claim expense and eligibility. Several companies only allow expense claiming to sales and business development executives or public relations employees.  You can outline your expense policy and share it with your new and current employees. It should be available on your company intranet, your company social media, your company handbook, and with HR. Things to include in an employee expense policy Your expenses policy must set out what spending is legitimate and what is not. It should describe what evidence employees need to show to support their claim, such as receipts, and whether they need approval or countersigning first. It is expected to have a person or department that handles these claims and keeps a record of expenses.  You are allowed to set limits, such as a maximum cost for hotel rooms, or informing your employees to use a company approved hotel chain or airline. Businesses can create a company account that can be used to book hotels, flights, or cars. You can also set limits on length of time before making a claim, so employees do not build up large expense claims over time.  Review these expenses every year or quarter, depending on the size of your business to understand your finances.  If you make changes to your expenses policy, you have to let your employees know in writing. You can also ask them for sign-off, to prove they have read and understood the changes. By enforcing the expenses policy in practice, employees are less likely to make false claims. Writing a good employee expense policy A good employee expense policy should be written clearly and have a positive tone of voice. Most of your employees submit valid claims and so it's vital that they don’t feel penalised or burdened for the same. By focusing on writing what employees are entitled to, you avoid them feeling restricted or mistrusted. A fair and reasonable expense policy will maximise staff uptake and helps to reduce costs. Use clear and specific language to avoid ambiguity. Provide examples to help them understand their duties and responsibilities. Create a FAQ section or glossary of terms to sit within your policy. Before you write your policy, you might want to research the expense types of similar organisations. Look at the monetary limits they set and let those limits reflect the level of authority. Types of expenses Employee expenses fall under two categories: Expenses that are paid directly by the company on behalf of employees. Expenses that are paid by the employees and are reimbursable. Travel expenses include any kind of transportation and accommodation expenses that employees incur when going on a business trip. Expenses related to this category that may be fully or partly reimbursable include: Accommodation. Legal document expenses (e.g. Visa). Air, train, ship or other transportation fares, Necessary medical expenses (e.g. vaccinations). Local transportation during trips (taxi fares, rental cars etc.). Other minor or per diem expenses that have been approved by an employee’s manager (e.g. meals, business material). Work-related expenses include expenses that are related to an employee either in the form of a benefit (e.g. business phone) or entertainment expenses that may occur in a business setting (e.g. professional dinners with clients or colleagues). Non-reimbursable expenses There are few types of expenses that cannot be claimed: Personal purchases and personal travel. Normal travel to and from work. Fines incurred while driving a company vehicle. Non-business subscriptions or training. Hotel mini-bar costs. Lost items. Expenses incurred by spouses/partners or other non-employees who accompany employees on business trips. Service upgrades. Procedure to claim expenses When your employee goes on work-related trips, the office manager/ personal assistants/HR manager will arrange for accommodation and transportation costs. They will also document expenses. Your employees will need to: Document any expenses that the company hasn’t directly arranged for (e.g. taxi fares). Get bills and receipts from everywhere. There is also a per diem sum to cover other necessary travel expenses. Submit a reimbursement claim through the company software or submit an expense report with all necessary documentation. Dealing with falsified expenses If you believe there are falsified or exaggerated expenses, they should be investigated. Consistent violations can also lead to potential disciplinary action. When your employees breach company expense policy, they may also be required to repay the Company any amounts incurred otherwise in accordance with this policy. Manage your workplace confidently with Peninsula Employers have responsibilities they need to meet, and a big part of these responsibilities is providing clear policies and procedures to employees. Having established and clear policies makes your workplaces secure and consistent. We know the challenges business owners and employers face and the support they need for employment relations and workplace health and safety. For expert advice on creating a claiming expenses policy for your business contact the team at Peninsula. 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 does pro rata salary mean?

Why is pro rata salary important?

Calculating pro rata salary

Step-by-step calculation

Calculating monthly pro-rated earnings

Calculating weekly pro rated earnings

Pro rata annual leave entitlement

Pro rata sick leave entitlements

Pro rata salary on payslips

Using a pro rata salary calculator

Understanding pro rata wage

Pro rata salary legal requirements and best practices

Fair Work Act and Awards

Avoid underpayment and ensure compliance

Best practices for communication and transparency

Need support with pro rata salary?

Have a question?

Related Guide Articles

Gross pay

Apprentice pay

Know your back pay obligations

Casual Loading

Creating an expense policy

Related Guide Articles

Gross pay

Apprentice pay

Know your back pay obligations

Do you have any questions regarding Payroll?