In Short
Remuneration refers to the total financial compensation an employee receives, including wages or salary, superannuation, bonuses and allowances. Wages usually refer to hourly or piece-rate payments linked to time worked, while salaries are fixed annual amounts paid regularly. Employers must structure payments carefully to meet minimum wage and modern award obligations and avoid underpayment risks.
Tips for Businesses
Clearly document whether employees receive wages or a salary and specify all remuneration components in employment contracts. Regularly review pay structures against modern awards, the National Minimum Wage and overtime or penalty rate obligations. If using annualised salaries, confirm the amount sufficiently covers all award entitlements and keep records supporting how the salary was calculated.
Summary
This guide explains the difference between remuneration, wages and salaries for businesses operating in Australia. It provides a plain-English explanation of key pay concepts and regulatory considerations, prepared by LegalVision, a commercial law firm that specialises in advising clients on employment law.
Employers often use different terms when discussing payments associated with performing work. Some of these critical terms include remuneration, wages and salaries. Employers need to understand these key terms to avoid the risk of underpayment and the penalties associated with underpayment. This article explains these three terms and provide an overview of the difference between gross pay and net pay.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
What is Remuneration?
Remuneration refers to the total financial compensation that employers pay to an employee. It is best to think about remuneration as a broader term for the amount that covers all payments, which may include:
- salary (which may be an hourly rate of pay);
- minimum superannuation contributions;
- overtime payments if applicable;
- bonuses;
- commissions;
- incentive payments; and
- specific allowances.
Remuneration generally covers both wages and salaries.
What Are Wages?
A wage is the rate of pay for a specific period of work. For example, you might pay an employee per hour of work. In this sense, wages pay for each unit of work rather than being paid periodically, as with a salary.
If you pay wages strictly under a modern award, the award may require you to pay the employee additional amounts in addition to their base pay. These additional amounts may include:
- overtime payments;
- any applicable allowances or loadings; and
- penalty rates.
Nevertheless, these additional payments depend on:
- the relevant modern award provisions; and
- when the employee performs work, for how long, and their specific role.
Therefore, check what modern award covers your employees to discern whether it entitles them to additional payments.
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What is a Salary?
A salary describes a regular and fixed payment that you provide to an employee. Employers generally pay employees a salary at least monthly, if not weekly or fortnightly, but it is paid annually.
Since a salary is a fixed and regular payment, an employee generally will not receive any additional payments or entitlements, such as penalty rates or payment for overtime. However, this may not be true if any relevant modern award covers the employee.
Where you pay an ‘all-inclusive’ salary, you must ensure the salary is sufficient to cover all award entitlements that apply to the employee for each pay period. Employers should include an appropriate buffer to reduce the risk of underpayment.
A common employer mistake is assuming that a salary covers all hours worked. Paying an employee a salary does not automatically exclude them from entitlements such as overtime or penalty rates. Employers should always check the applicable modern award to determine when these rates apply, particularly when employees work outside their ordinary hours or on evenings, weekends or public holidays.
A base salary refers to the amount an employee earns before you add any additional payments or apply necessary deductions. By contrast, a salary package refers to an agreed remuneration arrangement between an employer and an employee that covers:
- the employee’s salary; and
- one or more additional benefits such as share options, allowances, incentives or bonuses.
What is the Difference Between Gross Pay and Net Pay?
The law requires employers to provide their employees with pay slips that include the amounts of gross and net pay. The differences between gross pay and net pay are in the table below.
| Gross Pay | Gross pay refers to the total amount of money an employee earns from performing work. Since gross pay is the initial amount earned, it does not include any deductions that mayh be made. Salaries are generally expressed as a gross amount. |
| Net Pay | Net pay refers to the actual amount of money an employee is paid once any relevant deductions from the gross amount have been made. These deductions could include income tax, such as PAYG, or student loan repayments, such as a HECS/HELP debt. |
Key Takeaways
Remuneration, wages, and salaries are distinct concepts. While remuneration can cover wages and salaries, wages are associated with hourly pay rates. On the other hand, salaries are annual amounts that you pay either weekly, fortnightly or monthly. You can express employee remuneration, wages and salaries as either gross pay (the total amount earned) or net pay (the gross amount less relevant deductions such as income tax).
Employers need to understand their obligations regarding any payments owed to their employees. If you require assistance with employee remuneration, our experienced employment lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Remuneration is a broad term that covers the total compensation an employee receives. It can include both wages and salary.
An employer cannot change an employee’s wages or salary without the employee’s agreement and a proper contractual variation documented in writing.
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