In Short
- Remuneration: The total financial compensation an employee receives, encompassing salary or wages, superannuation, bonuses, commissions, overtime, and allowances.
- Wages: Hourly or piece-rate pay for work performed, often under a modern award, which may include additional entitlements like overtime and penalty rates.
- Salaries: Fixed annual amounts paid regularly (e.g., weekly or monthly), typically not tied to hours worked, and often expressed as gross pay.
Tips for Businesses
Clearly define remuneration components in employment contracts to avoid confusion and ensure compliance with the Fair Work Act. Regularly review pay structures to meet legal obligations and remain competitive. Seek legal advice if considering annualised salaries or implementing bonus schemes to ensure proper documentation and adherence to awards.
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 will explain 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. These two concepts will be covered in more detail below.
What Are Wages?
A wage refers to a rate of pay that corresponds to a specific period that an employee has worked. For example, you might pay an employee per hour of work. In this sense, wages cover payment for each unit of work rather than periodically, like a salary.
If an employer pays wages strictly per a modern award, the award-covered employee may also be entitled to payments beyond their base pay rate. 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.
Continue reading this article below the formWhat is a Salary?
A salary describes a regular and fixed payment that you provide an employee. Employers generally pay employees a salary at least every month, if not weekly or fortnightly, but it is usually expressed as an annual amount.
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.
What is the Difference Between Gross Pay and Net Pay?
The law requires employers to provide their employees with pay slips, including the amounts earned for gross and net pay. The differences between gross pay and net pay are explained 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 may 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 refer to different concepts. While remuneration can cover wages and salaries, wages are generally associated with hourly pay rates. On the other hand, salaries are generally fixed annualised amounts that you pay either weekly, fortnightly or monthly. Paying remuneration, wages and salaries to an employee can be expressed as either gross pay (the total amount earned) or net pay (the gross amount less any 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.
Wages are the payment that covers a specific period that has been worked, such as an hourly rate of pay.
Salaries are fixed and regular payments, usually calculated and described as an annual amount not linked to a specific number of hours worked.
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