Base pay vs total remuneration
Understanding the components of employee pay is essential for Fair Work compliance. Base pay forms the foundation of an employee's compensation, but total remuneration includes several additional components.
Base pay
- Core hourly or salary rate
- Must meet award minimum
- Foundation for calculations
- Before any loadings
Additional pay
- Overtime payments
- Penalty rates
- Allowances
- Bonuses and commissions
When calculating gross pay, start with the base pay rate and add all applicable loadings, penalties, and allowances as specified in the relevant Modern Award.
How base pay is determined in Australia
In Australia, base pay rates are primarily determined by the employee's Modern Award classification. Each award specifies minimum rates for different roles, experience levels, and employment types.
Factors that determine base pay
Employers may pay above the award minimum base rate, but never below. Market conditions, employee skills, and business needs often result in base pay rates higher than the legal minimum.
Base pay for different employment types
The way base pay is expressed varies depending on whether an employee is full-time, part-time, or casual.
- Full-time employees: Base pay is typically expressed as an annual salary, calculated from the award hourly rate multiplied by 38 hours and 52 weeks
- Part-time employees: Base pay is usually the same hourly rate as full-time, paid for contracted hours only
- Casual employees: Base pay includes a 25% casual loading built into the hourly rate to compensate for lack of leave entitlements
Australian compliance tip
When converting between hourly and annual base pay, use the formula: Annual = Hourly × 38 hours × 52 weeks. Don't forget that superannuation is calculated on top of base pay, not included within it. The Fair Work Pay Calculator can help verify your base pay rates.
What's included and excluded from base pay
Included in base pay
- Ordinary hours compensation
- Award classification rate
- Casual loading (for casuals)
- Above-award payments (if any)
Not included in base pay
- Overtime payments
- Penalty rates (weekends, public holidays)
- Allowances (travel, uniform, meals)
- Superannuation contributions
Common mistakes with base pay
Using outdated rates
Award base pay rates change annually on 1 July. Failing to update payroll systems can result in underpayment claims and penalties.
Wrong classification level
Assigning employees to lower award classifications than their actual duties results in underpayment of base rates.
Including super in base pay
Superannuation must be paid on top of base pay, not absorbed within it. A "$60,000 package" is not the same as "$60,000 base salary."
Offsetting with bonuses
Discretionary bonuses cannot be used to meet minimum base pay obligations. The base rate itself must comply with the award.
Key takeaways
Base pay is the foundation of employee compensation in Australia, representing the core rate before any additional payments. It must always meet or exceed the minimum specified in the applicable Modern Award for the employee's classification level.
Keeping base pay rates accurate and compliant requires regular reviews, especially after the annual Fair Work wage review. Using award interpretation software can help automate correct rate application and reduce compliance risk.
