Hourly wage vs salary in Australia
In Australia, employees are typically paid either an hourly wage or a salary. Each payment method has different implications for how pay is calculated and what protections apply under Fair Work.
Hourly wage
- Paid per hour worked
- Pay varies each period
- Overtime paid separately
- Common in shift-based roles
Salary
- Fixed annual amount
- Same pay each period
- May absorb overtime
- Common in office roles
Hourly wage employment is common in hospitality, retail, and other industries where work hours vary week to week. It provides transparency about exactly what employees earn for their time.
How hourly wages work in Australia
Hourly wages are calculated by multiplying the hourly rate by the number of hours worked. However, not all hours are paid at the same rate—penalty rates apply for overtime, weekends, public holidays, and late-night shifts.
Types of hourly rates
The exact penalty rates depend on the applicable Modern Award. Using award interpretation software ensures the correct rates are automatically applied to each shift.
Minimum hourly wage requirements
Australia has a national minimum wage that applies to all employees, plus award-specific minimum rates for covered industries. Employers must pay whichever rate is higher.
- National minimum wage: The baseline for all employees not covered by an award (currently $24.10/hour)
- Award minimum wage: Industry-specific rates that are usually higher than the national minimum
- Junior rates: Employees under 21 may be paid a percentage of the adult rate
- Training wages: Some awards allow lower rates for apprentices and trainees
Australian compliance tip
The minimum wage is reviewed annually by the Fair Work Commission with new rates typically effective from 1 July. Employers must update their pay rates accordingly. Use the Fair Work Pay Calculator to verify you're paying the correct hourly wage for each employee.
Calculating hourly wages correctly
Accurate hourly wage calculations require tracking several components. Here's how to calculate an employee's pay for a typical week:
- Record hours: Track all hours worked using time and attendance software
- Identify hour types: Separate ordinary hours, overtime, and penalty rate hours
- Apply correct rates: Multiply each hour type by its applicable rate
- Add allowances: Include any applicable allowances (meals, travel, uniform)
- Calculate gross pay: Sum all components to get total gross pay
For employers
- Cost control: Pay only for hours actually worked
- Flexibility: Scale workforce to match demand
- Transparency: Clear link between hours and pay
- Award compliance: Easier to verify minimum rates
For employees
- Fair pay: Compensated for every hour worked
- Overtime pay: Extra compensation for additional hours
- Penalty rates: Higher pay for unsociable hours
- Visibility: Easy to verify pay is correct
Common mistakes with hourly wages
Rounding hours down
Some employers round clock times down, shortchanging employees. If rounding is used, it must be neutral over time (not always benefiting the employer).
Missing penalty rates
Failing to apply weekend, public holiday, or overtime rates as required by the award results in underpayment.
Not updating after wage reviews
Continuing to pay the previous year's minimum rate after the 1 July increase is a common compliance failure.
Unpaid working time
Not paying for pre-shift meetings, training, or required setup time that counts as work under the award.
Key takeaways
Hourly wages provide a transparent way to compensate employees based on actual hours worked. In Australia, hourly rates must meet the national minimum wage or the applicable Modern Award rate, whichever is higher. Penalty rates for overtime, weekends, and public holidays are calculated as multipliers of the base hourly wage.
Accurate hourly wage calculations require proper time tracking and award interpretation. Workforce management software like RosterElf can automate these calculations, ensuring employees are paid correctly for every hour worked while maintaining compliance with Fair Work requirements.
