Salary vs wages in Australia
In Australia, the terms "salary" and "wages" are often used interchangeably, but they have distinct meanings under employment law. Understanding the difference is important for both employers and employees to ensure correct pay calculations and Fair Work compliance.
Salary
- Fixed annual amount
- Paid in regular instalments
- May include overtime/loadings
- Common for professional roles
Wages
- Based on hours worked
- Varies each pay period
- Overtime paid separately
- Common for shift-based roles
Regardless of whether an employee receives a salary or wages, employers must ensure the total pay meets or exceeds the minimum rates in the applicable Modern Award or enterprise agreement.
How salary works in Australia
Salaried employees in Australia are typically paid a fixed amount each pay period (weekly, fortnightly, or monthly). The annual salary is divided equally across pay periods, providing predictable income regardless of slight variations in hours worked.
What a salary typically includes
When advertising jobs or negotiating pay, it's important to clarify whether the salary figure is "package" (including super) or "base" (super on top). This affects the actual take-home pay significantly.
Annualised salaries and award compliance
An annualised salary arrangement pays a single amount intended to cover all award entitlements including overtime, penalty rates, and allowances. These arrangements are common but come with strict compliance requirements under Fair Work regulations.
Australian compliance requirement
Many Modern Awards require employers to conduct annual reconciliations for annualised salary employees. You must compare what the employee actually earned against what they would have received under the award, and pay any shortfall within 14 days. Failure to do so can result in significant penalties.
Benefits of salary employment
For employers
- Predictable costs: Fixed wage expense for budgeting
- Simpler payroll: Same amount each pay period
- Flexibility: Employees can work slightly longer when needed
- Attract talent: Salaried roles often perceived as more professional
For employees
- Income stability: Same pay regardless of hours variation
- Easier budgeting: Know exactly what each pay will be
- Full entitlements: Paid leave and NES protections apply
- Career progression: Often comes with more responsibility
Common mistakes with salary arrangements
Not tracking hours worked
Annualised salary arrangements require hour tracking to verify the salary covers award entitlements. Use time and attendance software to maintain records.
Skipping annual reconciliations
Many awards mandate yearly checks comparing actual salary paid against award entitlements. Missing these can result in back-payment claims.
Unclear salary packaging
Not specifying whether salary is base or package (including super) leads to disputes. Always clarify in the employment contract.
Expecting unlimited hours
Salaried employees can still refuse unreasonable additional hours. The Fair Work Act protects against excessive hours even for salaried workers.
Key takeaways
A salary provides fixed, predictable pay for employees, but Australian employers must ensure the annual amount meets or exceeds what the employee would earn under their applicable Modern Award. This includes tracking hours for annualised salary arrangements and conducting required reconciliations.
Whether you pay salaries or wages, using payroll integration software can help ensure accurate calculations and Fair Work compliance. RosterElf integrates with major payroll systems to streamline timesheet exports and reduce the risk of underpayment claims.
