A remuneration package includes salary or wages but may also contain other benefits or rewards such as accommodation, a car, telephone, gas or electricity allowances, meals or milk. Working out a good remuneration package will help to attract, retain and encourage the right employees.
Remuneration packages should suit the business situation, and reflect the responsibilities and duties of the position and the skills and abilities of the employee. To attract and retain staff it is also important to consider current market rates being offered for similar positions.
Pay is often called wages or salary. The term ‘wages’ usually refers to the monetary payment made to employees who are paid on the basis of time worked (by the hour, day or week). A salary is generally accepted to be the term used when employees are paid a set amount which is not paid on the basis of time actually worked. Visit the pay rates section for information on:
- hours of work
- types of pay
- pay rates
- calculating flat rates of pay
Bonuses are designed to reward employees who meet set targets or goals, for example, higher productivity. Performance measures might be milk production over a particular period, annual profit, or incidence of mastitis. Bonuses cannot stand in place of award requirements for rates of pay but can be considered when putting in place a workplace agreement.
Share of young stock as incentive
A common incentive for farm employees is to be given a share of the young stock that are raised each year. The stock can stay on the farm and be treated as part of the herd with ownership remaining with the employee. Over time, the employee can build up a significant asset that provides a start for his or her own herd.
Always have an exit clause in any stock bonus incentives. It is difficult to predict the future and problems may occur when ownership of stock is involved and an employee is leaving.
Pay milkers a percentage of the premium milk payment as incentive bonus
Another common incentive is to pay milkers a bonus which is a percentage of the premium milk payment that is credited to the proceeds due to quality of milk. This gives an incentive to keep focused on quality as it has a direct impact on the bonus.
Avoid incentive schemes that don’t genuinely reward employee performance
Some bonuses are set up such that there is little ability for the employee(s) to influence them. For example, the number of cow deaths may be related directly to the age of the herd or the transition cow management strategy. If the employee is unable to influence these factors, then no matter how much attention is given to cows at calving the employee will have little impact on death rates. Avoid incentive schemes that don’t genuinely reward employee performance because they lead to disenchantment.
A gratuity is a payment to an employee without conditions or qualifications attached to it. For example, on retirement an employee may be given a certain sum in addition to other entitlements simply in recognition of the work that he or she has performed for the business. Employers should take particular care to ensure that any gratuity is clearly documented in order to avoid confusion with other payments that an employee must receive by law.
Contract milkers are often paid ‘by the milking’ and are regarded by some employers as contractors rather than employees. From a legal perspective, despite their title, in most cases they will be classified as casual employees and be entitled to some employment benefits including award or state (WA) minimum wages.
Entitlements for share farmers will depend upon the terms of the particular share farming arrangement – read more about share farming arrangements.
Workers compensation laws vary between states and territories. Share farmers should check with their workers compensation insurer as each situation may be different.
Although remuneration is mostly thought of as wages, the value of accommodation, a car, telephone, gas or electricity allowances, meals or milk and any other benefits can be considered when putting together a total package.
Benefits cannot take the place of minimum award rates of pay and entitlements, or state (WA) or federal minimum rates of pay and entitlements but they may be used as part of the calculation for over award payments or payments which are over the minimum rate of pay.
However, such benefits can be used to offset award minimum rates of pay and entitlements in workplace agreements provided a monetary value is able to be given to the benefit and the employee is not worse off financially than under the minimum terms of the award.
All states have residential tenancies laws and some apply to accommodation on farms where the accommodation is not a part of the wider lease of the farming property. These laws lay down notice periods for ending the tenancy, whether bonds can be collected, how much can be charged, and rules regarding repairs and inspections. Some states require written agreements with specific terms. Breaches of these laws attract fines.
Whilst residential tenancy laws can protect both the tenant and the landlord, the notice periods for ending the tenancy can be problematic when an employee is dismissed and accommodation has been part of their remuneration package. It can be particularly problematic if the employee is dismissed summarily for misconduct. Notice periods will continue to apply (usually 60 days up to 120 days) and the only avenue the farmer will have to reduce the period is to go to one of the tenancy tribunals and make an application on the grounds of hardship.
Residential tenancy laws do not usually apply where the tenancy is not ‘for value’ which means that no rent is paid for the accommodation. However, farmers should be aware that including accommodation in a formal workplace agreement, where the accommodation is used as a part of the Better Off Overall Test (BOOT), may make the tenancy ‘for value’ and thus attract residential tenancy laws. For more information, visit State Industrial Laws
Fringe Benefits Tax implications
There are Fringe Benefits Tax implications for some benefits. Usually accommodation is excluded as are farm vehicles over 1 tonne but advice should be sought from an accountant before including such benefits in a remuneration package or workplace agreement. For more information, visit the Australian Taxation Office
Superannuation is not technically part of the employment remuneration package as, apart from a number of exceptions,all employers must pay superannuation for all employees. Visit our pay rates for more details about superannuation.
However, some employers choose to pay an increased rate of superannuation to attract employees and in this case, superannuation may form part of the remuneration package.
Once you have determined the relevant minimum amounts of remuneration required by law and any other benefits which you may be able to provide you can begin to work out a package.
In some circumstances it may be more straightforward to work out a package for full-time employees that includes a flat rate of pay taking into account overtime and penalty rates. As this is a variation to the award, the employer and employee must agree to the pay rate as part of an Individual Flexibility Agreement (IFA) or an enterprise agreement. IFAs and enterprise agreements must pass the Better Off Overall Test (BOOT) to ensure that the employee is better off overall compared with the award.
If you want to attract the right people you need to match market pay rates. The market rate is, more often than not, above the minimum rate of pay.
Document roles and responsibilities in position descriptions
Clarify roles and responsibilities for all people working on your farm by creating position descriptions
Consider other benefits
Once you have determined the current market rate, you can then add other benefits into the equation.
For instance, the face value of a wage for a dairy farm employee may not appear to be attractive compared with other industries. However, when the total package is measured you may be surprised at its value to the employee.
For example, a wage of $21.57 per hour for a 45-hour week comes to $55,146. The value of accommodation in rural areas is around $200 per week or $11,000 per year. If you also supply meat and milk and consider the fact that there is no travel cost to and from work, the value of the package is nearly $66,000 or $26.00 per hour.
Accommodation and other benefits
The agreed value of accommodation and/or other benefits can be deducted by the employer from an employee’s wages provided an Authority to Deduct has been completed by the employee.