Working out a remuneration package

A remuneration package includes wages or salary and may also offer additional benefits such as accommodation, a vehicle, phone, utilities, meals, or milk. A well-structured package helps attract, retain, and motivate the right employees. It should reflect the business’s circumstances, the responsibilities of the role, the employee’s skills, and current market rates for similar positions.

Pay

Pay is often referred to as wages or salary. Wages are payments based on time worked (hourly, daily, or weekly), while a salary is a fixed amount not tied to hours worked. For details on classifications, hours of work, pay types, pay rates, and calculating flat rates, visit the pay rates section.

Bonuses & incentives

Bonuses reward employees for meeting specific targets, such as increased milk production, annual profit, or reduced mastitis rates. They cannot replace award pay requirements but can be included as part of a workplace agreement.

Share of young stock as incentive

A common incentive is to offer employees a share of the young stock raised each year, allowing them to build their own herd over time while the animals remain on the farm. Always include an exit clause in stock incentive agreements to manage potential issues if the employee leaves.

Pay milkers a percentage of the premium milk payment as incentive bonus

Another effective incentive is to pay milkers a bonus based on a percentage of the premium milk payment received for high-quality milk, encouraging a strong focus on maintaining milk quality.

Avoid incentive schemes that don’t genuinely reward employee performance

Avoid incentive schemes that employees cannot meaningfully influence. For example, cow deaths may depend more on herd age or management strategy than on the employee’s actions. Bonuses tied to factors beyond their control can cause frustration and should be avoided.

Gratuities

A gratuity is an unconditional payment made to an employee, often on retirement, as recognition of their service in addition to legal entitlements. Employers should clearly document any gratuity to avoid confusion with mandatory payments.

Contract milkers

Contract milkers are often paid “per milking” and may be treated as contractors by employers, but in most cases, they are legally considered casual employees. This means they are usually entitled to award or state (WA) minimum wages, and employers must also comply with workers compensation and superannuation obligations.

Share farmers

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.

Other benefits

While remuneration is usually thought of as wages, benefits such as accommodation, a car, utilities, meals, or milk can also form part of a total pay package. These benefits cannot replace minimum award or state (WA) or federal pay and entitlements but can contribute to over-award payments. They may also be used to offset minimum award entitlements in a workplace agreement, provided a clear monetary value is assigned and the employee is not financially worse off than under the award.

Accommodation

Visit the accommodation page for detailed information about providing accommodation for employees as part of a package.

Fringe Benefits Tax implications

Some benefits may attract Fringe Benefits Tax. Accommodation and farm vehicles over one tonne are usually exempt, but employers should seek accounting advice before including any benefits in a remuneration package or workplace agreement.

Superannuation

Superannuation is generally not considered part of a remuneration package, as employers are legally required to pay it for all employees (with limited exceptions). However, some employers choose to contribute above the minimum rate to attract staff, in which case superannuation can be included as part of the overall remuneration package.

Building a package to attract the right person

Once you’ve identified the minimum legal pay and any additional benefits, you can put together a remuneration package. In some cases, it may be simpler to offer full-time employees a flat rate that includes overtime and penalty rates. Because this varies from the award, it must be agreed to in an Individual Flexibility Agreement (IFA) or enterprise agreement, which must pass the Better Off Overall Test (BOOT) to ensure the employee is better off overall than under the award. Find more information on IFA’s on our Pastoral Award 2020 page.

Enterprise agreements must be lodged with the Fair Work Commission for approval, while Individual Flexibility Agreements (IFAs) do not require ratification but can only be used if they leave the employee better off than under the award.

Consider other benefits

To attract the right people, you need to offer pay that matches market rates, which are often higher than the minimum wage. Once you know the market rate, include other benefits to show the full value of the package. For example, a wage of $25.29 per hour for a 45-hour week totals about $59,178.60 per year. Adding accommodation worth about $10,400 per year, plus extras such as meat, milk, and no travel costs, lifts the total package value to roughly $69,578.60 — equivalent to about $29.73 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.