Australian workforce enjoys one of the most sophisticated and complex remuneration structures in the developed World. 

The Australian Bureau of Statistics (ABS) finds 3 main ways of setting salaries and wages of employees: (i) Industrial Award, (ii) Enterprise Agreements and (iii) Individual Arrangements.

Industrial Awards

Industrial Awards are legally enforceable determinations which are mainly made by the federal Fair Work Commission. The Commission is responsible for setting the minimum pay and conditions for employees in a particular industry or occupation. Any employer paying less than the minimum wage specified in the relevant award is in breach of law and could be prosecuted.

Every year the Commission reviews and usually increases the “national minimum wage”, which is the lowest amount any adult employee may be paid. In June 2017, the national minimum wage was increased by 3.3% to $18.29 an hour. According to the latest statistics by ABS (May 2016), 23% of 10.1 million Australian employees were subject to minimum wage set by the Commission.

Most part time employees are covered by Awards.  The slowly increasing proportion of part time jobs are contributing to the greater coverage of workforce in this Award system. Industrial Awards are most common in hospitality (covering 43% of employees), administrative services (42%) and retailing (34%).

Enterprise Agreements

Enterprise Agreements are made at an enterprise level between employers and employees with representations by their union. In these Agreements, they collectively bargain for pay and conditions for all employees of the enterprise or agency.

These Agreements must be registered with the Commission and they usually have wage rates and conditions (such as paid leave) that are more generous than provided for in the Industrial Awards. Approximately 36% of employees are covered by Enterprise Agreements in Australia.

Collective bargaining is most common in public sector including public administration (78%), education and training (63%), utilities (60%) and health care (55%).

Individual Agreements

Individual Agreements are negotiated between an employer and employee. They certainly include executives and employees in highly paid professions whose wages and conditions have always been set by direct negotiation with the boss or board of directors.

Chief Executive Officers of large corporations are employees whose contracts are individually agreed upon with their respective board of directors. The largest share of employees’ (41%) wages are set by Individual Agreements and some of which could include people who are still on individual contracts left over from the Work Choice era.

Individual Agreements are most common in professional and technical services (80%), wholesale trade (70%), rental and real estate services (63%), construction (58%) and manufacturing (55%).

By comparison, the hourly rates of pay are highest for employees with Enterprise Agreements ($39.60), with Individual Arrangements next on $38.50 and Industrial Awards last on $29.60.

Australian workforce is changing. There are varied levels of employees covered by different award systems. There is a higher proportion of highly paid managers and professionals in the Individual Arrangements category than Enterprise Agreements.

Some industries are growing faster than others but different industries have different degrees of reliance on particular wage-setting structures and methods. This makes Australian industrial relations system as interesting as its people.