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In This Module

Working out a remuneration package

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

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 page for information on:

  • classifications
  • hours of work
  • types of pay
  • pay rates
  • calculating flat rates of pay

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Bonuses & incentives

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
Tip
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
Tip
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
Trap
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.

Gratuities

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.

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Contract milkers

Contract milkers are often paid ‘by the milking’ and are regarded 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 federal or state minimum wages.

Employers should also be aware that workers compensation and superannuation laws will more than likely apply to contract milkers.

Share farmers

Entitlements for share farmers will depend upon the terms of the particular share farming arrangement. Go to Share Farming for more details on share farming arrangements. 
 
Workers compensation laws vary between states and territories and owners should be aware that responsibility for workers compensation insurance will more than likely rest with the owner. 

 

 
Farm Scenario
Graeme and Stephanie took on a job share milking in what appeared to be a great opportunity. The farm had just been acquired by the owner and it had been milking 200 cows in a modern herringbone shed. The new owner set them up on a 20% share of the milk income and their only costs were their bike and farm ute. He had promised that they would milk 400 cows with a high input of concentrates.

The year got off to a good start and the cows kept arriving. What Graeme and Stephanie had not realised, though, was that the shed had only been designed to milk 200 cows and with 400 going through it took 4 hours, twice a day, for both of them to finish the milking. They were hardly seeing the children in the morning or evening and Graeme was tied up most of the rest of the day feeding out, handling calving cattle and doing other jobs. By the end of 12 months, Graeme and Stephanie had put in a huge effort and did their sums on their pay. Not only had they been working for $8 per hour, but they had not been able to do anything else. A fair proportion of their pay had gone in tax and there was little saved for their efforts. They knew it was time to move on.

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Other benefits

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 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.
 

Residential tenancies laws

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 No Disadvantage Test, may make the tenancy ‘for value’ and thus attract residential tenancy laws. For more information see State Industrial Laws.

Fringe Benefits Tax implications
Trap
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 go to the Australian Taxation Office website http://www.ato.gov.au/

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Superannuation

Superannuation is not technically part of the employment remuneration package as, apart from the exceptions listed below, all employers must pay superannuation for all employees.

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. 

Go to Pay rates for more details.

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Building a package to attract the right person

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. Individual Flexibility Agreements and enterprise agreements must pass the Better Off Overall Test (BOOT) to ensure that the employee is better off overall compared with the award. 

Enterprise agreements must be lodged with the Fair Work Commission
Tip
An enterprise agreement must be lodged with the Fair Work Commission; however, an Individual Flexibility Agreement can be implemented without ratification as long as it is better off than the award.

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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
Tip
Clarify roles and responsibilities for all people working on the farm by creating position descriptions.

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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 $17 per hour for a 45 hour week comes to $40,000. 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 $50,000 or $21 per hour.

 

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