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Employment arrangements: How pay is set
Methods of setting pay Of all employees in May 2000, the largest proportion (40%) had their pay set by individual agreements. Almost as many (37%) had their pay set by collective agreements, while the remaining 23% had their pay set by awards only (i.e. were paid at exactly the award rate). The vast majority of employees whose pay was set by collective agreements were in collective agreements that had been registered with a federal or State tribunal. In contrast, the vast majority of employees whose pay was set by individual agreements had unregistered agreements - including individual common law contracts and less formal arrangements. There are many factors which have a bearing on the pay setting methods currently in place, including the size, sector (public or private) and industry of the employer. There is also an association between certain employee characteristics (e.g. occupation, full-time/part-time status, sex) and the methods used to set employees' pay. The following subsections will briefly examine the influence that each of these factors has on how employees' pay is set, and will touch on some of the complex interrelationships that exist between them. METHODS OF SETTING PAY - MAY 2000
Employer size Smaller businesses (i.e. those with less than 100 employees) are more likely to use individual agreements, while those with larger numbers of employees are more likely to use collective agreements. In May 2000, the proportion of employees whose pay was set by individual agreements ranged from 69% in businesses of less than 20 employees down to 9% in those with 1,000 or more employees. Conversely, the proportion of employees whose pay was set by collective agreements ranged from 4% in businesses of less than 20 employees up to 83% in those with 1,000 or more employees. Award-only employees comprised a similar proportion of employees (between 25% and 32%) in all but the largest businesses. In businesses with 1,000 or more employees, only 8% of employees had their pay set by awards only. EMPLOYER SIZE AND METHODS OF SETTING PAY - MAY 2000
Industry For most industry groups the distribution of employees across pay setting methods largely reflects their distribution across employer size categories. However, other factors such as economic sector of employer and occupational skill levels of employees also influence pay setting methods in some industries. In May 2000, consistent with recent directions in government policy, collective agreements were the most common pay setting method used in the predominantly public sector industries. The proportions of employees whose pay was set by collective agreements were highest in Government administration and defence (78%), Education (77%), Electricity, gas and water supply (77%) and Communication services (69%). These industries are also dominated by very large employers. In the Health and community services industry, which is also mainly public sector, 44% of employees had their pay set by collective agreements, 37% by awards only and 19% by individual agreements. This pattern partly reflects the more even spread of employees across all employer size categories in this industry. Individual agreements were the most common method used to set employees' pay in all but two of the predominantly private sector industries. In May 2000, the three industries with the highest proportions of employees with individual agreements were Wholesale trade (77%), Property and business services (68%) and Construction (61%). These industries also had the highest proportions of employees working in businesses with less than 20 employees, and relatively low proportions working in businesses with 500 or more employees. In the Finance and insurance industry, more employees had their pay set by collective agreements (50%) than individual agreements (44%). This was in keeping with the proportion of employees working in larger businesses in this industry. Award-only employees comprised the majority (65%) of all employees in the Accommodation, cafes and restaurants industry in May 2000. Consistent with the predominance of small businesses in this industry, only 7% of employees had their pay set by collective agreements, but use of individual agreements was much lower than in other ‘small business’ industries. It may be that the predominance of award-only employees in this industry is associated with its relatively low-skill occupational profile. This may also be a factor in Retail trade, which had a relatively high proportion of award-only employees (35%). Award-only employees also comprised relatively large proportions of all employees in Health and community services (37%) and in Personal and other services (27%). INDUSTRY OF EMPLOYMENT AND METHODS OF SETTING PAY - MAY 2000
Occupation The occupations in which awards still predominate tend to be associated with lower skill levels. In May 2000, the occupation groups with the highest proportions of award-only employees were Elementary clerical, sales and service workers (42%) and Labourers and related workers (37%). In all other major occupation groups, award-only employees made up the smallest proportion of total employees. In the higher and intermediate skill level occupation groups, individual agreements tended to be the most common method of setting pay in May 2000. The exceptions were Professionals and Intermediate production and transport workers, who were more likely to have their pay set by collective agreements. Notably, the proportion of employees in professional occupations who had their pay set by collective agreements (51%) was higher than for any other occupation group. This may be because a large proportion of professionals (particularly teachers and nurses) work for large public sector employers. The proportions of employees whose pay was set by individual agreements were highest among Managers and administrators (74%), Advanced clerical and service workers (65%) and Associate professionals (54%). OCCUPATION OF EMPLOYEES AND METHODS OF SETTING PAY - MAY 2000
Source: Employee Earnings and Hours, Australia, May 2000 (ABS cat. no. 6306.0). Full-time and part-time employees In May 2000, similar proportions of both full-time and part-time employees had their pay set by collective agreements (38% and 35% respectively). However, there were large differences between full-time and part-time employees in relation to individual agreements and awards. Among full-time employees the most common method of setting pay was individual agreements (47%) and the least common was awards only (15%). In contrast, the most common method of setting pay for part-time employees was awards only (40%) and the least common was individual agreements (26%). Part of this difference can be attributed to differences in the occupation and industry mix of full-time and part-time employees. For example, in May 2000, proportionally more full-time than part-time employees were working in occupations in which individual agreements were the predominant method of setting pay (55% compared with 42%).1 On the other hand, proportionally more part-time than full-time employees were working in occupations in which awards were the predominant method of setting pay (39% compared with 14%).1 Similarly, over half (53%) of all part-time employees, but only 22% of all full-time employees, were found in the three industry groups with the highest proportions of award-only employees.1 However, in May 2000, there was also a general tendency towards using awards to set pay for part-time employees, and individual agreements to set pay for full-time employees. In all of the occupation groups, and in all but one of the industry groups, part-time employees were more likely than full-time employees to have their pay set by awards only. Similarly, in all but one of the occupation groups, and in 11 of the 16 industry groups, full-time employees were more likely than part-time employees to have their pay set by individual agreements. FULL-TIME, PART-TIME STATUS OF EMPLOYEES AND METHODS OF SETTING PAY - MAY 2000
Male and female employees Pay setting methods varied considerably between men and women in May 2000. While equal proportions of male and female employees (37%) had their pay set by collective agreements, female employees were more likely than males to have their pay set by awards, and less likely to have their pay set by individual agreements. Close to 30% of all female employees had their pay set by awards only (compared with 17% of males) and 33% had their pay set by individual agreements (compared with 47% of males). Some of this difference can be explained by the much higher proportion of female employees who worked part-time in May 2000 (43% compared with 13% of male employees).1 However, even among full-time employees, females were more likely than males to have their pay set by awards only (20% compared with 12% of males) and less likely than males to have their pay set by individual agreements (42% compared with 50% of males). Part of this difference can be attributed to the different occupation and industry mix of female and male full-time employees. For example, in May 2000, 43% of all female full-time employees, but only 23% of male full-time employees, were found in the three relatively low-skill occupation groups with the highest proportions of award-only employees.1 Similarly, 33% of all female full-time employees, but only 17% of all male full-time employees, were found in the three industry groups with the highest proportions of award-only employees.1 Compositional effects aside, in all of the occupation groups, female full-time employees were more likely than male full-time employees to have their pay set by awards only. This was also the case in 11 of the 16 industry groups. In all but one of the occupation groups, female full-time employees were less likely than male full-time employees to have their pay set by individual agreements. However, this pattern was less widespread across industry groups, being evident in only half of them. AVERAGE WEEKLY TOTAL EARNINGS OF EMPLOYEES AND METHODS OF SETTING PAY - MAY 2000
Source: Employee Earnings and Hours, Australia, May 2000 (ABS cat. no. 6306.0). Relative earnings of employees Comparing employee earnings across methods of setting pay provides a broad indication of the different wage and salary outcomes for employees under varying methods, and can help to identify those groups of employees most at risk of disadvantage in the workplace. However, such comparisons only provide part of the picture. Access to other employee benefits such as employer funded superannuation (over and above the prescribed minimum), employee discounts, employer provided/subsidised services (e.g. childcare), paid leave and so on, also have a considerable impact on the working lives and overall wellbeing of employees. In addition, the agreement-making process allows for rolling some employee entitlements (e.g. paid overtime) into a general weekly pay level. This could affect the comparability of average weekly earnings across pay setting methods, as could practices such as salary packaging and salary sacrificing which reduce cash earnings. In May 2000, employees whose pay was set by individual agreements earned an average of $731 per week which was 1.1 times the average for all employees. Those whose pay was set by collective agreements earned a little less ($717 per week ). The average weekly earnings of award-only employees were much lower, averaging $416, or 0.6 of the average for all employees. Relatively low average earnings among award-only employees are consistent with the recently reduced role of awards in setting minimum wages and conditions. However, such broad level comparisons can be strongly affected by certain compositional factors such as the full-time/part-time, male/female and occupational mix of employees in each pay setting group. For example, over half (56%) of award-only employees worked part-time compared with 30% of employees whose pay was set by collective agreements, and 21% of those whose pay was set by individual agreements. Taking the full-time/part-time status and sex of employees into account, award-only earnings were still considerably lower than for the other pay setting methods, particularly among male full-time employees. However, with the exception of male part-time workers, employees whose pay was set by collective agreements had higher average earnings than those who had individual agreements. A similar pattern occurs with occupation groups. Among full-time employees in May 2000, both males and females whose pay was set by collective agreements had the highest average earnings in all but one of the nine occupation groups. It was only among Professionals that individual agreements delivered the highest average earnings. Among male full-time employees, award-only employees had the lowest average earnings (compared with other pay setting methods) in all occupation groups except Advanced clerical and service workers and Intermediate production and transport workers. In these two occupation groups, those on individual agreements had the lowest average earnings. Among female full-time employees, award-only employees had the lowest average earnings in all occupation groups. The degree of the difference between award-only earnings and the highest average earnings for full-time employees in each group tended to be less for females than males in most occupation groups. By far the greatest difference for both males and females was among Tradespersons and related workers, possibly because apprentices make up a relatively high proportion of award-only employees in this group. The earnings ratio of male full-time award-only employees in this occupation group was 0.7 compared with 1.3 for those whose pay was set by collective agreements. For female full-time employees, the ratios were 0.9 and 1.3 respectively. In most industry groups, full-time employees whose pay was set by individual agreements had the highest average earnings. The difference between their earnings and the earnings of those whose pay was set by other methods was greatest among male full-time employees in industries dominated by large employers. This is consistent with the common practice in large enterprises of using collective agreements to set the pay of the majority of employees, and individual agreements for the (predominantly male) higher level managerial and executive staff. Among male full-time employees, award-only employees had the lowest average earnings (compared with other pay setting methods) in all industry groups except Mining (where those on individual agreements had the lowest earnings) and Accommodation, cafes and restaurants (where those with collective agreements had the lowest earnings). Among female full-time employees, award-only employees had the lowest average earnings in all industry groups except Accommodation, cafes and restaurants (where those with collective agreements had the lowest earnings). AVERAGE WEEKLY TOTAL EARNINGS OF FULL-TIME EMPLOYEES: OCCUPATION AND METHODS OF SETTING PAY - MAY 2000
(b) Occupation groups are based on the Australian Standard Classification of Occupations (ASCO) Second Edition (ABS Cat. no. 1220.0). Source: ABS 2000 Survey of Employee Earnings and Hours. Endnotes 1 Australian Bureau of Statistics, May 2000 Labour Force Survey.
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