This article was published in the April 2007 issue of Australian Labour Market Statistics (cat. no. 6105.0).
METHODS OF SETTING PAY
INTRODUCTION
The last two decades have seen a move away from a centralised system of awards that set pay levels and increases, towards agreements at the enterprise, workplace and individual levels. Information on how employees' pay is set has been collected in the biennial Survey of Employee Earnings and Hours (EEH) since 2000. This article uses estimates from the 2000, 2002, 2004 and 2006 surveys to compare how methods of setting pay have changed over time. It also compares the average earnings of employees for each of the methods of setting pay, and discusses sector, industry and occupational differences in the methods used to set pay in May 2006.
METHODS OF SETTING PAY
Three different methods of setting pay are identified in the EEH survey: awards, collective agreements and individual arrangements.
Awards are legally enforceable determinations made by federal or state industrial tribunals that set the terms of employment (pay and conditions) usually in a particular industry or occupation. Employees are classified to the 'Award only' category if they are paid at the rate of pay specified in the award and are not paid more than that rate of pay.
Collective agreements, which include enterprise and workplace agreements, are agreements between an employer (or group of employers) and a group of employees (or one or more unions or employee associations representing the employees). Collective agreements set the terms of employment (pay and conditions) for a group of employees, and are usually registered with a state or federal industrial tribunal or authority.
Individual arrangements are arrangements between an employer and an individual employee on the terms of employment (pay and conditions) for the employee. Employees whose pay is set through an individual arrangement include those whose pay is set by an individual contract, registered individual agreement (e.g. an Australian Workplace Agreement), common law contract, employees receiving overaward payments by individual agreement, and working proprietors of incorporated businesses.
In May 2006, 41% of employees had their pay set by a collective agreement, 40% by individual arrangement, and a further 19% by award only. The proportion of employees paid by award only has declined between 2000 and 2006 (down from 23% in May 2000), while the proportion of employees paid by a collective agreement has risen slightly (up from 37% in May 2000). The proportion of employees paid by individual arrangement has fluctuated slightly between 2000 and 2006, although it has remained at around 40% for most of this period.
1. METHODS OF SETTING PAY - May 2000-May 2006
In May 2006, average weekly total cash earnings for employees who had their pay set by award only was $491.10. This compares with $886.90 for employees who had their pay set by a collective agreement and $988.60 for employees who had their pay set by individual arrangement.
2. AVERAGE WEEKLY TOTAL CASH EARNINGS(a), by Methods of Setting Pay - May 2006
SECTOR
Overall, the private sector tends to have a greater diversity of methods of setting pay than the public sector. In May 2006, 42% of all private sector employees had their pay set by a registered or unregistered individual arrangement, 28% by a collective agreement and 23% by award only. A further 6% of private sector employees were a working proprietor in their own incorporated business. In contrast, the majority of public sector employees had their pay set by a collective agreement (93%).
3. METHODS OF SETTING PAY, Proportion of employees - by Sector - May 2006 |
|  |
| | | Collective agreement
| Individual arrangement
| | |
| | Award only | Registered | Unregistered | | Registered | Unregistered | Working proprietor of
incorporated business | All methods of setting pay | |
| | % | % | % | | % | % | % | % | |
| |
| Males | | | | | | | | | |
| Private sector | 17.4 | 23.2 | 3.9 | | 3.9 | 43.1 | 8.6 | 100.0 | |
| Public sector | *1.4 | 92.4 | *0.2 | | 2.4 | 3.6 | . . | 100.0 | |
| All sectors | 14.7 | 34.6 | 3.3 | | 3.6 | 36.6 | 7.2 | 100.0 | |
| Females | | | | | | | | | |
| Private sector | 29.7 | 25.8 | 3.6 | | 2.7 | 34.4 | 3.8 | 100.0 | |
| Public sector | *3.1 | 93.2 | **0.2 | | 1.6 | 1.8 | . . | 100.0 | |
| All sectors | 23.4 | 41.7 | 2.8 | | 2.5 | 26.7 | 2.9 | 100.0 | |
| Persons | | | | | | | | | |
| Private sector | 23.1 | 24.4 | 3.8 | | 3.3 | 39.0 | 6.3 | 100.0 | |
| Public sector | *2.4 | 92.9 | *0.2 | | 2.0 | 2.6 | . . | 100.0 | |
| All sectors | 19.0 | 38.1 | 3.0 | | 3.1 | 31.7 | 5.1 | 100.0 | |
| |
| * estimate has a relative standard error of 25% to 50% and should be used with caution |
| ** estimate has a relative standard error greater than 50% and is considered too unreliable for general use |
| . . not applicable |
| Employee Earnings and Hours, Australia, May 2006 (cat. no. 6306.0). |
OCCUPATION
In May 2006, individual arrangements were most prevalent in the Managers occupation group, with 54% of Managers having their pay set by a registered or unregistered individual arrangement, while a further 23% of Managers were working proprietors of their own incorporated business. Awards were more prevalent in the lower skilled occupation groups, with 39% of Community and personal service workers, 32% of Sales workers and 30% of Labourers having their pay set by award only. In contrast, only 3% of Managers and 7% of Professionals had their pay set by award only. The occupation group with the highest proportion of employees paid by a collective agreement was Professionals (56%).
4. METHODS OF SETTING PAY, Proportion of employees - by Occupation group - May 2006 |
| |
| | | Individual arrangement
| | |
| Award only | Collective agreement(a) | Registered or unregistered | Working proprietor of
incorporated business | Total | All methods of setting pay | |
| % | % | % | % | % | % | |
| |
| Managers | 2.6 | 20.9 | 53.7 | 22.8 | 76.5 | 100.0 | |
| Professionals | 6.6 | 56.1 | 32.5 | 4.8 | 37.3 | 100.0 | |
| Technicians and trade workers | 18.7 | 31.3 | 43.3 | 6.7 | 50.0 | 100.0 | |
| Community and personal service workers | 39.2 | 43.6 | 16.9 | *0.3 | 17.2 | 100.0 | |
| Clerical and administrative workers | 13.4 | 40.1 | 42.8 | 3.7 | 46.5 | 100.0 | |
| Sales workers | 32.4 | 37.5 | 28.4 | 1.7 | 30.1 | 100.0 | |
| Machinery operators and drivers | 16.3 | 44.5 | 35.6 | 3.5 | 39.1 | 100.0 | |
| Labourers | 29.7 | 43.4 | 25.5 | 1.4 | 26.9 | 100.0 | |
| All occupations | 19.0 | 41.2 | 34.8 | 5.1 | 39.9 | 100.0 | |
| |
| * estimate has a relative standard error of 25% to 50% and should be used with caution |
| (a) Includes registered and unregistered collective agreements. |
| Employee Earnings and Hours, Australia, May 2006 (cat. no. 6306.0). |
INDUSTRY
The Accommodation, cafes and restaurants industry had the highest proportion of employees with their pay set by award only (57%). The proportion of employees paid by a collective agreement was highest in Government administration and defence (92%) and lowest in Accommodation, cafes and restaurants (9%). The proportion of employees paid by individual arrangement was highest in Wholesale trade (78%) and lowest in Education (7%).
5. METHODS OF SETTING PAY, Proportion of employees - by Industry - May 2006 |
| |
| | | Individual arrangement
| | |
| Award only | Collective agreement(a) | Registered or unregistered | Working proprietor of
incorporated business | Total | All methods of setting pay | |
| % | % | % | % | % | % | |
| |
| Mining | *2.4 | 29.8 | 66.7 | *1.1 | 67.8 | 100.0 | |
| Manufacturing | 10.6 | 37.7 | 47.4 | 4.3 | 51.7 | 100.0 | |
| Electricity, gas and water supply | *0.9 | 84.4 | 14.4 | *0.3 | 14.7 | 100.0 | |
| Construction | 12.0 | 27.7 | 43.5 | 16.8 | 60.3 | 100.0 | |
| Wholesale trade | 12.8 | 9.5 | 71.1 | 6.6 | 77.7 | 100.0 | |
| Retail trade | 28.7 | 34.8 | 32.1 | 4.4 | 36.5 | 100.0 | |
| Accommodation, cafes and restaurants | 57.2 | 8.8 | 30.6 | 3.5 | 34.0 | 100.0 | |
| Transport and storage | 12.4 | 40.4 | 40.9 | 6.3 | 47.1 | 100.0 | |
| Communication services | **0.9 | 61.3 | 30.7 | 7.1 | 37.8 | 100.0 | |
| Finance and insurance | 5.1 | 42.6 | 45.8 | 6.4 | 52.3 | 100.0 | |
| Property and business services | 23.2 | 15.5 | 52.4 | 8.9 | 61.3 | 100.0 | |
| Government administration and defence | *0.6 | 91.8 | 7.6 | . . | 7.6 | 100.0 | |
| Education | 11.9 | 81.5 | 6.5 | *0.2 | 6.7 | 100.0 | |
| Health and community services | 25.4 | 58.4 | 14.0 | 2.2 | 16.2 | 100.0 | |
| Cultural and recreational services | 19.2 | 40.7 | 37.2 | *2.9 | 40.1 | 100.0 | |
| Personal and other services | 23.4 | 46.4 | 26.8 | 3.4 | 30.1 | 100.0 | |
| All industries | 19.0 | 41.2 | 34.8 | 5.1 | 39.9 | 100.0 | |
| |
| * estimate has a relative standard error of 25% to 50% and should be used with caution |
| ** estimate has a relative standard error greater than 50% and is considered too unreliable for general use |
| . . not applicable |
| (a) Includes registered and unregistered collective agreements. |
| Employee Earnings and Hours, Australia, May 2006 (cat. no. 6306.0). |
FURTHER INFORMATION
Further information can be found in Employee Earnings and Hours, Australia, May 2006 (cat. no. 6306.0), which was released on 28 February 2007. The publication and associated spreadsheets provide statistics on the composition and distribution of employee earnings and hours paid for, and how their pay is set. For information about these and related statistics contact Perth office on (08) 9360 5305 or the National Information and Referral Service on 1300 135 070.
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