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6105.0 - Australian Labour Market Statistics, Oct 2009  
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METHODS OF SETTING PAY


INTRODUCTION

Over the past few years there have been a number of changes to the Australian workplace relations environment, including the introduction of the Workplace Relations Amendment (WorkChoices) Act 2005, which came into effect in March 2006, and more recently the Fair Work Act, which came into effect in July 2009. These changes have contributed to interest in how an employee's pay is set, whether through collective or individual bargaining or through reference to the award system. This article uses data from the two-yearly Survey of Employee Earnings and Hours (EEH) (cat. no. 6306.0) to highlight the latest data on methods of setting pay and how this has changed over time. This article also looks at a range of other characteristics, including industry, occupation, sector and employment status, as well as the average earnings of employees for each of the methods of setting pay.


METHODS OF SETTING PAY

Three different methods of setting pay are identified in the EEH survey: collective agreements, individual arrangements and award or pay scale only.

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/or conditions) for a group of employees, and are usually registered with a state or federal industrial tribunal or authority. Employees are classified to the collective agreement category if the main part of their pay is set by a registered or unregistered collective agreement or enterprise award.

Individual arrangements are organised between an employer and an individual employee for the terms of employment (pay and/or conditions) for the employee. Employees whose pay is set by an individual arrangement include those whose pay is set by an individual contract, registered individual arrangement (e.g. an Australian Workplace Agreement), common law contract and employees receiving over award payments. Working proprietors of incorporated businesses are included in the individual arrangements category within EEH.

Award or pay scale only - awards are legally enforceable determinations made by federal or state industrial tribunals that set the terms of employment (pay and/or conditions), usually in a particular industry or occupation. From March 2006, pay rates for employees in the federal jurisdiction who were previously paid by an award are now contained within the Australian Pay and Classification Scales (Pay Scales). An award or pay scale may be the sole mechanism used to set the pay and/or conditions for an employee or group of employees, or alternatively may be used in conjunction with an individual or collective agreement. Employees are classified to the award or pay scale only category if they were paid at the rate of pay specified in the award pay scale. If an employee was paid more than the rate of pay specified in the award or pay scale they are included in the individual arrangement category.


OVERVIEW

In August 2008, 40% of employees had their pay set by a collective agreement, 39% by a registered or unregistered individual arrangement and 17% of employees had their pay set by award or pay scale only. Working proprietors of incorporated businesses accounted for approximately 5% of employees.

The proportion of employees who had their pay set by an award or pay scale only decreased from 19% in May 2006 to 17% in August 2008. The coverage of this method of setting pay has declined over the last 8 years, from 23% in May 2000 to 17% in August 2008. For registered and unregistered individual arrangements, there was a 4 percentage point increase between May 2006 (35%) and August 2008 (39%). The proportion of employees whose pay was set by a collective agreement had a 1 percentage point decrease between May 2006 (41%) and May 2008 (40%).

1. METHODS OF SETTING PAY - 2000 to 2008
Graph: 1.  METHODS OF SETTING PAY - 2000 to 2008



SECTOR

In August 2008 nearly half (45%) of employees in the private sector had their pay set by an unregistered individual arrangement (i.e. which was not registered with a federal or state tribunal) and a further 26% of employees in the private sector had their pay set by a registered collective agreement. In contrast, almost all (96%) of the public sector employees had their pay set by a registered collective agreement.

The proportion of female employees who had their pay set by award or pay scale only was 20%, compared with 13% of male employees. Collective agreements were also a more common method of setting pay for female employees (43%) than for male employees (37%), while registered or unregistered individual arrangements were more common amongst male employees than female employees (43% compared with 34%). Male employees were twice as likely (8%) to be a working proprietor of an incorporated business than female employees (4%).

2. METHODS OF SETTING PAY, Proportion of employees - By Sector - August 2008

COLLECTIVE AGREEMENT
INDIVIDUAL ARRANGEMENT
Award or pay scale only
Registered
Unregistered
Registered
Unregistered
Working Proprietor of Incorporated Business
Total
All methods of setting pay
%
%
%
%
%
%
%
%

Males
Private Sector
15.7
25.2
*0.6
2.7
47.5
8.3
58.6
100.0
Public Sector
*0.3
94.5
0.9
1.2
3.1
. .
4.3
100.0
All Sectors
13.3
35.9
0.6
2.5
40.7
7.0
50.2
100.0
Females
Private Sector
25.8
26.1
0.8
2.0
41.5
3.8
47.3
100.0
Public Sector
*0.5
97.0
*0.3
0.9
1.3
. .
2.2
100.0
All Sectors
19.9
42.6
0.7
1.8
32.2
2.9
36.9
100.0
Persons
Private Sector
20.4
25.6
0.7
2.4
44.7
6.2
53.3
100.0
Public Sector
*0.4
96.0
0.5
1.1
2.0
. .
3.1
100.0
All Sectors
16.5
39.2
0.6
2.2
36.5
5.0
43.7
100.0

* estimate has a relative standard error of 25% to 50% and should be used with caution
. . not applicable
Source: Employee Earnings and Hours, Australia, August 2008 (cat. no. 6306.0).



INDUSTRY

The industries with the highest proportion of employees with their pay set by collective agreements were Public administration and safety (88%) and Education and training (81%). This is consistent with the high proportion of employees in the public sector who had their pay set by collective agreements (96%). With one in two employees having their pay set by award or pay scale only, Accommodation & food services has the highest proportion of employees (50%) for this method of setting pay. Registered and unregistered individual arrangements were most common in the Wholesale trade (76%) and Professional, scientific and technical services (71%) industries and least common in Public administration and safety (8%) and Education and training (10%).

3. METHODS OF SETTING PAY, Proportion of employees - by Industry - August 2008

Individual Arrangement
Award or pay scale only
Collective agreement(a)
Registered or unregistered
Working proprietor of incorporated business
Total
All methods of setting pay
%
%
%
%
%
%

Mining
*1.2
30.8
66.1
1.8
67.9
100.0
Manufacturing
12.2
29.9
54.3
3.6
57.9
100.0
Electricity, Gas, Water & Waste Services
*5.4
67.5
25.8
1.2
27.0
100.0
Construction
9.1
25.6
49.1
16.1
65.3
100.0
Wholesale Trade
9.0
10.1
75.5
5.3
80.8
100.0
Retail Trade
28.9
36.2
31.1
3.8
34.9
100.0
Accommodation & Food Services
50.3
19.3
28.4
2.1
30.5
100.0
Transport, Postal and Warehousing
8.3
48.9
35.9
6.9
42.8
100.0
Information Media and Telecommunications
5.6
31.1
59.2
4.1
63.3
100.0
Financial and Insurance Services
*2.2
38.9
53.0
6.0
59.0
100.0
Rental, Hiring and Real Estate Services
20.2
*11.9
57.5
10.4
67.9
100.0
Professional, Scientific and Technical services
5.4
8.6
70.9
15.0
85.9
100.0
Administrative and Support Services
33.9
15.7
48.0
2.5
50.5
100.0
Public Administration and Safety
**3.6
88.2
7.9
*0.3
8.2
100.0
Education and Training
*8.4
81.2
9.7
*0.7
10.4
100.0
Health Care and Social Assistance
17.2
64.5
16.2
2.1
18.2
100.0
Arts and Recreation Services
14.2
37.9
43.6
4.3
47.9
100.0
Other Services
25.4
7.3
58.2
9.1
67.3
100.0
Total all industries
16.5
39.8
38.7
5.0
43.7
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
(a) Includes registered and unregistered collective agreements.
Source: Employee Earnings and Hours, Australia, August 2008 (cat. no. 6306.0).



OCCUPATION

The use of the various methods of setting pay differs between occupation groups. Collective agreements were most common for Professionals (52%) and least common for Managers (20%). Registered or unregistered individual arrangements were the most common method of setting pay for Managers (59%), Technicians and trades workers (46%) and Clerical and administrative workers (47%). Award or pay scale only as a method of setting pay was highest for Community and personal service workers (32%), Sales workers (31%) and Labourers (30%).

4. METHODS OF SETTING PAY, Proportion of employees - by Occupation - August 2008

Individual Arrangement
Award or pay scale only
Collective agreement(a)
Registered or unregistered
Working proprietor of incorporated business
Total
All methods of setting pay
%
%
%
%
%
%

Managers
2.3
19.8
59.0
18.9
77.9
100.0
Professionals
4.2
52.4
37.7
5.6
43.3
100.0
Technicians and trades workers
18.4
28.6
45.7
7.3
53.0
100.0
Community and personal service workers
31.7
46.6
20.9
*0.8
21.7
100.0
Clerical and administrative workers
10.7
38.6
46.8
3.9
50.7
100.0
Sales workers
30.5
36.5
31.7
1.3
33.0
100.0
Machinery operators and drivers
12.7
44.8
39.0
3.5
42.5
100.0
Labourers
29.8
41.0
27.8
*1.4
29.2
100.0
Total all occupations
16.5
39.8
38.7
5.0
43.7
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.
Source: Employee Earnings and Hours, Australia, August 2008 (cat. no. 6306.0).



EMPLOYMENT ARRANGEMENTS

The methods of setting pay differs considerably between full-time and part-time employees. For part-time employees, the most common pay-setting arrangement was by collective agreement (43%). Full-time employees were most likely to have their pay set by a registered or unregistered individual arrangement (46%). The proportion of part-time employees (29%) whose pay was set by award or pay scale only was almost three times that for full-time employees (10%). This reflects that many industries with high levels of part-time employment also have high levels of award coverage, such as Accommodation and food services, Retail trade and Health care and social assistance.

5. METHODS OF SETTING PAY, Full-time and part-time status - August 2008
Graph: 5.  METHODS OF SETTING PAY, Full-time and part-time status - August 2008


Casual employees were more likely than permanent/fixed term employees to have their pay set by award or pay scale only (40% compared with 11%). This reflects that casual employees are likely to be found in industries such as Retail trade, Accommodation and food services and Administrative and support services which have high levels of award coverage. For permanent/fixed term employees, the most common methods of setting pay were collective agreement (42%) and registered or unregistered individual arrangement (41%).

6. METHODS OF SETTING PAY, Permanent/fixed term and casual employees - August 2008
Graph: 6.  METHODS OF SETTING PAY, Permanent/fixed term and casual employees - August 2008



EARNINGS

In August 2008, the average weekly total cash earnings for employees who had their pay set by award or pay scale only was $486, compared with average weekly cash earnings for all methods of setting pay of $958. Employees whose pay was set by a collective agreement had average weekly cash earnings of $979, while employees with a registered or unregistered individual arrangement had average weekly cash earnings of $1,117. The smallest difference between male and female earnings was for employees who had their pay set by award or pay scale only ($449 for female employees compared with $539 for male employees).

7. METHODS OF SETTING PAY, Average weekly total cash earnings - August 2008
Graph: 7.  METHODS OF SETTING PAY, Average weekly total cash earnings - August 2008


The average weekly total cash earnings for full-time adult non-managerial female employees was $1,080 and $1,332 for full-time adult non-managerial male employees.

The distribution of full-time non-managerial adult employees by earnings for each method of setting pay shows that over two-thirds (71%) of employees whose pay was set by collective agreement earned between $700 to $1,500 per week. For full-time non-managerial adult employees who had their pay set by registered or unregistered individual arrangement, 67% had earnings between $700 and $1,500 per week. In contrast, 81% of full-time non-managerial adult employees who had their pay set by award or pay scale earned between $500 and $1,000 per week. Only 7% of employees who had their pay set by award or pay scale only earned $1,200 or more per week, compared with 37% of employees who had their pay set by registered or unregistered individual arrangement and 48% of employees who had their pay set by collective agreement.

8. METHODS OF SETTING PAY, Weekly total cash earnings - Distribution of full-time non-managerial adult employees - August 2008

Award or pay scale only
Collective Agreement(a)
Individual Arrangement(b)
All Methods of Setting Pay
Weekly total cash earnings ($)
%
%
%
%

Under 200
**0.7
*0.2
*0.1
*0.2
200 and under 300
*0.3
**0.1
*0.2
0.1
300 and under 400
1.2
0.2
*0.2
0.3
400 and under 500
3.0
0.2
0.6
0.7
500 and under 600
14.6
1.1
2.5
3.1
600 and under 700
24.0
4.3
7.2
7.6
700 and under 800
20.7
8.1
12.2
11.3
800 and under 900
14.2
9.7
12.4
11.4
900 and under 1000
7.5
10.3
10.5
10.1
1000 and under 1100
4.3
9.5
9.0
8.8
1100 and under 1200
2.6
8.8
7.5
7.6
1200 and under 1300
1.9
8.0
6.3
6.6
1300 and under 1400
*2.1
8.5
5.3
6.4
1400 and under 1500
1.2
7.6
4.2
5.4
1500 and under 1600
*0.4
4.5
4.0
3.9
1600 and under 1700
*0.5
4.3
2.6
3.1
1700 and under 1800
**0.3
3.1
1.9
2.3
1800 and under 1900
*0.1
2.3
1.9
1.9
1900 and under 2000
*0.1
1.8
1.9
1.7
2000 and over
*0.3
7.4
9.3
7.6
Total
100.0
100.0
100.0
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
(a) Includes registered and unregistered collective agreements.
(b) Includes registered and unregistered individual arrangements.
Source: Employee Earnings and Hours, Australia, August 2008 (cat. no. 6306.0).



FURTHER INFORMATION

For further information about the data presented in this article, please contact Barbara Sidwell on (02) 6252 6466 or email <barbara.sidwell@abs.gov.au>. Further information can be found in Employee Earnings and Hours, Australia, August 2008 (cat. no. 6306.0), which was released on 17 June 2009. For information about these and related statistics contact Amanda Baile in Perth on (08) 9360 5305 or the National Information and Referral Service on 1300 135 070.


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