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6105.0 - Australian Labour Market Statistics, Apr 2005  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 21/01/2005   
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Feature Article: Spotlight: Methods of setting pay


INTRODUCTION


The last decade has seen a move away from a centralised system of awards to set pay levels and increases, towards agreements at the enterprise, workplace and individual levels. Information on how employees' pay is set has been collected since 2000 in the biennial Survey of Employee Earnings and Hours (EEH). This article uses estimates from the 2000, 2002 and 2004 surveys to compare how methods of setting pay have changed over time. It also discusses sector and occupation differences in the methods used to set pay in May 2004.



METHODS OF SETTING PAY

Three different methods of setting pay are identified in the EEH: 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 whose pay is set by 'award only' are those who are covered by awards and who are paid at the rate of pay specified in the award. In May 2004, 20.0% of employees had their pay set by 'award only'. This represents a decrease from previous years (20.5% in 2002 and 23.2% in 2000).


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. In May 2004, 41% of employees had their pay set by a collective agreement, compared to 38% in 2002 and 37% in 2000.


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. Australian Workplace Agreement), or common law contract, as well as employees receiving overaward payments by individual agreement, and working proprietors of incorporated businesses. In May 2004, 39% of employees had their pay set by individual arrangement, compared to 41% in 2002 and 40% in 2000.

1. METHODS OF SETTING PAY

Award only
Collective agreement
Individual arrangement
%
%
%

May 2000
23.2
36.8
40.0
May 2002
20.5
38.2
41.3
May 2004
20.0
40.9
39.1

Employee Earnings and Hours, Australia (cat. no. 6306.0).



SECTOR

Overall, the private sector tends to have more diverse methods of setting pay than the public sector. In May 2004, 41% of all private sector employees had their pay set by registered or unregistered individual arrangements. A further 27% of private sector employees had their pay set by collective agreements, 25% by award only and 7% were working proprietors in their own incorporated business. In contrast, the majority of public sector employees had their pay set by collective agreements (92%).

2. METHODS OF SETTING PAY, By sector - May 2004

Collective agreement
Individual arrangement
Award only
Registered
Unregistered
Registered
Unregistered(a)
Working proprietor of incorporated business(a)
Total
All methods of setting pay
%
%
%
%
%
%
%
%

Males
Private sector
19.0
23.3
3.6
3.0
41.7
9.5
54.2
100.0
Public sector
*0.7
90.7
*0.6
3.0
5.0
. .
8.0
100.0
All sectors
15.7
35.2
3.0
3.0
35.2
7.8
46.0
100.0
Females
Private sector
31.0
25.2
2.8
2.2
34.9
3.9
41.0
100.0
Public sector
*3.5
92.6
*0.2
0.9
2.8
. .
3.7
100.0
All sectors
24.4
41.4
2.2
1.9
27.2
2.9
32.0
100.0
Persons
Private sector
24.7
24.2
3.2
2.6
38.5
6.9
47.9
100.0
Public sector
*2.3
91.8
0.4
1.8
3.7
. .
5.5
100.0
All sectors
20.0
38.3
2.6
2.4
31.2
5.4
39.1
100.0

* estimate has a relative standard error of 25% to 50% and should be used with caution
. . not applicable
(a) Prior to 2004, working proprietors of incorporated businesses were classified to unregistered individual arrangements.
Employee Earnings and Hours, Australia, May 2004 (cat. no. 6306.0).



OCCUPATION

In May 2004, Advanced clerical and service workers and Managers and administrators had the highest proportion of employees who had their pay set through a registered or unregistered individual arrangement (52% and 47% respectively). A further 27% of Managers and administrators were working proprietors of their own incorporated business. Awards were far more prevalent in the lower skilled occupations, with 40% of Elementary clerical, sales and service workers and 38% of Labourers and related workers having their pay set by Award only. In contrast, only 1% of Managers and administrators, 7% of Professionals and 8% of Associate professionals had their pay set by Award only. Collective agreements were most prevalent for Professionals (56%) and Intermediate production and transport workers (50%).

3. METHODS OF SETTING PAY, By occupation - May 2004

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

Managers and administrators
0.8
25.3
47.3
26.7
73.9
100.0
Professionals
6.7
55.8
32.8
4.7
37.4
100.0
Associate professionals
8.3
40.0
42.6
9.1
51.7
100.0
Tradespersons and related workers
22.5
34.6
35.2
7.7
42.9
100.0
Advanced clerical and service workers
8.2
30.2
51.8
9.8
61.6
100.0
Intermediate clerical, sales and service workers
25.8
38.3
34.6
1.2
35.9
100.0
Intermediate production and transport workers
17.3
50.0
29.9
2.9
32.7
100.0
Elementary clerical, sales and service workers
39.9
37.1
21.8
*1.2
23.0
100.0
Labourers and related workers
37.9
36.8
24.5
*0.8
25.2
100.0
All occupations
20.0
40.9
33.7
5.4
39.1
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.
(b) Prior to 2004, working proprietors of incorporated businesses were classified to unregistered individual arrangements.
Employee Earnings and Hours, Australia, May 2004 (cat. no. 6306.0).



FURTHER INFORMATION

Further information can be found in Employee Earnings and Hours, Australia, May 2004 (cat. no. 6306.0), which was released on 23 March 2005. The publication provides statistics on the composition and distribution of earnings and hours of employees, and how their pay is set. For information about these and related statistics please contact the Assistant Director on Perth (08) 9360 5305 or the National Information and Referral Service on 1300 135 070.

For email enquiries please contact Client Services on client.services@abs.gov.au.



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