Feature Article - Spotlight on Methods of Setting Pay
This article was published in the April 2003 issue of Australian Labour Market Statistics (cat. no. 6105.0).
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 in the biennial Survey of Employee Earnings and Hours (EEH) since 2000. This article uses estimates from the 2000 and 2002 surveys.
Three different methods of setting pay are identified in the EEH: awards, collective agreements and individual agreements. Employees are classified to one of these categories based on how their pay was set in May of the survey year.
METHODS OF SETTING PAY
Collective agreements, which include enterprise and workplace agreements, are agreements between one or more employers and a group of employees (or associations representing employees) that set the terms of employment, including pay, for a group of employees. The agreements may be either registered with an industrial tribunal or authority, or be unregistered. In May 2002, 38% of employees had the main part of their pay set by collective agreements (37% in May 2000).
Individual agreements set the terms of employment for an individual employee and are agreed to by the individual rather than on behalf of the individual. The agreement may be verbal or written, and registered or unregistered. Employees whose pay is set by individual agreements include those whose pay is set by an individual common law contract, employees receiving pay at more than the award rate by individual agreement, and working proprietors of incorporated enterprises who set their own rate of pay. In May 2002, 41% of employees had the main part of their pay set by individual agreements (40% in May 2000).
Awards are legally enforceable determinations made by federal or state industrial tribunals that set the terms of employment, including pay. Employees whose pay is set by 'award only' are those who are covered by awards and whose pay is set at exactly the award rate of pay without reference to an individual or collective agreement. In May 2002, 20% of employees were in this category (23% in May 2000).
Methods of setting pay, by sector—May 2002
|Source: Employee Earnings and Hours, Australia, May 2002 (cat. no. 6306.0). |
Just on half (50%) of all private sector employees had their pay set by individual agreements in May 2002. The other half were evenly split between those whose pay was set at the award rate and those whose pay was set by collective agreements (25% each). In contrast, collective agreements set the pay for the majority of public sector employees (90%).
Individual agreements and collective agreements were more prevalent in higher skilled occupation groups than in lower skilled occupation groups. Of employees classified as Managers and administrators, 79% had their pay set by individual agreements and 21% by collective agreements in May 2002. For lower skilled occupation groups, such as Elementary clerical, sales and service workers, a relatively high proportion of employees had their pay set at the award rate without reference to individual or collective agreements (41%). This compares with 35% of employees in this occupation group who had their pay set by collective agreements.
Methods of setting pay, by occupation—May 2002
|Managers and administrators|
|Tradespersons and related workers|
|Advanced clerical and service workers|
|Intermediate clerical, sales and service workers|
|Intermediate production and transport workers|
|Elementary clerical, sales and service workers|
|Labourers and related workers|
|* estimate is subject to sampling variability too high for most practical purposes|
|Source: Employee Earnings and Hours, Australia, May 2002 (cat. no. 6306.0).|
Further information can be found in Employee Earnings and Hours, Australia, May 2002 (cat. no. 6306.0), which was released on 26 March 2003. The publication provides statistics on the composition and distribution of earnings and hours of wage and salary earners, and how their pay is set. For information about these and related statistics contact Brad Pottinger on Perth 08 9360 5305 or the National Information and Referral Service on 1300 135 070.