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Employee Benefits and Compensation in Australia: A Comprehensive Guide

What are Employee Benefits?

Employment benefits are perks or fringe benefits offered by businesses to their employers in addition to their salaried incomes. Legislations of most nations guarantee some employee benefits, such as minimum wages, maternity leave, medical insurance, retirement funds, among others. All employers must be aware of these regulations, as not adhering to them may attract fines. 

Employee benefits are the employer’s way of showing gratification to their employees. They help employers retain talent. Moreover, employees are satisfied when employers invest in their career growth. This article will give details regarding compensation and benefits policy in Australia

Compensation Laws in Australia

Like most nations, the compensation laws and perks enjoyed by workers vary according to the states in Australia too. The primary regulation overseeing labor in Australia is the Workplace Relations Act of 1996, according to which the Australian Industrial Relations Commission (AIRC) was established. AIRC overlooks industrial disputes and settlements, permits negotiation and enforcement of individual and collective employment agreements, regulates unions and employer associations, determines the minimum employee entitlements, and compensation package in Australia. 

The Fair Work Commission reassesses the minimum wage rates every year, while the National Employment Standards (NES) and the Fair Work Act (2009) make for the major governing employment laws in the country.  

Australian labor laws set the following guidelines that all employers doing business in Australia must abide by while determining workers’ compensation in Australia:

  • The federal minimum wage in Australia for all employees over the age of 21 is AU$20.33 per hour as of July 2021. However, the federal minimum hourly wage in non-constitutional corporations in Western Australia is AU$19.66 per hour.
  • As per National Employment Standards (NES), an employer cannot request full-time employees to work more than 38 hours a week or 7.6 hours a day unless there is a reasonable explanation for any additional hours. Employees can decline any offers of overtime work if the reason provided is not satisfactory. 

Employers must pay 150% of the regular pay for all the work hours in addition to the standard 38-hour workweek. Employees are entitled to twice their normal hourly wages if they work on Sundays and public holidays according to the compensation structure in Australia.

How to Design an Employee Benefits Program in Australia for Employees?

Benefits planning is a challenge for most employers as it forms a critical component in calculating total compensation costs. Employers need to develop an efficient and well-thought design of benefits programs to address the needs of all employees. The ideal benefits plan design presents a perfect balance between the needs of both the corporation and the employees while adhering to the local labor laws. To design the compensation structure in Australia, employers need to follow the following steps:

Step 1: Determine budget & set clear goals 

The foremost step of designing a compensation package in Australia is to assess your company budget and consider how much you can afford to pay in benefits and compensation packages of employees. 

After you have a precise figure in your mind, focus on the benefits you are willing to offer to keep your employees satisfied. While figuring out the list of compensation and benefits in Australia you may offer, your key objectives should be:

  • Scouting and retaining potential talents
  • Functioning within the allocated budget
  • Complying with the regional and federal labor laws 

Step 2: Research industry standards and employee needs

Once you have a clear set of objectives in mind and a budget to work with, research the employee compensation and benefits in Australia offered by your rival companies as well as ones that are the usual industry standards. You can also conduct an assessment internally for your employees to get a precise understanding of their needs. All these data will help you to get a clear picture of:

  • What employee benefits in Australia do you need to add to make a lucrative offer to beat your rivals in hiring new talents?
  • What benefits do your employees need in addition to the ones you are already offering? 

These research data and surveys are the fundamentals that will permit you to design a compensation package in Australia that is lucrative for recruits and satisfactory for your existing employees. They will also enable you to compare your design with the industry standards and ones offered by your rival companies and help you make a unique benefits plan. 

Step 3: Design a flexible and customizable compensation package

After you have worked out the main framework of your benefits plan and filled in the gaps, you need to ensure that your design is flexible for the employees to benefit. A perfect benefits plan should offer employees the selection of the supplementary benefits they need from the proposed compensation package.

Such a package will be cost-efficient by cutting under-used benefits while ensuring each employee gets their relevant benefits.  

Step 4: Convey the benefits plan to the existing and potential employees 

Clear communication is the key to a well-planned benefits plan. Convey your design to all existing and potential employees and collect feedback. Try to incorporate their inputs and keep communication channels open to show how much you value their opinions. These will help you gain their trust, stimulate a sense of appreciation and security in the employees, and create a safe and productive workspace. 

Step 5: Evaluate the effectiveness of the benefits package

The most vital step in understanding the effectiveness of your benefits package is regular evaluation and assessment on your part. It will help you check whether the benefits plan fulfills its objective and if further modifications are needed. 

Monitor the workforce, economy, demographics, and legislature regularly to remain compliant and competitive throughout.

Types of Guaranteed Employee Benefits in Australia

Along with the National Employment Standards (NES) and the Fair Work Act (2009), federal and state legislation determine the employer-employee relationship in Australia. Australian legislation makes some employee benefits in Australia mandatory, and the employers, who fail to meet these, will attract fines and impositions. A list of the compulsory employee benefits in Australia are as follows:


Businesses are required to pay superannuation as part of the compensation policy in Australia. As of June 2023, the legislated minimum Super Guarantee (SG) is 10.5% of the earnings, which will increase as per the table below:
Period Contribution to Super % 
1 July 2022 – 30 June 202310.50% 
1 July 2023 – 30 June 202411.00% 
1 July 2024 – 30 June 202511.50% 
1 July 2025 – 30 June 202612.00% 
1 July 2026 – 30 June 202712.00% 
1 July 2027 – 30 June 2028 and onwards12.00% 
In addition, Australia has a ‘Choice of Fund’ legislation that directs employers to see that employees select their preferred pension plan or opt for the default fund set up by their employers.

Sick Leave

All full-time employees are entitled to paid sick leave as set by the NES. They should be permitted to have an annual quota of 10 days to support an immediate family member suffering from emergencies or ailments. If any employee has any unused day in their allocation, it must be carried forward to the following year. However, employers are entitled to ask for medical certificates as part of medical benefits for employees in Australia.

Maternity / Paternity / Parental Leave

Maternity leaves in Australia are allocated as per the employment contract. Partners and fathers are also entitled to receive a paid leave of 10 days. Parental leave is applicable in cases where an employee, their spouse, or de facto partner gives birth. Employees are also eligible for this privilege if they adopt a child below 16 years. If any full-time employee has worked for at least a year for an employer before the adoption date or the expected date of birth, they are eligible for parental leave. Parental Leave Pay (PLP) is AU$772.55 (US$567.75) per week before tax. 

Holidays & annual leave

NES directs employers to grant all full-time employees four weeks of annual paid leave of each year of service as part of leave benefits in Australia. Leave begins amassing from the first day the employee works, and they can enjoy leaves as soon as they accumulate them.

Long Service Leave

Australia has unique legislation that allows full-time employees a legislated 8.67 weeks of paid leave in addition to the annual leave applicable. However, leave benefits in Australia states that this is only applicable to employees who have completed a decade of service, and the entitlement starts to accrue from five years. Most employers register this as a ‘liability’ in their balance sheets.

Employee Benefits for Expatriates

In Australia, expatriates are allowed several benefits guaranteed by Australia’s Social Security Act and provided by Centrelink (Department of Human Services branch). Some of the primary benefits provided are:

  • Disability support pension
  • Pharmaceutical allowance
  • Sickness allowance
  • Retirement benefit plans such as superannuation/pension

How are Employee Benefits Taxed in Australia?

In Australia, employers have to pay Fringe Benefits Tax (FBT) which they may claim as income tax deductions. However, the employer is responsible for paying the taxes levied on employee benefits in Australia, irrespective of whether they are a corporation, sole trader, or government authority.

The federal government levies FBT on employers at the rate of 47%. However, rates may vary from year to year, and the Australian Taxation Office (Tax Office) advises employers regarding the current rates at the beginning of the financial year. 

Restrictions for Australia Benefits and Compensation

Two of the most substantial restrictions in the Australian compensation law are the federal minimum wage and the maximum working hours per week. While regulations and restrictions may vary according to different states, the above two constraints are applied strictly all over the country. Thus, employers must read up about the local rules on benefits and compensations before hiring. 

Supplemental Benefits for Employees in Australia

Social security or health insurance does not come under mandatory employee benefits in Australia. They are funded entirely by the central government and do not require contributions from employers. 

However, the government has raised taxes and reduced rebates for high-income earners, pushing large businesses to offer health insurance. Here is a list of such supplemental compensation and benefits in Australia:

  • Group Insurances
  • Education Advancement/Programs 
  • Childcare centers and subsidiaries
  • Health insurance
  • Company cars 
  • Flu Shots and vaccinations
  • Group benefit pools

How Multiplier Can Help With Benefits Management in Australia?

Setting up a new business can pose quite a challenge in a new country. Each country has a specific set of labor laws and legislations that business organizations need to meet while allocating benefits and compensations for their employees. Failing to meet these regulations can attract a hefty fine. So outsourcing this task to a global employment solution like Multiplier is a safe way to start a new business in a new country. 

Multiplier can help employers create a comprehensive employee benefits package. So employers should leave the planning and allocation of the compensation and benefits policy in Australia for the employees to us, while you can concentrate on your business’ administrative operations.

Frequently Asked Questions

The Fair Work Commission has set the federal minimum wage in Australia for all employees over the age of 21 at AU$20.33 per hour as of July 2021.

Health insurance does not come under mandatory employee benefits in Australia. The Medicare levy is 2% of your taxable income in addition to the taxes you already pay on your taxable income and is imposed by the central government to fund healthcare in the country.

High-earning professionals who do not have a private insurance plan are levied a surcharge between 1% and 1.5%. In such a case, the dependents of the high-income employees are also covered.

Parental Leave Pay (PLP) in Australia amounts to AU$154.51 (US$113.55) daily before tax. It entitles 90 days of paid leave to employees giving birth, while fathers and partners are eligible for ten paid days.

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