Australia Employee Benefits

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Australia Employee Benefits 

Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in Australia might not all be familiar to you yet. By using our PEO and EOR service we can provide compliant labor contracts for employees in Malta including local benefits.

When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few. In Australia, benefits are guaranteed by national legislation as well as collective agreements with trade unions or workers’ councils.

Our guide will explain what benefits and employee compensation are guaranteed, and what can be modified, for any employer who wishes to expand their business into Australia.

What are Employee Benefits in Australia?

Foreign companies’ responsibilities when hiring in Australia stretch beyond complying with tax and payroll regulations. Workers’ rights and benefits are also strictly applied by a number of specific laws covering minimum wage, working hours, vacations, sick leave, and severance. These are covered by the Fair Work Act and National Employment Standards (NES) legislation.

Additionally, employers must also be aware of Modern Awards and Enterprise Agreements, which have a similar effect to Collective Bargaining Agreements (CBAs). Award and enterprise agreements apply to individual workplaces and companies and are industry- and legislation-based arrangements that set minimum pay and conditions above those laid down by statutory laws.

Minimum guaranteed benefits, either from legislation or collective agreements, include:

  • Minimum wages
  • Paid vacations
  • Working hours
  • Termination, notice periods and severance
  • Sick leave
  • Maternity allowances and benefits

Failure to comply with specific regulations applying to benefits and entitlements runs the risk of fines and sanctions. It is vital that employers have a firm grasp of what is guaranteed for their employees, as this will affect the employer-employee relationship.

What Compensation Laws exist in Australia?

The employer-employee relationship in Australia is largely based on federal and state legislation, with the Fair Work Act (2009) and National Employment Standards (NES) the main factors governing employment law. However, extra considerations arise through Modern Award and Enterprise Agreements. These apply to individual workplaces and companies and are industry- and legislation-based agreements that set terms and conditions above statutory minimums.

The requirement for employers to respect employees’ rights stretches further than simply complying with tax and payroll procedures. Legislation applies to such as maternity allowances and benefits, holidays, sick pay and severance payments, minimum wages and working hours, for example.

Drawing up contracts is tricky enough, but in Australia it is vital for employers to be up to speed with responsibilities to their staff over benefits, compensation, and minimum requirements. Do not take the risk of paying penalties for ignoring these responsibilities.

Compensation, entitlements, and benefits include:

  • National Minimum Wage: In July 2021, Australia’s Fair Work Commission raised the basic minimum for full-time workers over 21 years old to AU$772.60 (€497, US$567) per week / AU$20.33 (€13, US$15) per hour. Rates apply till June 2022. Most employees’ minimum wages are set by Enterprise Agreements for their industry or sector, which cannot undercut the statutory national minimum.

    The national minimum applies to most private companies that are regulated by the Fair Work Act, (2009) and whose employees are covered by the National Workplace Relations System. Part-time employees’ pay is adjusted pro rata for their working hours. Casual workers’ pay is ‘casual loaded’ above the standard salary as they are not entitled to benefits such as sick leave or paid vacations.

  • Sick Leave: National Employment Standards regulations entitle all full-time employees to paid sick leave. Employees can also take paid leave to support an immediate family member who is sick, injured or faces an emergency situation. The annual entitlement is 10 days (pro rata for part-timers) with unused days carried forward to the next year. Casual workers do not qualify for sick leave but are paid ‘casual loading’ above their basic pay to compensate. Medical certificates may be required by the employer.

  • Working Hours and Breaks: The Fair Work Act (2009) states an employee’s maximum working week is 38 hours, or 7.6 hours each day. Their employer can request they work reasonable extra hours. The conditions as to whether the extra hours are ‘reasonable’ include such as if there is provision to pay overtime, or whether they would pose a risk to the employee’s health.

    Maximum working hours come under National Employment Standards and apply to all employees covered by the National Workplace Relations System regardless of any awards, agreements, or contracts. Working hours can be ‘averaged out’ over a maximum 26 weeks, although there is no requirement for employer or employee to conclude an averaging out agreement. Working time fits into a ‘span of hours’.

    This includes:
    - Between 4 and 5 hours - 10-min break
    - Between 5 and 7 hours - 10-min break; 30-60 min meal break
    - Between 7 and 10 hours - 2 x 10-min breaks; 30-60 min meal break
    - More than 10 hours - 2 x 10-min breaks; 2 x 30-60 min meal breaks

  • Overtime: Employers can ask employees to perform reasonable amounts of overtime, above their normal working hours of 38 a week or 7.6 hours daily. If employees are not covered by a Modern Award or Enterprise (collective) Agreement regarding overtime entitlement, any overtime pay depends on their individual contract.

    Some award or enterprise agreements allow employees time off in lieu of working overtime, instead of extra pay. Typically, overtime pay may be 1.5 times normal salary for the first two or three hours and twice the normal hourly rate after this.

  • Paid Vacations: Under National Employment Standards (NES), full-time employees are entitled to four weeks’ annual leave each year of service with their employer. Registered shift workers receive five weeks annual leave. Casual workers are not entitled to annual leave, but their salary is ‘casual loaded’ above their standard salary as compensation.

    Employees covered by award or enterprise agreements may receive additional leave; employees not covered by such agreements may ‘buy’ extra vacation by giving up equivalent pay.

  • Maternity Benefit: Parental Leave Pay (PLP) is AU$772.55 (€498.68, US$567.75) each week, AU$154.51 (€99.75, US$113.55) daily, before tax. The benefit is 90 ‘payable days’ over 18 weeks, comprising 60 payable days of PLP and 30 Flexible Paid Parental Leave days. Fathers and partners may also be eligible for 10 payable days over two weeks, so families can qualify for a total of 100 payable days over 20 weeks. Calculations are based on the weekly rate of the national minimum wage.

  • Maternity / Paternity / Parental Leave: Paid maternity leave totals 18 weeks; fathers and partners may receive 10 days’ paid leave. Following the birth or adoption of a child, parents are entitled to parental leave. Leave applies when an employee, their spouse or de facto partner gives birth, or when they adopt a child under 16 years old.

    Employees are eligible if they have worked for their employer at least 12 months before the expected date of the birth or before the adoption date. Employees need not work another 12 months to take another period of parental leave with the same employer but will have to work for one year before taking parental leave with a new employer.

  • Termination and Severance: These are covered by National Employment Standards (NES). Employers cannot terminate employment of individuals who have a ‘workplace right’ or take part in lawful ‘industrial activity’. Termination is prohibited on grounds such as race, gender, age, or disability or if the employee is absent due to illness or injury for less than three months in a 12-month period. In the case of 15 or more collective redundancies the relevant government agencies and trade unions must be informed.

    On termination, employees’ severance pay should include:

    - Outstanding salary or other remuneration
    - pay in lieu of notice of termination
    - accrued annual leave or long service entitlements
    - balance of any time off taken instead of overtime pay
    - redundancy pay, if eligible

    Termination due to redundancy entitles employees to severance pay based on years of service. Entitlement begins after 12 months with four weeks’ pay for service up to two years. With each yearly increment of service from three years to nine years, the corresponding entitlement increase from six weeks’ pay to 16 weeks salary. Service of more than 10 years attracts 12 weeks’ pay on the assumption the employee will also be eligible for long service benefits.

  • Notice Periods: These begin the day after the employer tells the employee they want to terminate employment and end on the final day of work. Minimum notice periods apply: One year or less – one week; up to three years – two weeks; up to five years – three weeks; more than five years – four weeks.

    Employees over 45 years old receive an extra week’s notice if they have been with the employer for at least two years. Awards, contracts, enterprise (collective) agreements may stipulate longer periods of notice, such as one month rather than one week.

Social Security in Australia

Social security in the usual sense does not apply in Australia. The social security income support system is entirely funded by central government, without contributions from employer or employees. It is restricted to Australia residents, as defined by the Social Security Act 1991. 

Migrants generally have no access to social security payments for four years after their arrival.

Statutory Employer Costs in Australia

  • National Minimum Wage: Employers must comply with minimum wage requirements. In July 2021, Australia’s Fair Work Commission raised the basic minimum for full-time workers over 21 years old to AU$772.60 (€497, US$567) per week or AU$20.33 (€13, US$15) per hour. The rate applies till June 2022.
  • Superannuation: Employers paying a full-time, part-time, or casual employee more than AU$450 (€290, US$326) regular earnings per month must pay superannuation towards their Age Pension. The minimum Super Guarantee (SG) is 10% of their earnings and is expected to be 12% by 2025. The SG contributions also apply to employees who are temporary residents of Australia. Employees can choose their own ‘super fund’ or take the employer’s default fund.
  • Corporate Income Tax (CIT): Resident companies are taxed on their worldwide income at a standard rate of 30%, with Small and Medium Enterprises (SMEs) pay 25% for the 2021/22 tax year, subject to integrity checks on their income.
  • Payroll Tax: States and territories impose payroll taxes at various rates, generally ranging from 0.5% to 4.85% against various thresholds.

What Benefits are guaranteed in Australia?

Some employee benefits are guaranteed by mandatory regulations, others by individual employer-employee contracts. Basic benefits and entitlements can also be upgraded by Modern Awards or Enterprise Agreements, which operate at sector, industry, or company level. Statutory minimums include the following:

  • Maternity / Paternity Leave: Paid maternity leave is for a total of 18 weeks; fathers and partners may receive 10 days paid leave. On the birth or adoption of a child, parents are entitled to parental leave.
  • Maternity Benefit: Parental Leave Pay (PLP) is AU$772.55 (€498.68, US$567.75) per week, AU$154.51 (€99.75, US$113.55) per day, before tax. The award is for 90 ‘payable days’ over 18 weeks, comprising 60 payable days of PLP and 30 Flexible Paid Parental Leave days.
  • Sick Leave: National Employment Standards regulations decree that all full-time employees are entitled to 10 days paid sick leave (pro rata for part-timers) with unused days carried forward to the following year.
  • Working Hours: Based on 2009’s Fair Work Act an employee’s maximum working week comprises 38 hours, or 7.6 hours each day, unless asked by their employer to work reasonable extra hours. The maximum period working hours can be ‘averaged out’ is 26 weeks, although there is no requirement for employer or employee to conclude an averaging out agreement.
  • Holiday Entitlement: Under National Employment Standards (NES), full-time employees are entitled to four weeks’ annual paid leave each year of service with their employer. Employees classified as shift workers receive five weeks annual leave.

What Restrictions exist for Benefits and Compensation in Australia?

Maternity Leave: Claimants must have worked continuously for their employer for at least 12 months before the date of the expected birth or adoption. Employees wanting to claim the extra 52 weeks’ unpaid leave must give their employers at least four weeks’ notice in writing.

Unemployment Benefit: The JobSeeker Payment system requires claimants to be between 22 years old and pension age, to meet residency rules, to meet means-tested regulations, to be unable to work due to injury or illness or to be looking for work.

Health Insurance and other Benefits in Australia

Australia’s universal public healthcare system comes under Medicare, providing a wide range of services for Australian citizens, permanent residents, and some overseas visitors. 

The private healthcare system includes private hospitals and specialized clinics funded by premiums from individuals, corporations, or government incentives. Some employers may offer private healthcare as an employee benefit.

Other statutory entitlements cover such as maternity leave and paternity / parental leave; paid sick leave; paid vacations; termination and severance pay; notice periods and guaranteed minimum wages.

Benefit from our advice!

Legally protected compensation and benefits are an essential factor in ensuring contracts comply with Australia’s various labor regulations, which can be set by statutes, Modern Awards or Enterprise Agreements. 

Bradford Jacobs ensures compliance with these crucial requirements to avoid delays in becoming operational. Contact one of our consultants today to learn more!