Payroll Management: The Basics of Calculating Payroll

Posted by Cedric Joshua Martinez
Aug 25, 2016
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Before you calculate for the payroll of hundreds of employees, you need to make sure that you know what you are doing. Mistakes will only add to your burden,  so devote time to learning the process beforehand and being careful. Australian law dictates many of the details of how one employee is paid and how their pay is calculated. Below you may find a short guide on the process of calculating payroll.

Preparations for Payroll

Before anything, you must correctly classify your employee under the right award. There is a specific award for every profession known to the Australian government, so you should have no trouble choosing the proper category your employees fall under. To give you an example, if you own a retail business, you and your employees will most likely fall under the General Retail Industry Award 2010 (MA000004). Next, you will have to be in agreement with your employees on their salary. This is up to your discretion, but you must note that each award enforces a minimum wage, specific for each industry. With preparations complete, you can now calculate their payroll.


Step 1: Is your employee a trainee, apprentice, or eligible for supported wage?

These three factors affect the overall amount that they are paid. A trainee is defined as an employee who is under a formal training contract to earn qualification in your industry. An apprentice is the same, but with a few notable differences: training will continue even if ownership transfers to another, and once training ends, there must be a mutual agreement with both parties in order for the contract to be cancelled. There is a different kind of apprenticeship known as school-based apprenticeship, where the person juggles work, training, and high school simultaneously.

Supported wage can only be qualified for those with disabilities that affect their productivity. The Supported Wage System assesses the employee and grades their productive capacity, which is the percentage of pay they should receive from you. For example, if assessed to be only 50% productive, they will only receive half of a normal salary.

Please note that this step isn’t a multiple choice scenario and most employees will not be applicable to any of the three. They will receive normal pay without any changes to their salary, assuming that the following steps do not affect them further.

Step 2: What is their classification in the job ladder?

While this may differ with every industry, each level denotes the type of work they do and their background requirements. To take the retail example from earlier, here are the differences of level 1, the lowest level in the industry, and level 8, the highest:


Some of the tasks they are expected to do

Retail employee level 1

  • preparation for sale and or display of goods in or about any shop
  • display, shelf filling, presentation for sale of goods
  • recording of sales
  • wrapping/packing of goods for despatch
  • delivery of goods
  • window dressing/merchandising
  • demonstration of goods for sale
  • provision of information and assistance to customers

Retail employee level 8

  • shop manager of a shop with departments/sections
  • Utilisation of complex computer software for the industry
  • provide reports for management
  • administer individual executive salary packages, travel expenses, allowances, company transport, pay, and payroll requirements

As you can see, each level is expected to accomplish different tasks, and is therefore subject to different salary and benefits.

Step 3: Is your employee full-time, part-time, or casual?

The type of employment affects their salary, amount of leaves (if any), and other benefits. Distinguishing among the three is as simple as identifying their ordinary hours of work (the amount of hours they work in a week).

Ordinary hours of work

Type of Employment

Equal or greater than 38 hours


Less than 38 hours


No guaranteed hours


Step 4: How old is your employee?

The final step is simply knowing the age of your employee. You can ignore this step if all of your employees are 21 years old or above as wage only differs below that.

Once you have gone through each step, you’ll be able to find their salary quite easily in the Fair Work Regulations. Do note that this is only the minimum wage of the employee. If there was a mutual, written agreement before employment on their salary then you must adhere to that and it should never be below the minimum wage that you just calculated.

Want to know more about pay rates or have someone crunch the numbers for you? You should invest in a payroll outsourcing service that caters to Australian businesses and firms. With our extensive knowledge of Fair Work Regulations, we at D&V can make your payroll run smoother than it has ever run before. Contact us today to learn more about our top-notch payroll services!

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