Understanding employee benefits

Published

Dec 11, 2024

Author

Employee benefits are a top consideration when deciding whether to take a job. For existing employees, many would opt for extra benefits instead of a pay rise. So, offering a good benefits program isn't an option. In a highly competitive job market, it's a must!

By providing employee benefits, your business can comply with regulations. It can also enhance its ability to attract and retain top talent.

In this article, we explore employee benefits in Australia. You'll find information on everything from mandatory benefits to supplementary benefits. We also discuss fringe benefits.

The information provided in this article is accurate as of 06/12/2024. For the most up-to-date information, please refer to the Fair Work Act 2009 and the National Employment Standards.

What are employee benefits?

Employee benefits are a major element of total compensation. They represent the non-wage offerings your business provides employees. These benefits might be mandatory entitlements, like superannuation and paid leave. They may also be voluntary perks, such as health insurance and career development programs.

Collectively, they create a more competitive and appealing employment package. They often boost employee retention, workplace engagement, and productivity, too.

Mandatory employee benefits

The Fair Work Act and National Employment Standards (NES) outline the minimum entitlements for employees. They mandate that you must provide various benefits to eligible employees. These compulsory benefit provisions are known as mandatory employee benefits. Their purpose is to ensure Australian employees receive fair compensation, workplace protection, and support during challenging times.

Below, you can explore the mandatory benefits:

Superannuation

Superannuation is a cornerstone of retirement savings in Australia. As an employer, you must contribute a percentage of an employee’s earnings to a superannuation fund. This contribution is known as the Superannuation Guarantee. As of July 2024, the minimum contribution is 11.5%. This will rise to 12% by July 2025.

These contributions are subject to the superannuation concessional contribution cap. For the 24–25 financial year, the cap is $30,000. If an employee's contributions exceed this cap, additional tax may apply.

Example: An employee earns $70,000 per year. Their employer must contribute a minimum of $8,050 a year into their superannuation fund. This is assuming it doesn't exceed the contributions cap. Over time, these contributions can create substantial retirement fund and financial security for the employee.

Learn more about employer superannuation obligations

Paid leave

Australia has a comprehensive paid leave system. It ensures eligible employees have access to a range of leave benefits:

Annual leave: Full-time employees get four weeks of paid annual leave per annum. Part-time employees receive a pro rata amount. Casual employees don't get annual leave.
Personal/carer’s leave: Full- and part-time employees get 10 days of paid personal/carer’s leave per year. Casual employees don't have a right to personal and carer's leave.
Parental leave: Eligible full-time, part-time, and casual employees can access 12 months of unpaid parental leave.
Compassionate/bereavement leave: Full- and part-time employees get two days of paid compassionate leave. Casuals get this leave on an unpaid basis.
Family and domestic violence leave: All employees (full-time, part-time, and casual) have a right to 10 days of paid family and domestic violence leave per year.
Community service leave: Community service leave is split into two parts. It covers jury duty and emergency services leave.

Jury duty: Full-, part-time, and casual employees get up to 10 days of leave for jury duty. As an employer, you provide make-up pay. This covers the difference between what the employee receives from the court and their ordinary earnings.
Emergency services leave: All employees can take leave as required to attend eligible community emergencies. This can include firefighting or other emergency response activities. Employees must provide evidence of the need to attend the emergency to access this leave.

Example: A full-time employee working for a retail company could take annual leave to travel. They may use personal leave if they become ill. They also have access to compassionate leave if a close family member passes away.

Public holidays

Public holidays are an essential element of a mandatory employee benefit program. They allow eligible employees to take days off on nationally and regionally recognised holidays without losing pay. Public holidays may differ from state and territory. However, they typically include New Year’s Day, Australia Day, and Christmas Day.

In industries like hospitality and healthcare, employees may need to work on public holidays. In these instances, penalty rates or alternative leave arrangements usually apply.

Example: In New South Wales, a full-time employee works in retail under the General Retail Industry Award. They're eligible for paid leave on public holidays. When working on these days, they receive penalty rates of 225% of their base pay.

Learn more about employer public holiday obligations

Worker’s compensation

Worker’s compensation applies to eligible employees who experience injury or illness because of their job. It provides financial support to assist with expenses or losses incurred because of their work-related injury or illness. Your business must have workers' compensation insurance to cover costs related to medical expenses, lost wages, and rehabilitation.

Example: An employee working on a construction site in Victoria suffers a back injury while lifting heavy equipment. They have a right to worker’s compensation. This covers their medical treatment and a percentage of their wage while they recover.

Minimum wage

Australia has the second highest minimum wage in the world. As of July 2024, the national minimum wage is $24.10 per hour. The national minimum wage applies to employees who don't fall under a Modern Award or enterprise agreement. Specific industries or occupations under the Modern Awards usually have their own minimum wages. You have an obligation to pay your employees the minimum wage as part of your mandatory employee benefits program.

Example: According to the Professional Employees Award, the minimum rate an employer must pay a Level 1 graduate professional with a 3 year degree is $31.09 per hour.

Flexible work arrangements

Flexible working arrangements allow employees to adjust their work hours or location. By doing so, they can better accommodate their personal lives and achieve a ‌work-life balance.

The Fair Work Act stipulates that eligible employees have a right to request flexible working arrangements. This includes employees with caring responsibilities. For example, parents or guardians of school-aged children, individuals with disabilities, and more.

If an employee completes at least 12 months of continuous service, you have an obligation to consider their request for flexible working. This is also true for long-term casual employees with reasonable expectations of continuing work.

Example: A professional services firm offers its employees flexible working arrangements. They do this by allowing their employees to work remotely two days a week. They also allow flexible work schedules. For example, adjusted start and finish times. This enables employees to avoid rush-hour traffic. These practices boost both morale and productivity, while supporting legal obligations.

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Supplementary (voluntary) employee benefits

Supplementary employee benefits are voluntary. They are benefits you may offer your employees beyond the legal requirement. Their purpose is to enhance employee satisfaction, and attract and retain talent. Provision of voluntary employee benefits can also promote a positive workplace culture. Because of this, many businesses include them in their competitive employee benefit programs.

You can explore some examples of these kinds of benefits below:

Health and wellness benefits

Health and wellness benefits promote the well-being of Australian employees. They can include private health insurance, gym memberships, and mental health support.

Example: A company offers employees discounted health insurance and gym memberships as part of their wellness program. This ensures that employees can access private healthcare and stay active.

Financial benefits

You may offer financial benefits in your employee benefit programs. These benefits often encourage performance and give employees extra financial security. Financial benefits can include bonuses, stock options, or financial planning services.

Example: A technology start-up offers stock options to its Australian employees as part of a long-term incentive plan. This allows their employees to benefit from the company's growth. It also promotes loyalty and retention.

Professional development

Professional development benefits help Australian workers advance their careers. They facilitate access to training, mentorship programs, and continuing education. These programs can lead to improved job satisfaction and skill development. They can also pay a role in improving employee retention. Ultimately, they can benefit both the employee and your company.

Example: A large accounting firm offers paid access to professional development courses and certifications for its employees. This helps their employees stay current in the field and improve their qualifications.

Lifestyle and perks

Lifestyle perks include non-work-related benefits. These may be travel discounts, subsidised meals, or access to company-owned holiday homes. These perks can help make the workplace more enjoyable. They may also improve overall work-life balance, employee satisfaction, and workplace culture.

Example: A sales manager in a multinational company receives a generous travel allowance and access to corporate housing. This provides them with convenience and a valuable lifestyle benefit. In turn, it enhances their work experience.

Fringe benefits

Fringe benefits are a subset of voluntary non-cash supplementary benefits. It's important to note that they're subject to Fringe Benefits Tax (FBT). Many supplementary employee benefits qualify as fringe benefits and are subject to FBT. For instance, private health insurance, gym memberships, and vehicle allowances. But not all supplementary benefits are fringe benefits. For example, bonuses don't count as fringe benefits.

Types of fringe benefits

Here, you can find a few examples of fringe benefits that the Australian Taxation Office (ATO) recognises:

Loans: You may offer current employees interest-free or low-interest loans for personal use. These can include home loans or car loans.
Meal and entertainment expenses: You might offer payment for an employee’s meals or entertainment. This can include covering costs for them to dine at restaurants or attend events.
Employee discounts: You may offer employees significant discounts on your company's products or services. These discounts would typically extend beyond what you offer regular customers.
Parking: You might provide free or subsidised parking for employees as part of their employee benefits programs. This can be particularly valuable to them in urban areas where parking is costly.
Private use of company property: You may allow employees to use company property for personal use. Company property can include electronics or a vehicle, for example.

Fringe Benefits Tax

FBT is a tax that the ATO regulates. It applies to the non-cash benefits you provide to Australian workers as part of your company's compensation package. The ATO taxes these non-cash perks, such as company cars or subsidised loans, similar to how they tax salary and wages. FBT applies to the taxable value of the benefit. This means the higher the value of the fringe benefit, the higher the tax liability.

It's your responsibility to calculate and report FBT separately from income tax. Fringe benefits enhance employee satisfaction and help retain talent. However, they add a cost that you must consider when designing your employee benefits programs. You may choose to pass the tax cost onto your employees. You might do this by reducing the total value of the benefit you offer.

FBT applies to most non-cash perks. But there are exemptions and reductions available for certain benefits. For example, work-related tools or laptops. It’s imperative to understand the rules and obligations surrounding FBT. This can help you maintain compliance and manage the financial impact on your business.

Importance of employee benefits

Here are some of the major reasons employee benefits programs are important for businesses:

Attracting and retaining talent

There's a higher chance of employees staying with companies that offer attractive perks beyond basic salary. If your business offers benefits like flexible working arrangements or wellness programs, it's also more likely to recruit top talent. As benefits improve employee loyalty, they reduce turnover and recruitment costs, too.

Employee satisfaction and productivity

Comprehensive employee benefits programs link to enhanced employee well-being, engagement, and productivity. Benefits like gym memberships, an employee assistance program, or child care support can positively impact employees' performance. Personally and professionally supported employees are likely to experience more motivation and productivity at work.

Company reputation

A strong benefits program can contribute to your company's employer branding. By offering more than just the statutory benefits, you can create a positive company reputation. If your business wants to attract younger workers, this is especially important. Younger employees often prioritise workplace culture and company values. They may particularly value a company’s commitment to employee wellness.

Legal compliance

Offering employee benefits is key to legal compliance. You must adhere to Australian laws, such as the Fair Work Act. These laws mandate specific statutory benefits. For example, superannuation, paid leave, and minimum wages. If you don't offer these benefits, your business may face fines, back-payment orders, and legal action.

Employee benefits management made easy with Rippling

There's no denying that employee benefits are a significant aspect of any company's HR strategy. Offering them results in a lot more than just compliance with labour laws. By offering mandatory benefits and voluntary perks, you can create a well-rounded employee benefits program. Essentially, employee benefits are a key component of thriving in a job market that's more competitive than ever.

Rippling assists with employee benefits management. Its all-in-one HR platform allows you to track and manage benefits with ease. This includes everything from processing leave requests to managing superannuation contributions. The platform also integrates with payroll. This means accurate calculations every time. It also means the ability to keep employee records up-to-date, effortlessly.

With Rippling’s powerful tools, you can maintain compliance while reducing administrative burdens. As a result, you can free up more time to focus on creating a positive workplace culture!

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