Remuneration and how pay is determined: HSC Legal Studies

What this dot point is asking

Remuneration is the last item under regulation of the workplace in the Workplace option of the Legal Studies Stage 6 Syllabus (2009). The syllabus asks you to outline how remuneration is determined. Remuneration means everything an employee receives for their work: wages or salary, penalty rates, overtime, allowances, loadings, bonuses and superannuation.

Pay is also where non-compliance is most visible. The 2025 HSC asked whether "non-compliance challenges the effectiveness of the law" in the workplace, and the 2020 HSC asked whether compliance is difficult to achieve. Underpayment is the best evidence for both, so this page covers how pay is set and how the law makes sure it is paid.

The answer

How remuneration is determined

1. The Annual Wage Review (the safety net). Each year the FWC's Expert Panel reviews the national minimum wage and modern award minimum rates (Fair Work Act Part 2-6). It must apply the minimum wages objective (s 284): the performance and competitiveness of the economy, promoting social inclusion through workforce participation, relative living standards and the needs of the low paid, equal remuneration for work of equal or comparable value, and, since 2022, the need to achieve gender equality. Unions (the ACTU), employer groups, governments and researchers make submissions.

The 2026 decision (announced 2 June 2026) shows the balancing:

• modern award rates rose 4.75 per cent from 1 July 2026;
• the FWC began phasing out the lowest ongoing classification (C13) in stages, lifting the national minimum wage to $26.44 an hour ($1,004.90 a week);
• it considered how far the fall in the real value of award wages since July 2021 could be remedied, against higher inflation and the uncertainty added by the Middle East conflict that broke out on 28 February 2026.

In May 2025, 22.7 per cent of employees were paid by award only, and over 60 per cent of them were women (ABS). The FWC describes award-reliant employees as predominantly part-time, female-dominated and a majority casual.

2. Modern awards. Each award sets classifications (pay grades by skill and experience) with a minimum rate, plus:

• penalty rates for weekends, public holidays and late nights; overtime rates; allowances (tools, travel, uniforms); loadings, including the casual loading (usually 25 per cent) and annual leave loading;
• junior rates (a percentage of the adult rate), apprentice and trainee rates, and the supported wage system for some workers with disability.

Penalty rates show how pay reflects values. In 2017 the FWC reduced Sunday and public holiday penalty rates in the hospitality, fast food, retail and pharmacy awards, finding they were no longer justified. After years of union campaigning, the Fair Work Amendment (Protecting Penalty and Overtime Rates) Act 2025 (assented to 28 August 2025) now requires the FWC to ensure awards do not reduce penalty or overtime rates, or replace them with "annualised" arrangements that leave any employee worse off.

3. Enterprise agreements

Most employees in large organisations are paid under agreements negotiated through collective bargaining, which usually set pay above the award, with annual increases for the life of the agreement. The FWC approves an agreement only if it passes the better off overall test. Multi-employer agreements, such as the early childhood education agreement approved on 10 December 2024, can lift pay across low-paid sectors. See negotiations.

4. Individual contracts and salaries

Many professional and managerial employees are paid an annual salary under their contract, often above the award. Where the award still applies, the salary must cover all the employee's award entitlements (overtime, penalties) and employers must keep records to prove it. High income employees (above $190,100 a year from 1 July 2026, with a guarantee of annual earnings) can be excluded from award terms. Contracts can add bonuses, commissions and shares. Since 7 December 2022, pay secrecy clauses are banned (s 333B), so employees can share and ask about pay.

5. Superannuation

Employers must contribute 12 per cent of ordinary time earnings (from 1 July 2025) under the superannuation guarantee. From 1 July 2026, under Payday Super, the 12 per cent is worked out on qualifying earnings (ordinary time earnings plus some other amounts, such as commissions), and contributions must be paid with each pay so they reach the employee's fund within 7 business days, rather than quarterly, making unpaid super easier to detect. The right to super has also been part of the NES since 1 January 2024.

6. Pay equity

The Fair Work Act lets the FWC make equal remuneration orders (s 302) and vary awards for work value. After 2022 amendments, the FWC does not need a male comparator to find female-dominated work undervalued. In 2025 it ordered pharmacists' minimum rates to rise 14.1 per cent in three stages, and on 11 September 2026 it finalised its review of five priority awards, with increases phased in for early childhood educators, dental assistants, pathology workers, disability home care workers, pharmacists and other health professionals; nurses and flight attendants are next. In the NSW system, the IRC's nurses decision of April 2026 made similar findings. WGEA reports a private sector gender pay gap of 21.1 per cent in average total remuneration, and the ABS gap in full-time base earnings was 11.3 per cent in May 2026.

7. Labour hire

Since 1 November 2024, a same job, same pay order can require a labour hire provider to pay its workers at least what the host's enterprise agreement pays its own employees, closing a loophole where labour hire was used to undercut agreements.

Non-compliance: the underpayment problem

Setting pay is one thing; paying it is another. Underpayment is widespread:

• Scale. The Fair Work Ombudsman recovered $453 million for more than 181,000 workers in 2025-26, up 27 per cent on the year before, taking back-payments to almost $2.5 billion over six financial years. Close to half came from large corporate employers. In 2024-25 it secured a record $23.7 million in court penalties, including $15.3 million against the operators of Sushi Bay outlets for deliberately underpaying 163 workers more than $650,000.
• Big employers. In FWO v Woolworths Group [2025] FCA 1092 (5 September 2025), Justice Perram decided four proceedings together (two FWO cases and two class actions). He held that annual salaries could be set off only against award entitlements falling due in the same pay period, so the salaries did not necessarily discharge the managers' overtime and penalty entitlements. Woolworths employed about 19,000 salaried managers between 2015 and 2019 (the FWO's own case tested a sample of 70), and the FWO alleged that Coles underpaid more than 7,800 salaried employees between 2017 and 2020. The ABC reported that the underpayments could cost more than $1 billion.
• Vulnerable workers. International students, visa holders and young workers are exploited most, as the 7-Eleven scandal (2015) showed.

Why compliance is difficult. Awards are complex; some employers deliberately underpay because the chance of detection was low and the penalty was only back pay; vulnerable workers fear losing their job or visa; phoenix companies close to avoid debts; and many underpayments are only found through audits or whistleblowers.

How the law responds

Judgement. Remuneration is determined fairly and transparently at the minimum level: the Annual Wage Review is independent, evidence-based and increasingly focused on gender equality, and penalty rates are now protected by statute. But non-compliance seriously challenges the effectiveness of the law. The response since 2017 has been to shift from education to deterrence: franchisor liability, higher penalties, a criminal offence and Payday Super. The effectiveness of the wage theft offence will depend on whether prosecutions follow; as it applies only to conduct from 1 January 2025, its impact is still emerging.

In one sentence

Remuneration is determined in layers, from the Fair Work Commission's Annual Wage Review and modern awards to enterprise agreements, individual contracts and 12 per cent superannuation, with pay equity cases lifting female-dominated work, but widespread underpayment means the law's effectiveness depends on enforcement, which is why it now includes franchisor liability, higher penalties, Payday Super and a wage theft offence.

Try this

Q1. Outline the role of the Annual Wage Review in determining remuneration. (4 marks)

• What the marker wants. Who conducts it, what it sets, the factors it weighs, and the 2026 outcome.

Q2. Explain how the law has responded to wage underpayment. (6 marks)

• What the marker wants. Two or three responses (2017 Act, wage theft offence, FWO enforcement) with evidence.

Q3. To what extent does the law achieve fair remuneration for women? (8 marks)

• What the marker wants. The gender pay gap data, equal remuneration and gender undervaluation cases, pay secrecy ban, WGEA reporting, and a judgement.