R.News November 2009

Welcome to the final edition of R.News for 2009. This year has seen many legislative changes with modifications made to executive termination benefits, employee share benefits provisions and of course the introduction of the Fair Work Act in July. 2010 is set to be just as dynamic as the Fair Work Act’s Ten National Employment Standards take effect on January 1st.

In this edition of R.News we bring you: insight into effective management of remuneration and reward; an overview of the Notice of Termination and Redundancy Pay National Employment Standard; Bupa Australia’s R.Review case study; a summary from the Sydney R.Network session on non-financial reward; advice for getting your performance framework right; changes that are likely to impact your salary packaging policy; 2010 Remesys training dates; an update from Remesys Recruitment and the outcomes of a straw poll we conducted on end of year functions.

Enjoy this final 2009 edition of R.News. The Remesys team wish you a happy and safe holiday season.

Your Say: End of Year Functions

For many employees, their first real insight into the impact of the global financial crisis arrived in late 2008 in the form of a company-wide e-mail advising that the company’s long-anticipated 2008 end of year function would be a much smaller affair than in prior years. Or even worse, that the year-end celebratory function would be skipped entirely!

Since that time, and as a direct result of the economic challenges faced, many organisations spent 2009 reining in their fixed cost expenditure and reducing spend in areas identified as unnecessary. With recent reports that Australia’s GFC woes are largely behind us, Remesys was eager to understand if employees were likely see a return of the larger-scale year-end function. To do this we conducted a straw poll at the latest R.Network event and can report that:

• 94% of participating companies partially subsidise or fully fund the company end of year event
• 56% advised of a proposed reduction in spend for this year’s event versus last year’s spend
• None of the companies polled intends to cancel this year’s event

On that note, we hope you have a safe and enjoyable end of year celebration!

Managing the Remuneration & Reward Function

Remuneration and Reward is a specialised human resources function and one that can be rather complex. Effective management and administration of remuneration and reward requires a specific skill set that is often quite different from skills used in other areas of Human Resources (HR).

Large corporations tend to have a specialist remuneration team to manage the diverse workforce. Listed organisations may also have a team responsible for managing complex equity programs and reporting to remuneration committees and/or remuneration boards. In smaller organisations responsibility for the remuneration function usually falls within the responsibilities of an HR generalist.

With that said, in the area of remuneration and reward, a dedicated resource does not necessarily mean a suitably experienced, qualified or confident resource. It is difficult to attain specific qualifications in remuneration and many remuneration practioners have moved into the remuneration function because of either an interest in this area, or accidentally due to circumstance.

In a survey undertaken by Remesys and previously published in R.News we noted that people managing the remuneration function started their careers in the following:

• HR Generalists                            43%
• Degree Qualified Graduate         17%
• Other                                          17%
• Payroll                                         11%
• HR Specialists                              6%
• Finance/Analytical                        6%

The effective management of remuneration and benefits requires a solid understanding of a variety of different concepts including:

• Salary reviews;
• Variable pay programs (short and long term incentive);
• Equity programs;
• Superannuation and related legislation;
• Job evaluation methods and approaches;
• Performance strategies;
• Executive remuneration;
• Employee benefit programs; and
• Salary packaging solutions.

Although implementation of these concepts will vary greatly from one organisation to the next each area has a core structure and similar components. Once the fundamentals are understood they can be effectively incorporated into a very specific remuneration framework that is aligned to an organisation’s overall business objectives and culture.

For the most part, skills and knowledge of remuneration concepts are gained through osmosis or on the job learning. Professionals looking to develop their remuneration and benefits skills or keep up to date with legislative changes and best practice methodologies and systems can:

• Join a networking group
• Attend a specialised remuneration training program
• Obtain expert remuneration consulting advice
• Implement technology solutions such as salary review systems or performance management software
• Read HR publications and newsletters

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National Employment Standard: Notice of Termination & Redundancy Pay

In recent times much attention has been focussed on executive remuneration termination pay. With the Federal Government’s Ten National Employment Standards (NES) implementation date of January 1^st 2010 fast approaching it is time to get back to basics.

In the last edition of R.News we covered the Right to Request Flexibility standard in the wake of a report by Aequus Partners and CCH that revealed more than 80% of respondents (working in HR, diversity and law) rated their understanding of the standard as non-existent or low. We now turn to the Fair Work Act's National Employment Standard (NES) on Notice of Termination and Redundancy Pay.

The NES stipulates a minimum notice of termination that is consistent with the previous Government’s Work Choices legislation. The period of notice required for employment to be terminated will continue to be dependent on an employee’s employment status and length of service. For many organisations this will not be much of a departure, if indeed any, from current practice. However, the NES takes the requirement for notice of termination one step further through its application to businesses which are to be transmitted.

The most significant change that will be ushered in on January 1^st is a statutory entitlement to redundancy pay for any permanent employee whose employer’s workforce is comprised of 15 employees or more. This will be  the first time that such a provision has been legislated in Australia.

In accordance with the Australian Industrial Relations Commission standards, this NES introduces a maximum of 16 weeks’ severance pay for employees who are made redundant.

To qualify for this redundancy provision an employee must have a minimum tenure of 12 months, and exemptions apply in some circumstances:

• To small businesses with less than 15 employees
• For anyone employed on a fixed contract, be it for a specified period of time, or a specified task
• Employees made redundant within their probationary period
• Trainees, apprentices, casuals and those deemed seasonal employees

The severance pay entitlements prescribed by this NES are currently in effect under many awards, however through the Fair Work Act they will be extended to a far greater proportion of workers. For many of us working in professional environments and corporations, there may be little or no change in terms of practices as most awards contain better provisions already, as do many individual employment contracts.

Does the National Employment Standard for Notice of Termination and Redundancy Pay require your organisation to change its practices, or are you already compliant? Is your organisation prepared for the introduction of the ten National Employment Standards? Please join our conversation on Twitter.

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Bupa Australia

Bupa Australia, which operates under the trusted and respected brands MBF, HBA, Mutual Community and Clearview, implemented R.Review - Remesys' innovative web-based remuneration review tool - to enhance its complex and labour intensive salary and bonus review systems and processes.

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Sydney Round-Table: Non-Financial Reward

Following successful launches in Sydney and Melbourne, R.Network held a round-table discussion on non-financial reward in Sydney on October 29^th.

We extend our thanks to our host company, Commonwealth Bank of Australia, and our featured speaker Brook Ferguson, the Bank's Manager of Employee Benefits and Salary Packaging.

Brook’s presentation showcased the Bank’s benefit offering and provided valuable insight into one organisations approach to differienate themselves in the market and enhance their attraction and retention strategies. The group showed a particular interest in discussing the best ways for organisations to communicate their benefit suites. One interesting approach that a number of organisations are looking into is to segment their benefit offering based on the specific needs of defined demographics of their workforce.

The primary objective of R.Network is to provide a forum for remuneration and benefits specialists to share ideas, seek solutions and discuss topical issues in an open and collaborative environment and it’s incredibly satisfying for us to see our vision of R.Network being realised.

Upcoming R.Network Events

Remesys will continue to hold R.Network events in both Sydney and Melbourne on a quarterly basis and we encourage members to utilise our LinkedIn group to share ideas and pose questions in between R.Network events.

The next Sydney R.Network event will be a wine tasting and networking evening on February 11^th 2010 to be hosted by The Wine Society. Please click here for more information and to register your attendance at this event.

The next R.Network event scheduled for Melbourne will be a round table discussion on non-financial reward on March 3^rd 2010, with guest speaker Peter Laragy, Manager Employee Benefits, Performance and Reward at National Australia Bank. Please click here for more information and to register your attendance at this event.

If you would like to find out more about R.Network, are interested in hosting an event, or you are not based in either Sydney or Melbourne but would still like to be part of an Australian networking group for remuneration professionals, please register your interest online.

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Performance & Reward: Getting your Peformance Framework Right

Regardless of how innovative your organisation’s remuneration strategy, remuneration framework or reward programs are, your ability to fairly and appropriately reward employees for the true value and contribution that they deliver to the organisation could be flawed if you don’t get the basics right.

The days of implementing a performance management program with the aim of simply delivering a rating, or worse still, with the sole purpose of providing a means to swiftly “find and punish” an organisation’s underperformers, are past. In recent years, organisations have recognised and embraced the benefits that can be realised by establishing a performance framework that effectively focuses the organisation on the creation and development of a high performance culture.

Having an effective performance management program can ensure that:

• Your teams are motivated to perform;
• There is a shared understanding of what needs to be achieved and how to go about achieving it;
• An environment of continual development is fostered;
• Specific areas for growth and improvement are identified;
• Employees and managers receive constructive feedback;
• You have a fair and equitable process for measuring and rewarding achievements;
• You have a clear link between performance and reward;
• You focus effort in a specific direction; and
• You are more likely to retain your top performers.

When designing or reviewing your current process it is important to identify what it is that you want to achieve from your performance framework. Common desired outcomes include:

• Greater communication between managers and their teams;
• Formalised objectives;
• A process that can clearly be linked to reward;
• Identification of developments needs;
• Identification of career aspirations as a basis for succession planning;
• A historical record of employee performance;
• A method for comparing and ranking employees; and
• Capturing an overall rating for each employee.

The following questions will assist you in determining what your desired outcomes are:

• What do you want to assess (e.g. values, objectives, behaviours)?
• How often do you want to conduct performance reviews?
• Do managers have the skills required to set objectives?
• Are managers skilled in providing constructive feedback?

Answering these questions will put you in a strong position to design a performance review process that meets your organisation’s unique needs. The best advice we can offer to anyone about to embark on designing or refashioning a performance program is to keep it simple. Complex documentation and cumbersome manual processes usually result in managers either not completing reviews for their teams, or filling out forms robotically. For performance review processes to be successfully executed they need to:

• Be easy to understand and complete;
• Focus on communication and content not forms or delivery;
• Feed into other processes within the organisation (e.g. remuneration reviews, training, succession);
• Be fair and consistent; and
• Contain objectives that are appropriate.

If you are looking for an online alternative to your paper based performance process or if you require assistance in reviewing your current performance management framework or designing a new performance management program, Remesys have experienced consultants who can work with you to ensure your performance program focuses employee efforts on those areas critical to your business success and supports the promotion of a pay for performance culture.

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Salary Packaging – Have you Reviewed your Policy Lately?

Early last year we published an article on salary packaging outlining a number of items that could be offered to employees. Since that time there have been a number of changes resulting in some of these items no longer being as tax effective as they once were.

Salary Packaging is when an employee sacrifices some of his or her cash salary for a particular benefit. The employee pays for the chosen benefit  from their pre-tax earnings rather than from their after tax earnings. The advantage to the employee is that the employee does not pay income tax on packaged items. The actual saving depends on the individual’s income level and personal tax bracket.

Which items need to be reviewed?

Remesys recommends only including benefits that are tax effective to the employee in your company’s salary packaging policy. These are items that do not attract Fringe Benefits Tax (FBT) or items where the FBT is concessionally taxed and therefore is less than PAYG income tax. The current full FBT rate is 46.5%.

Motor Vehicle

A novated lease is a popular way to package a motor vehicle. The tax-effectiveness as a salary packaged item will, however, depend on the car’s value, the kilometres that the car is driven in the FBT year and the employee’s marginal tax rate.

Salary packaging a novated leased car creates an FBT liability. However, this liability may be less than the employee’s marginal tax rate. Due to the changes to individual income tax thresholds with the highest marginal tax rate now set at 45% (less than the FBT rate of 46.5%), a novated lease may no longer provide a tax effective benefit to employees earning less than $180,000.

To regain the lost tax-effectiveness it is possible to use a combination of both pre-tax and post-tax deductions which is known as the Employee Contribution Method.

Superannuation

Most organisations offer employees the opportunity to salary sacrifice superannuation up to the concessional contributions cap. There is no FBT on salary sacrificed superannuation.

Employees should be aware that in this year’s Federal Budget, the concessional contribution caps were halved. This meant that from 1 July 2009, employees under age 50 only receive concessional tax treatment on employer contributions (including superannuation guarantee) and salary sacrifice contributions up to the new standard cap of $25,000 (indexed) each financial year, instead of the previous cap of $50,000 (indexed) per financial year. For individuals aged 50 and over, the transitional cap has been reduced from $100,000 to $50,000 each financial year (neither of which is indexed). The transitional cap will cease on 30 June 2012 when the concessional cap for those 50 and over will drop to the standard cap amount applicable at the time.

Contributions which are included   in the concessional contributions cap include the total of all employer contributions (including superannuation guarantee contributions), all salary sacrifice contributions made by the employee as well asany personal deductible contributions made by the employee in the applicable  the financial year. In the case where an employee exceeds the concessional contribution cap, an additional tax liability arises, a liability for which the employee is personally responsible.

Laptop Computer, Portable Printers and Computerised Diaries

Employees can no longer package a computer or computerised diary without incurring FBT, unless the laptop is required for business purposes.

Office Lunches

The ability for employees to buy their lunch through their pre-tax dollars without incurring an FBT liability is no longer available. Previously, if the lunch was supplied to the employee’s work premises through an approved provider and was consumed on the business premises on a working day the cost of lunch was FBT free.

Despite these changes to salary sacrifice arrangements there are still a number of items that employees are able to package. For further information on salary packaging, or if you require assistance in reviewing any of the salary packaging items that you offer, please feel contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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R.Packaging- Salary Packaging Calculator

In today’s competitive environment where many employees expect to be offered a variety of employee benefits, the challenge for employers is to ensure their benefit offerings are well communicated to current staff and lend support to their attempts to differentiate themselves in the market in which they operate.

Salary Packaging, whilst a common employment offering, is not always understood by employees and as a result, employee take up of the various benefits offered by their employer can vary.

In response to the need to ensure an appropriate level of visibility Remesys has developed R.Packaging, a calculator that assists employees to evaluate the potential impact on their net take home pay of “packaging” or “salary sacrificing” particular benefits from their pre-tax salary.

The Calculator is tailored to reflect the specific benefits and remuneration policy of your organisation.

All fields can be customised to your organisation’s specific requirements.

R.Packaging provides your employees with an easy to use calculator that:

• Provides a menu of the company’s available packaged items lifting the profile of the various benefits in which your company offers;
• Enables different cost options to be considered by employees ensuring informed decisions are made;
• Calculates and displays potential savings; and
• Prints in a ready-to-print format.

R.Packaging comes complete with a User Guide and Administrator Instructions.

The Benefits of R.Packaging

R.Packaging provides organisations with a number of benefits:

• Enabling ready access to the Calculator via the company’s intranet,  providing a practical supplement to existing salary packaging communications;
• Increasing employee awareness and understanding of salary packaging;
• Reducing demand on Payroll and Human Resources to respond to packaging queries; and
• Differentiating the company’s Salary Package offering through the additional informative support it provides.

For further information regarding R.Packaging, or to arrange a demonstration of the Calculator, please contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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Remesys Recruitment: Preparing for the Upturn

Historically, remuneration professionals have been in the fortunate position of being able to easily find both permanent and contract work. However, over the last nine months, fewer roles have been advertised and as such, many remuneration specialists have chosen to wait for the economy to pick up before they consider making their next move. This general feeling of caution is now dissipating and as such, we should expect that by the beginning of 2010 employees will increasingly pursue other opportunities and employers will start the search to fill vacant roles.

Remesys can assist your organisation with the recruitment of remuneration and human resources specialists.

Our specialist knowledge and hands-on experience in remuneration and reward enables us to provide quality candidates with the appropriate skills to meet your requirements. We focus on building strong relationships with both clients and candidates resulting in a large referral network that provides us with an advantage during the search process.

Whether your requirement is for someone permanent or contract, full time or part time we will match the candidate to your specific needs.  We currently have a number of highly skilled and experienced remuneration specialists available in Sydney, Melbourne and Brisbane.  For further information please contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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Remesys Training

Remesys offer a range of practical remuneration and benefits training programs. The programs provide an environment for participants to learn and share ideas through practical examples, hands-on exercises and group discussion.

Feedback from Remesys training participants includes:
The course provided a good basis to commence my remuneration skills. It clarified the knowledge that I already had and helped me question current practices in my own work environment. - Cindy Marshall, Employee Services Consultant, ING Australia

Content was well structured and easy to follow. No unnecessary information - everything was relevant - Pearl Backhouse, HR Connect - Lloyds International

Training dates for 2010 have been released and are now available on our website. Spaces are limited so please register your interest now!

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