Earning Money - Wages and Salaries
Understand how Australians are paid for their work. Calculate earnings from hourly wages and annual salaries, and learn to read a real pay slip.
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Worksheet
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Q1 · How do you calculate total pay for someone who works a fixed number of hours at an hourly rate?
Q2 · Do you think a salary always pays more than a wage? Why or why not?
Learning Intentions
Know
- The difference between wages and salaries.
- The key components of an Australian pay slip.
Understand
- How hourly rates and hours worked determine total pay.
- How an annual salary is distributed across pay periods.
Can Do
- Calculate total earnings from an hourly rate and hours worked.
- Calculate portions of an annual salary (weekly, fortnightly, monthly).
Success Criteria
- I can calculate total pay using $\text{Pay} = \text{hours} \times \text{hourly rate}$.
- I can convert an annual salary into weekly, fortnightly or monthly amounts.
- I can identify gross pay, net pay and deductions on a standard Australian pay slip.
Key Terms
Common Mistakes to Avoid
Wrong: “A salary always means you earn more than a wage.” The payment structure (fixed vs hourly) does not determine the total amount. A high hourly wage can exceed a low salary.
Right: Wages and salaries are different payment structures, not different pay levels. What matters is the total annual equivalent.
Wrong: “To find a fortnightly salary, divide by 12 and then by 2.” There are 26 fortnights in a year, not 24.
Right: Divide an annual salary by 52 for weekly, by 26 for fortnightly, or by 12 for monthly. Always use the correct number of pay periods.
Most Australians are paid either a wage or a salary. The structure affects how you calculate earnings and how your pay changes with extra hours.
A wage is paid based on the number of hours you work. The formula is straightforward:
If you work more hours, you earn more. If you work fewer hours, you earn less. Wages are common in retail, hospitality, construction and casual work.
A salary is a fixed annual amount agreed in your employment contract. It is paid in equal instalments regardless of exact hours worked:
Real-World Anchor: As of 2025, the Australian national minimum wage is $\$24.10$ per hour (or $\$915.90$ per week for a full-time 38-hour week). Many workers are covered by awards set by the Fair Work Commission, which specify minimum rates for different industries.
Important: A salary does not automatically mean higher pay. A full-time retail worker on $\$28$/hour earns approximately $\$55,300$ per year ($28 \times 38 \times 52). An office worker on a $52,000 salary earns less despite being on a “salary.” Always compare annual equivalents.
What to write in your book
- Wages are calculated using hours worked × hourly rate.
- A salary is a fixed annual amount paid in regular instalments regardless of hours.
- Convert a salary by dividing by 52 (weekly), 26 (fortnightly) or 12 (monthly).
- Compare annual equivalents to judge which pay structure is better.
Every Australian employer must provide a pay slip within one working day of paying an employee. A pay slip reports gross and net pay, permitted deductions, and (where relevant) employer super contributions. These are separate categories:
- The employer’s and employee’s names
- The pay period dates
- Hours worked and the hourly rate (for wage earners)
- Gross pay - cash earnings before deductions
- Deductions - amounts withheld from gross cash earnings, such as PAYG tax and any authorised deductions
- Employer super contributions - shown separately; compulsory SG is paid by the employer into the worker's super fund and is not withheld from gross cash earnings
- Net pay - gross cash earnings less deductions; the amount paid to the worker
- Any loadings, penalties or allowances
Super and salary sacrifice: As at 21 October 2026, the SG rate is 12% for eligible workers. The employer pays SG to the worker's super fund; it is not taken out of gross cash earnings. If an employee agrees in advance to salary sacrifice part of future salary into super, that sacrificed amount is treated as an employer contribution and the employee's cash salary is reduced. A pay slip can report employer super separately from deductions and net pay. See the ATO super guarantee rates and Fair Work pay slip guidance.
What to write in your book
- A pay slip reports gross pay, deductions, net pay, and (where relevant) employer super contributions.
- Employer SG is paid into super separately; it is not deducted from gross cash earnings.
- Net pay (take-home pay) is what the worker actually receives.
- Employers must provide a pay slip within one day of paying an employee.
Interactive: Pay Calculator
Your Turn
Question 1: Chen works 22 hours this week at $29.80 per hour. Calculate Chen’s gross pay.
Question 2: Aisha has an annual salary of $68,000. Calculate her fortnightly pay before tax.
Revisit Your Thinking
Look back at your Think First response about Alex working 8 hours at $\$25.50$ per hour. Was your answer correct? What if Alex worked a Sunday shift paid at double time ($\$51.00$ per hour) for 6 hours instead? Which shift pays more?
Earlier you were asked: What was your first thought on this topic?
Now that you've worked through the lesson, write a fuller answer. What changed in your thinking?
Multiple Choice
Select the best answer for each question.
1 mark A casual worker earns $28.50 per hour. How much do they earn for a 7.5-hour shift?
1 mark Mia earns a salary of $78,400 per year. What is her fortnightly pay before tax?
1 mark Which of the following correctly describes a salary?
1 mark Jordan’s pay slip shows a gross pay of $\$1,250$ and total deductions of $\$312.50$. What is Jordan’s net pay?
1 mark An employee is paid $1,200 per week. What is their approximate annual salary?
Short Answer
Show all working and justify your answers.
Question 6
Sam works 38 hours at $32.40 per hour and an additional 4 hours of overtime at time-and-a-half. Calculate Sam’s gross pay for the week. Show all steps.
Question 7
Two job offers are available:
- Job A: Wage of $30/hour, 38 hours per week
- Job B: Salary of $62,000 per year
Calculate the annual equivalent of Job A and determine which job pays more per year. Show your reasoning.
Question 8
Explain why dividing an annual salary by 24 to find a fortnightly amount is incorrect. In your answer, state the correct method and calculate the difference this error would make for a salary of $52,000 per year.
Model Answers
Normal pay: $38 \times \$32.40 = \mathbf{\$1{,}231.20}$
Overtime rate: $\$32.40 \times 1.5 = \mathbf{\$48.60}$ per hour
Overtime pay: $4 \times \$48.60 = \mathbf{\$194.40}$
Gross pay: $\$1{,}231.20 + \$194.40 = \mathbf{\$1{,}425.60}$
Marking guidance: 1 mark for normal pay calculation, 1 mark for overtime rate and pay, 1 mark for correct total.
Job A annual: $\$30 \times 38 \times 52 = \mathbf{\$59{,}280}$
Job B annual: $\mathbf{\$62{,}000}$
Difference: $\$62{,}000 - \$59{,}280 = \mathbf{\$2{,}720}$
Conclusion: Job B pays $2,720 more per year.
Marking guidance: 1 mark for Job A calculation, 1 mark for identifying Job B amount, 1 mark for correct comparison, 1 mark for clear conclusion with units.
There are 26 fortnights in a year, not 24. Dividing by 24 assumes only 48 weeks of pay, ignoring 4 weeks.
Correct fortnightly pay: $\$52{,}000 \div 26 = \mathbf{\$2{,}000.00}$
Incorrect fortnightly pay: $\$52{,}000 \div 24 = \mathbf{\$2{,}166.67}$
Difference per fortnight: $\$2{,}166.67 - \$2{,}000.00 = \mathbf{\$166.67}$
Annual difference: $\$166.67 \times 26 = \mathbf{\$4{,}333.42}$
Marking guidance: 1 mark for explaining 26 fortnights, 1 mark for correct calculation, 1 mark for incorrect calculation, 1 mark for difference, 1 mark for clear reasoning.