An annual salary is a type of remuneration where the employee works set hours each week, and gets a pre-determined wage each week, fortnight or month. This salary is usually negotiated as an annual figure.
The conditions of an annual salary and the associated entitlements must be outlined between employer and employee in an employment agreement. Negotiating a salary is common practice in most industries and often crucial to meeting the needs of the individual and the business.
One of the entitlements that should be included in a salaried employment agreement is annual leave cash up. This is the practice of an employer paying an employee for any unused annual leave entitlements when the employee leaves the company. The process and conditions around annual leave cash up should be clearly outlined in the employment agreement.
How should an annual salary be calculated?
Salaried workers must receive at least equal or higher than the current minimum wage rate.
As of 1 April 2023, the minimum wage rate per hour for employees 16 years or older is:
- Adult: $22.70
- Starting-Out: $18.16
- Training: $18.16
While this is the minimum wage, an employee’s salary will naturally be calculated based on the profession, training and level of experience.
What To Include In A Salaried Employment Agreement
Employers should take the time to develop an employment agreement that is specific to the employee’s role. This means employers must have an in-depth understanding of the current market (in relation to their industry) and the minimum entitlements for New Zealand workers.
Below are the most common conditions for salaried employment agreements:
- parties involved in the contract and the duration of the contract
- duties and responsibilities of the position
- hourly wage rate
- remuneration adjustments
- weekly number of hours
- overtime agreements
- termination clause
- performance reviews
- specific details about entitlements:
- annual leave
- sick leave
- long service leave
- carer’s leave
- superannuation
- reimbursements for any expenses
- parental leave, and
- other leave
Other factors to include that may be relevant are development and training, intellectual property, confidential information and restrictive covenants.
Negotiating An Annual Salary
Annual salary negotiations give the employer and employee a chance to discuss the terms of an employment agreement. The purpose of negotiating a salary is to reach a mutual agreement that not only falls in-line with the current market – but satisfies the needs of the individual and financial limitations of the employer.
Employers should be prepared to make an offering that guarantees long-term success for the business and employee. This means not just offering the right salary range, but understanding people’s deeper desires such as spending time with the family, personal development, and pursuing their hobbies.
By appealing to the specific needs of people – rather than focusing on the numbers – employers can make an enticing offer than makes themselves and the employee happy.
For advice on annual salaries and negotiating a salary in the workplace, contact Employsure on 0800 568 012.
