Alex is Sprintlaw’s co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
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When you’re hiring (or reviewing pay for your existing team), the phrase “total annual salary” can seem straightforward - until you actually have to put a number on it.
As a small business owner, understanding the total annual salary meaning matters for more than just budgeting. It affects how you advertise roles, draft employment contracts, stay compliant with the Fair Work framework, and avoid misunderstandings that can turn into disputes later.
In this guide, we’ll walk through what “total annual salary” is commonly taken to mean in an Australian employment context, what it does (and doesn’t) include, and how you can calculate it in a practical, defensible way.
What Is The Total Annual Salary Meaning For Small Businesses?
In plain terms, total annual salary is the amount of salary or wages you pay an employee over a 12-month period for their work.
However, in Australia, people use “total annual salary” in two common (and sometimes conflicting) ways:
- Base salary (annualised): the employee’s ordinary earnings for their standard hours, expressed as a yearly figure (for example, $80,000 per year).
- Total remuneration package (TRP) / total package: the overall value of the employee’s remuneration for a year. This often includes the employer’s superannuation contributions and may also include other benefits.
This is where small businesses can get caught out: two people can say “total annual salary” and mean two different things.
If you want to avoid confusion, it’s best to be explicit in your job ads, offer letters and contracts about:
- Whether the figure is inclusive or exclusive of superannuation (noting super is an employer contribution, not “take-home” pay)
- Whether the figure covers ordinary hours only, or whether it’s intended to absorb overtime/penalty rates (only where legally allowed and documented)
- Whether any allowances or bonuses are included
And if the role is award-covered, you’ll also want to ensure the annual salary still results in the employee being paid at least what they would be entitled to under their award over time (including penalty rates and allowances where applicable). Exactly how you do this can be award-specific, which is why businesses often pair salary setting with Award Compliance work upfront.
Is “Total Annual Salary” The Same As “What Is A Annual Salary”?
When people search “what is a annual salary”, they’re usually asking for the basic concept: a yearly pay amount for a permanent employee (often full-time).
In everyday conversation, total annual salary is often used in that same way. But in business practice, it’s also used to describe broader package concepts. As an employer, the key is not the label - it’s what the number actually includes.
What Should Be Included (And Not Included) In Total Annual Salary?
To calculate total annual salary properly, you need to be clear about the components of pay.
Common Inclusions
Depending on how your business uses the term, total annual salary might include:
- Base salary / ordinary wages: the fixed amount paid for ordinary hours of work over the year.
- Superannuation: if you’re talking about a “package” figure (for example, “$110,000 package including super”). While super is paid by the employer and generally not received as cash in-hand, it is commonly included when describing total remuneration.
- Allowances: such as tool allowance, leading hand allowance, travel allowance, uniform allowance (these can be award-based or contractual).
- Bonuses or commissions: if contractually promised (or if your business consistently pays them in a way that becomes expected).
- Other benefits: sometimes, businesses include non-cash benefits (like car allowance, phone allowance, or health benefits) when describing total remuneration.
Common Exclusions (Unless You’ve Clearly Agreed Otherwise)
Many employers treat these as outside the total annual salary unless expressly included in an annualised salary arrangement (and permitted under the relevant award/agreement):
- Overtime and penalty rates: these may apply under modern awards/enterprise agreements and are often paid on top of base salary unless a valid annualised salary arrangement applies.
- Reimbursements: genuine reimbursements (like repaying an employee for a work expense) aren’t “salary”.
- One-off discretionary payments: truly discretionary bonuses are usually not treated as part of total annual salary, but wording and practice matter.
A good rule is: if an employee could reasonably read “total annual salary” and assume something is included, you should clarify it in writing. That clarity typically lives inside an Employment Contract.
A Quick Word On Super: Inclusive Or Exclusive?
This is one of the biggest sources of confusion.
- “$90,000 + super” usually means $90,000 base salary, and super is paid on top (so the employer’s total cost is higher).
- “$90,000 package (incl. super)” usually means the super comes out of the $90,000 (so the base salary is lower).
From a budgeting perspective, it’s fine to use either approach - you just need to communicate it clearly and document it properly.
How Do You Calculate Total Annual Salary (Step-By-Step)?
There isn’t one single “official” formula because it depends on what you’re including. But you can use a consistent method so your figures are accurate and easy to explain.
Step 1: Confirm The Pay Structure (Hourly Vs Salary)
Start by identifying whether the role is:
- Salaried (a fixed annual amount paid in regular instalments), or
- Hourly (paid per hour worked, often casual or part-time).
If someone is paid hourly, you can still work out their “annualised” pay for budgeting - but you’ll need assumptions about average hours, penalty rates, and leave patterns.
Step 2: Work Out The Base Annual Salary
If the employee is salaried, the base annual salary is usually the stated annual amount (for example $75,000 per year).
If the employee is hourly, a simple starting point is:
- Hourly rate × ordinary weekly hours × 52
For example, $30/hour × 38 hours/week × 52 = $59,280 base annual (before considering penalties, overtime, allowances, and leave impacts).
Step 3: Decide Whether You’re Adding Super
If you want “total annual salary” to mean a “package” figure, you’ll typically add the employer’s superannuation contributions to the base salary figure.
Example (illustrative only):
- Base salary: $80,000
- Super (using the applicable super rate): $80,000 × super rate
- Total package = base salary + super
Because super rates and rules can change, it’s smart to confirm the current requirements and make sure your contract wording matches your intention (for example, “inclusive of super” vs “plus super”). For payroll set-up and tax treatment, it can also help to confirm the numbers with your accountant or payroll provider (this article is general information, not financial or tax advice).
Step 4: Add Guaranteed Allowances And Contractual Extras
If you pay a fixed allowance (or another fixed benefit paid as cash) each pay period, annualise it and add it.
For example:
- Car allowance: $150 per week × 52 = $7,800 per year
- Total annual remuneration (cash) = base salary + $7,800 (+ super if using package approach)
If allowances vary (for example, “travel allowance when travel occurs”), you may prefer to treat them as variable and not part of “total annual salary”, unless you’re using averages for budgeting.
Step 5: Check Award/Agreement Minimums And Annualised Salary Rules
This is the compliance step many small businesses miss.
If the employee is covered by a modern award (or enterprise agreement), salary setting isn’t just about the annual number - it’s about whether the employee is ultimately receiving at least what they’re entitled to when you account for things like:
- minimum classification rates
- penalty rates (weekends, public holidays, evenings)
- overtime
- allowances
Some awards allow annualised salary arrangements, but they can come with specific rules (which differ by award), such as record-keeping, reconciliation, written terms, and ensuring the employee is not worse off overall. This is one area where getting advice early is far easier than fixing a problem after the fact.
Common Mistakes When Using “Total Annual Salary” In Job Ads And Contracts
Even well-meaning business owners can run into issues if the salary language is vague.
1. Advertising A “Package” Without Saying It Includes Super
If you advertise “$100,000 total annual salary” without clarifying “+ super” or “incl. super”, candidates may assume it’s a base salary, and you may be thinking it’s a total cost figure.
That mismatch can lead to disputes very early in the relationship (sometimes before the employee even starts).
2. Treating Salary As “All Inclusive” Without A Proper Annualised Salary Arrangement
Salaries are common in small businesses because they make payroll predictable. But a salary does not automatically wipe out award entitlements like overtime and penalty rates.
If the role regularly involves additional hours, weekend work, or shift work, it’s worth checking whether the relevant award permits an annualised salary and what you need to do to implement it properly.
3. Forgetting To Address Leave Entitlements In Costing
Permanent employees are typically entitled to paid leave (like annual leave and personal/carer’s leave). While leave doesn’t usually change the annual salary figure, it does change your true cost of employment and rostering capacity.
When budgeting, you’ll also want to understand how leave payments work in practice, including things like Annual Leave Payments and whether your award includes leave loading (and how that impacts payroll in leave periods). If leave loading applies, a leave loading approach may need to be factored into your overall employment costs.
4. Mixing Up “Total Annual Salary” With “Total Employment Cost”
Your total employment cost is often higher than total annual salary because it can include payroll tax (where applicable), workers’ compensation premiums, recruitment costs, and tools/equipment.
Total annual salary is usually about what you pay the employee as salary/wages (and, depending on how you’ve described the figure, it may also include your super contributions). For payroll tax, workers’ comp and budgeting assumptions, it’s worth confirming the numbers with your accountant or payroll professional (this article is general information, not financial or tax advice).
How To Document Total Annual Salary Clearly (And Pay It Correctly)
Once you’ve decided what “total annual salary” means in your business, the next step is putting it into writing in a way that is consistent, compliant, and easy to administer.
Use Clear Salary Clauses In Your Employment Contract
Your contract should spell out:
- the base salary amount (and when it’s paid)
- whether super is paid on top or included
- the employee’s ordinary hours of work
- how overtime/penalty rates are handled (especially if you’re setting an annualised salary)
- any allowances, bonuses, or commissions (and whether they’re discretionary)
Having the right contract in place isn’t just a “nice to have” - it’s one of the simplest ways to reduce misunderstandings and show that you’re paying correctly from day one. Many businesses start with a tailored Employment Contract for permanent staff (and adjust depending on the role and seniority).
Make Sure Your Payroll Practices Match Your Paperwork
It’s important that your actual pay practices match what’s written. If the contract says “$85,000 + super”, but payroll is treating it as inclusive of super, that can create underpayments.
Similarly, if you’re relying on an annual salary to cover what would otherwise be overtime, you’ll generally need to ensure:
- the salary is high enough to cover the employee’s minimum entitlements over time
- you keep appropriate time and wage records
- you reconcile if needed (depending on the relevant award/arrangement)
Be Careful With Changes And Termination Payments
Even if this article is focused on salary, salary decisions connect directly to termination and exit payments. For example:
- If you end employment and pay out notice instead of having the employee work it, payment in lieu of notice needs to be calculated correctly.
- If a role becomes redundant, redundancy pay calculations can depend on the employee’s base rate of pay and length of service (and award coverage). A quick sense-check using a redundancy calculator can help you spot issues early, but you should still confirm the legal requirements for your specific situation.
These moments (exits, redundancy, contract changes) are often where salary wording gets tested, so it’s worth getting it right upfront.
Key Takeaways
- The total annual salary meaning can vary - it might refer to base salary (annualised) or a total remuneration package that includes super and other benefits.
- The safest approach is to be explicit about what’s included: super, allowances, bonuses, and whether the salary is intended to cover overtime or penalty rates.
- To calculate total annual salary, start with base pay for ordinary hours, then add any guaranteed cash allowances and (if relevant) employer superannuation contributions to reach the “package” figure.
- If the role is award-covered, you’ll want to ensure the annual salary does not undercut award entitlements over time (especially where overtime, penalties or allowances apply), noting the detailed rules can differ between awards and agreements.
- A clear written contract and payroll practices that match the contract are key to preventing disputes and avoiding accidental underpayments.
If you’d like help setting up salaries, contracts, or pay structures for your team, you can reach Sprintlaw on 1800 730 617 or email team@sprintlaw.com.au for a free, no-obligations chat.
