You are competing for talent in a market where candidates compare parental leave policies, equity offers, and wellbeing budgets before they compare base salaries. But before you design a compelling benefits package, you need to know which benefits you are legally required to provide — and which ones you have discretion over. Getting this wrong in either direction is costly: underpaying entitlements exposes you to Fair Work enforcement and back-pay claims; over-promising benefits you haven't designed properly creates disputes and tax headaches.
This guide draws the line between mandatory and optional, walks through the rules that apply to each, and covers the super and tax mechanics that catch employers out most often.
What the law requires you to provide
Most mandatory entitlements for national system employees come from the National Employment Standards (NES) in the Fair Work Act 2009 (Cth). If a modern award or enterprise agreement covers your workforce, that instrument may impose additional obligations — higher rates, allowances, or specific break entitlements — on top of the NES floor.
Leave entitlements
Annual leave. Full-time employees accrue four weeks of paid annual leave for each year of service. Part-time employees accrue on a pro-rata basis. Employees classified as shiftworkers under an applicable award or enterprise agreement and defined as shiftworkers for NES purposes are entitled to five weeks.
Personal/carer's leave. Full-time employees accrue 10 days of paid personal/carer's leave per year (pro-rata for part-time). This covers personal illness or injury and caring for an immediate family or household member who is sick, injured, or facing an unexpected emergency. Casual employees are not entitled to paid personal/carer's leave but have access to two days of unpaid carer's leave per occasion.
Unpaid parental leave. An eligible employee — one who has completed at least 12 months of continuous service — can take up to 12 months of unpaid parental leave and has the right to request a further 12 months. Regular casual employees who have worked for you on a regular and systematic basis for at least 12 months may also be eligible. Paid parental leave from the government (administered through Services Australia, not the employer) is a separate entitlement; employer-funded paid parental leave is optional and discussed below.
Family and domestic violence leave. All employees — full-time, part-time, and casual — are entitled to 10 days of paid family and domestic violence leave each year. The entitlement is available in full from the start of employment and resets on each work anniversary; it does not accumulate year to year. Employees must be experiencing family and domestic violence and need to take the leave to deal with its impact.
Compassionate and community service leave. Separate NES entitlements cover compassionate leave (two days per occasion) and community service leave — for example, jury duty — which must be unpaid for the first ten days unless an award or enterprise agreement provides otherwise.
Public holidays. Full-time and part-time employees are entitled to be absent on a public holiday and to be paid their base pay rate for the hours they would ordinarily have worked. An employer may make a reasonable request for an employee to work on a public holiday; an employee may refuse if the request is unreasonable or the refusal is reasonable in the circumstances. The Fair Work Act 2009 (Cth) sets out the factors for assessing reasonableness, including operational requirements, the nature of the employee's role, whether the employee could reasonably have expected to be asked, and the amount of notice given. If an employee does work, award penalty rates may apply.
Hours of work and flexibility
The NES sets the maximum at 38 ordinary hours per week for a full-time employee, plus reasonable additional hours. Awards and enterprise agreements often add specific meal-break and rest-break rules, so your rosters must reflect the correct entitlements for your industry.
Certain employees have the right to request flexible working arrangements: employees who are parents or carers of school-aged or younger children, employees with a disability, employees aged 55 or over, and employees experiencing family or domestic violence. You must consult with the employee and provide a written response within 21 days of receiving the request. If you refuse, you must state the reasonable business grounds and explain why you could not accommodate the request or any agreed alternative.
Notice and redundancy
Minimum notice periods and redundancy pay scale with an employee's length of continuous service. Employees with less than 12 months of service are not entitled to redundancy pay. For longer-serving employees, the statutory redundancy entitlement scales up from four weeks for one to two years of service through to 16 weeks for nine or more years, though small-business employers (fewer than 15 employees) are generally exempt from redundancy pay under the Fair Work Act 2009 (Cth).
Superannuation
You must pay super to eligible employees and, in some cases, to contractors who are engaged primarily for their labour. The current super guarantee rate is 12% of ordinary time earnings (OTE), effective from 1 July 2025.
Payday Super — a significant change from 1 July 2026. From 1 July 2026, the Payday Super regime takes effect. Employers will be required to pay super on the same day as salary and wages, calculated at 12% of each employee's qualifying earnings — a concept that is broader than OTE. Under the new framework, all commissions (including those earned entirely outside ordinary hours) and certain bonuses and allowances that were previously excluded from OTE may now be qualifying earnings. Payroll systems that have been configured around OTE will need to be reviewed and updated before 1 July 2026.
Optional benefits worth structuring carefully
Optional benefits become binding once you commit to them in writing. Draft them imprecisely and you create disputes about entitlements you never intended to confer.
Employer-funded paid parental leave
Many employers offer paid parental leave on top of the government scheme as a retention tool. Document eligibility clearly — minimum service thresholds, whether it is available to both primary and secondary carers, how it interacts with the government payment, and what happens on early resignation. Avoid ambiguity about whether the payment is a loan with a repayment obligation if the employee leaves within a defined period: if you intend a repayment clause, it must be in writing and enforceable.
Additional annual leave, leave loading, and cash-out
You can offer more than four weeks' leave or permit cash-out, but only in compliance with your applicable award or enterprise agreement. Cash-out arrangements must be voluntary, agreed in writing on each occasion, and must not reduce the employee's remaining accrued entitlement below four weeks. Leave loading — the additional percentage paid on top of base pay when leave is taken — is set by many awards at 17.5%; if your award provides it, it is not optional. If your employees are award-free, leave loading is only payable if you have agreed to it in the contract.
Time off in lieu (TOIL)
TOIL allows an employee to take paid time off instead of receiving overtime payments. Whether TOIL is available depends on whether your applicable award permits it, and under what conditions. Where it is permitted, the arrangement must be agreed in writing before the overtime is worked, the time off must be taken at the overtime penalty rate (not straight time), and there is usually a time limit on when it must be taken. Record-keeping is critical: unrecorded TOIL arrangements regularly generate disputes about accrued hours.
Bonuses, commissions, and salary packaging
Discretionary bonuses and commissions need to be drafted carefully. A bonus described as "discretionary" in a contract may still be found to be legally enforceable if there is a consistent pattern of payment or if the metrics triggering it are specified. Document whether a bonus is earned at the time of grant or contingent on remaining employed; include a clear clawback clause where relevant.
Salary packaging — redirecting pre-tax salary towards non-cash benefits such as a novated lease, laptop, or additional super contributions — can reduce an employee's taxable income, but it comes with FBT implications for you as the employer. The FBT rate is 47% and applies to the grossed-up taxable value of the benefits provided. Some benefits are exempt from FBT (for example, portable electronic devices used primarily for work); others attract it in full. Get tax advice before launching any salary packaging arrangement.
Employee equity
An employee share scheme (ESS) or employee share option plan (ESOP) can align long-term incentives, but the legal and tax design is not straightforward. The employee share scheme concessions in the income tax legislation reduce the upfront tax hit for employees in certain circumstances, but the conditions are specific — the plan must be structured to qualify. Plan rules, offer documents, and leaver provisions all require careful drafting and should be reviewed against the Corporations Act 2001 (Cth) and applicable tax rulings.
Wellbeing and learning budgets
Wellness stipends, training allowances, Employee Assistance Programs (EAPs), and paid volunteering days are usually the simplest optional benefits to administer, but they still need a policy that defines who is eligible, how much is available, what it can be spent on, and what approval process applies. Without this, managers apply the benefit inconsistently and you risk discrimination claims.
How awards interact with your benefits package
If a modern award covers your employees, your benefits must meet or exceed that award's terms. Offering an "all-in" salary to an award-covered employee is not prohibited, but you must conduct regular reconciliations to confirm the salary genuinely covers all award entitlements — base rates, overtime, penalty rates, and allowances — for the actual hours worked. If it does not, the employee is entitled to the shortfall. Many underpayment claims arise not from bad intentions but from employers who set an all-in salary once and never re-checked it as award rates increased.
Getting the super calculations right
OTE versus overtime. Super is payable on ordinary time earnings, which generally includes base salary, certain allowances, and bonuses that relate to ordinary hours. Overtime payments are not OTE and do not ordinarily attract super. However, if a bonus is structured so that it relates to all hours worked (not just ordinary hours), the ATO may characterise it as OTE in full. How you draft and label a bonus matters.
Termination payments. Some termination payments attract super; others do not. Genuine redundancy payments, payment in lieu of notice, and unused annual leave payments each have different super treatment. These edge cases come up at exactly the moment when mistakes are most expensive — the end of the employment relationship — so it pays to check them with your payroll system and accountant before the final pay is processed.
The 1 July 2026 Payday Super transition. Employers who are not yet across the Payday Super changes should treat the next few months as a preparation window. The shift from quarterly to per-payroll super payments, and the move from OTE to qualifying earnings, will require payroll configuration changes, cash-flow planning (super becomes due on each payday rather than within 28 days of the end of each quarter), and potentially updated employment contracts and bonus plans.
How Artificer Legal can help
A well-designed benefits package is not just a collection of good intentions — it is a set of legal obligations, each of which can give rise to a claim or an audit if it is wrong. The judgment calls that this article cannot make for you include:
- Whether your workforce is covered by an award (and which one), and how that affects minimum pay, overtime, and TOIL.
- Whether an "all-in" salary clause in your employment contracts genuinely satisfies award obligations after the most recent award increase.
- Whether your bonus and commission plans create unintended legal entitlements — or fail to protect the discretion you intended to reserve.
- Whether your salary packaging arrangements are structured to minimise FBT liability, and whether the documentation meets ATO requirements.
- Whether your employee equity plan qualifies for the ESS tax concessions and complies with the Corporations Act.
- Drafting or updating employment contracts, a staff handbook, a parental leave policy, and a flexible work policy that are consistent with each other and with current awards and the NES.
Artificer Legal's employment team works with Australian small and medium businesses to design and document compliant, practical benefits packages — and to review existing arrangements before a Fair Work audit or employee dispute makes the review compulsory. Contact us to discuss your situation.
The most important thing to get right first
The single most common source of underpayment liability is not a deliberate decision — it is an employment contract that was accurate when it was signed and has drifted out of compliance as award rates and the NES have changed around it. Annual leave loading provisions, all-in salary clauses, and super calculations configured against old OTE rules all fall into this category. Review your template contracts and payroll configuration at least once a year, and build the 1 July 2026 Payday Super changes into your planning now.
Key points from this article:
- The NES in the Fair Work Act 2009 (Cth) sets the minimum floor: four weeks annual leave, 10 days personal/carer's leave, up to 12 months unpaid parental leave, 10 days paid family and domestic violence leave, and a 38-hour maximum working week.
- All employees (including casuals) are entitled to 10 days paid family and domestic violence leave, available in full upfront.
- Flexible work requests require a written response within 21 days; refusal must be on reasonable business grounds.
- Super is currently 12% of ordinary time earnings; from 1 July 2026, Payday Super replaces quarterly payments and uses a broader "qualifying earnings" base.
- FBT at 47% applies to non-cash benefits under salary packaging arrangements — get tax advice before launching one.
- Optional benefits — paid parental leave, TOIL, bonuses, equity — create binding obligations once documented; the drafting determines your exposure.
- Review your employment contracts, award coverage, and payroll configuration at least annually.