What are earnings?¶

An employee's pay is not one single number. It is made up of several parts added together. Those parts are called earnings. When you add all the earnings for a pay period, you get the gross pay — the amount before any tax or other deductions are taken out.

Understanding the building blocks helps you see where a pay figure comes from, and why two people who work the same number of hours can still be paid different amounts.

In one line

Earnings are the building blocks — ordinary pay plus any overtime, penalty rates, allowances, bonuses and commissions — that add up to an employee's gross pay.

Why this matters¶

When an employee asks "how did you work out my pay?", the answer is almost always in the building blocks. Getting the blocks right matters because some of them are taxed differently, and some count towards super while others do not. If you know what each part is, you can read a payslip, check a pay run, and explain it in plain English.

What you will learn¶

The main building blocks that make up an employee's earnings
How those building blocks add up to gross pay
Why different building blocks can be treated differently for tax and super

Understanding the concept¶

Earnings are all the amounts an employee is paid for their work in a pay period. Here are the common building blocks.

Ordinary pay — the base amount for an employee's normal (ordinary) hours of work. This is usually a weekly rate or an hourly rate multiplied by the ordinary hours worked. It is the biggest building block for most people.
Overtime — extra pay for hours worked outside the ordinary hours set in an award or agreement. Fair Work explains that overtime is usually paid at a higher rate than ordinary hours.
Penalty rates — a higher rate for working at particular times, such as weekends, public holidays, late nights or early mornings. Fair Work explains that the penalty rates that apply depend on the award or agreement.
Allowances — extra amounts for particular things, such as using your own tools, travel, or working in certain conditions. Some allowances reward work; others just cover an expense.
Bonuses and commissions — extra amounts on top of the base pay, often linked to performance or sales.

Add the building blocks that apply, and you get the gross pay for the period. The mix is different for every employee and every pay period.

An important point: the building blocks are not all treated the same way. Some count towards super (the money an employer sets aside for an employee's retirement) and some do not. Overtime, for example, is generally left out of the amount super is worked on. You do not need to memorise the rules here — just know that the type of earning matters, not only the dollar amount.

For accountants & bookkeepers

The building blocks map onto pay-item categories that also drive PAYG withholding and the amount super is calculated on. The ATO's list of ordinary time earnings treats ordinary hours, many allowances, shift loadings, commissions and some bonuses as ordinary time earnings, while overtime is generally excluded where ordinary hours are clearly identified. Classifying each pay item correctly at setup is what keeps super and Single Touch Payroll reporting right.

Example¶

Priya works a week at a cafe. Her pay for that week is built from several parts: her ordinary hours at her normal rate, a few hours at a weekend penalty rate, and a small laundry allowance for washing her uniform. One week she also earns a sales bonus.

Each part is a separate building block. Added together, they give Priya's gross pay for that week. The following week she works no weekend and earns no bonus, so her gross pay is different — even though her ordinary hours were the same. The payslip lists each building block on its own line, so Priya can see exactly how the total was reached.

Common mistakes¶

Thinking gross pay is just "hours times rate" — it can also include overtime, penalties, allowances, bonuses and commissions.
Treating every allowance the same — some reward work, others only cover an expense, and they can be treated differently for tax and super.
Assuming every building block counts towards super — overtime generally does not.
Confusing gross pay (the total of the building blocks) with take-home pay (what is left after deductions).

How this works in myaccountant¶

In the app — when you set up an employee and run a pay run, each building block is a separate pay item with its own category (for example ordinary pay, overtime, allowance or bonus). myaccountant adds the pay items together to work out the gross pay, works out PAYG withholding, and works out super on the earnings that count. Each pay item appears as its own line on the payslip you can email to the employee.

Key points¶

Earnings are the building blocks that add up to an employee's gross pay.
The common blocks are ordinary pay, overtime, penalty rates, allowances, bonuses and commissions.
The mix is different for every employee and every pay period.
The building blocks are not all treated the same way for tax and super.
Overtime is generally left out of the amount super is worked on.
Gross pay is the total of the building blocks, before any deductions.

Learn next¶

General information only — not tax, super or financial advice.

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