Am I entitled to an Annual Pay Rise?

Overview

In Australia, it is most common that an employer will have absolute discretion to decide whether an employee is entitled to receive a bonus or pay rise. However, an employee may have a right to claim a bonus or pay rise as a legal entitlement if the employee has a right enshrined in one of the following instruments:

a) Contract;
b) Company policy; or
c) Award or Enterprise Bargaining Agreement (EBA)

Contract

In some circumstances, an employee will have a clause in his or her contract of employment that specifically details whether the employee is entitled to bonuses and/or pay rises. The clause may also specify details as to how often a pay rise is to be considered by an employer. However, it is often the case that such clauses often specify that the decision to give a bonus or pay rise is at ‘the absolute discretion of the employer’ or to similar effect. As a result, such a clause means the employee cannot force their employer to grant a bonus or pay rise.

Some contracts of employment may contain a clause to the effect that an employee must be given a bonus or pay rise if certain conditions are met. In this case, if it appears the employee has met those conditions, there may be a strong argument that he or she is entitled under their contract to receive a bonus or pay rise, as specific in their contract of employment. Language that imposes an obligation on an employer to act if certain conditions are met will further the argument that an employer will be bound if an employee meets the conditions specified.

Company Policy

The rules for granting a bonus or pay rise may be contained in a workplace policy, rather than an employee’s employment contract. In some circumstances, the terms of a policy can form part of an employee’s contract, therefore making an employee contractually entitled to benefits under the policy. To be enforceable the language of the policy must be obligatory, and the employee must have met all the conditions for achieving a bonus or pay rise under the policy in order for it to be enforceable as a contractual entitlement.

However, some employers guard against this by inserting a clause into the policy that states to the effect that a workplace policy does not form part of an employee’s contract and does not operate to grant any contractual benefits to the employee.

Award or EBA

Even if an employee does not possess a legal entitlement to a pay rise or bonus under their employment contract or workplace policy an applicable award or EBA may provide for such pay rise or bonus.

An Award or EBA may contain terms regulating minimum wages for employees in particular occupations, as well as terms about minimum non-performance based pay increased. In some cases, an EBA may contain terms that govern how annual performance and pay reviews take place.