JUNE 2015 PROFESSIONAL ENGINEER REMUNERATION SURVEY SUMMARY REPORT

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1 SALARY INCREASES REMAIN SUBDUED Salaries of professional engineers rose only marginally over the past year according to the results of the June 2015 Professional Engineer Remuneration Survey, published by Professionals Australia. Average annual increase GRAPH 1 - ANNUAL SALARY INCREASES BY EMPLOYMENT SECTOR VS ECONOMIC INDICATORS The survey, conducted over October and November this year, attracted over 1,400 responses, analysis of which showed an average annual increase in professional engineer salaries of 2.9% across all sectors combined. The result compares with an annual increase in salaries of 3.3% reported in June The Australian Bureau of Statistics Consumer Price Index rose by 1.3% in the 12 months to the end of March 2015 whilst its Wage Price Index series rose by 2.3% over the same period. 2.9% 3.1% 2.7% 3.5% 2.8% 2.3% 1.3% All Private Public Mfg Sector Non-Mfg Wage Price Index (Mar '15) Consumer Price Index (Mar '15) GRAPH 2 - ANNUAL SALARY INCREASES (JUNE REPORTS) The survey found respondents employed in the non-manufacturing sector had received an average increase in annual salary of 2.8%, whilst the manufacturing sector, comprising mostly private sector respondents, reported an average increase in annual salaries of 3.5% All Private Public Graph 2 shows average rate of increase in professional engineer salaries had slowed dramatically over the last few years, supporting anecdotal evidence of a sizeable slowdown in demand for professional engineer services, notably in the mining industry. % GRAPH 3 - AVERAGE ANNUAL SALARY INCREASE BY INDUSTRY Communication inc Telstra Electricity & Gas supply Chemical & Petroleum Water, Sewerage & Drainage Other Consulting & Tech Services Construction, Contract, Maint. Transport & Storage Public Administration Transport Equipment Defence 3.5% 3.3% 3.1% 3.0% 2.7% 2.5% 2.0% 3.1% Average annual increase Salary growth was generally similar across most industries although the impact on salary growth of Federal and State government wage fixing policies saw wages increase by only 2-3 per cent in industries where these governments were predominant employers. 1

2 Mean annual increase JUNE 2015 PROFESSIONAL ENGINEER annual package value GRAPH 4 MEDIAN PACKAGE BY RESPONSIBILITY LEVEL $242,011 $202,226 $154,182 $121,688 $99,981 $74,387 Level 1 Level 2 Level 3 Level 4 Level 5 Above 5 Responsibility Level Graph 4 illustrates the relationship between remuneration and responsibility level, and shows respondents at Level 5 earning around 3.5 times the average total package incomes of those at Level 1. Total package is defined as the sum of base salary, employer superannuation contributions, value of employer-provided motor vehicles, performance pay, and the value of any other cash and non-cash benefits provided. GRAPH 5 GRADUATE COMMENCING SALARIES $57,250 $62,961 $73,000 $64,843 Graph 5 shows graduate engineer respondents commencing work during the last twelve months earned a median base salary of $62,961 on commencement. The amounts shown for graduates do not include compulsory employer superannuation contributions. Annual salary (excl. superannuation) Mean GRAPH 6 MEAN ANNUAL INCREASE BY STATE/TERRITORY 4.1% 3.1% 2.8% 2.8% 2.6% 2.5% 2.3% Comparing States & Territories, Graph 6 shows that respondents located in Western Australia recorded the highest average increase in salaries at 4.1%, whilst the Northern Territory saw the lowest rate of average increases at 2.5%. Insufficient responses were received from respondents located in the ACT for reporting purposes. WA VIC NSW TAS QLD NT SA State/Territory GRAPH 7 MEAN ANNUAL INCREASE BY ENGINEERING DISCIPLINE Mean annual increase Graph 7 shows mechanical engineers reported the highest average increase in salaries of 3.1%. 3.1% 3.0% 3.0% 3.0% 2.8% 2.6% 2.0% The rate of increase in annual salaries across most disciplines was seen to be very similar at around 3%. Mechanical Environmental Civil & Structural Chemical Aeronautical Electrical Electronic/ Comm Engineering discipline 2

3 TABLE 1 MEDIAN SALARY & PACKAGE ALL SECTORS ALL FULL-TIME RESPONDENTS Level 1 Level 2 Level 3 Level 4 Level 5 Above Level 5 Consulting & Tech Services Construction, Contract, Maint. Mining or Quarrying Oil/Gas Explrtn/Prodn Electricity & Gas supply Water, Sewerage & Drainage Communication inc Telstra Defence Public Administration Transport & Storage Transport Equipment Appliances and Electricals Industrial Equip & Machinery Other 60,000 65,782 79,992 90,010 95, , , , , , , ,538 63,750 78,625 75,000 88,788 97, , , , , , ,000 96,031 90, , , , , , ,000 91, , , , , , , ,000 99,469 97, , , , , , , , ,911 91,206 83,000 97, , , , , , , ,000 61,600 82,271 90, , , , , ,236 70,411 79,216 91, , , , , , , ,000 93,531 95, , , , , , ,000 78,000 95, , , , , , , , , , , , , , , , ,500 86, , , , , ,187 73, , , ,765 71,958 86, , , , , , , , ,000 74,837 82,986 99, , , , , , , , ,011 TABLE 2 SALARY & PACKAGE BY YEARS OF EXPERIENCE ALL SECTORS ALL FULL-TIME RESPONDENTS Less than 1 1 to less than 2 2 to less than 3 3 to less than 4 4 to less than 5 5 to less than 6 6 to less than 7 7 to less than 8 8 to less than 9 9 to less than to less than to less than to less than to less than to less than to less than to less than to less than or more N SALARY Mean PACKAGE 25 50,000 56,667 60,000 77,000 80,000 65,500 61,600 64,413 75,803 90, ,660 80, ,000 58,848 63,000 68,564 87,700 65,223 55,650 65,700 74,602 91, ,200 77, ,000 63,236 68,128 82,953 89,666 71,970 66,808 70,710 86,107 97, ,892 85, ,000 66,600 73,000 82,000 98,555 76,195 66,808 76,813 87, , ,268 92, ,000 70,500 82,801 97, ,000 86,081 65,780 83,068 94, , ,472 99, ,343 76,300 82, , ,000 88,895 80,935 88, , , , , ,000 84, , , , ,506 89,790 99, , , , , ,000 83,483 99, , ,000 98,556 85,353 92, , , , , ,000 84, , , , ,471 84,510 93, , , , , ,000 88, , , , ,094 88, , , , , , , , , , , ,357 98, , , , , , ,000 97, , , , , , , , , , , ,000 96, , , , , , , , , , , , , , , , , , , , , , , , , , , , ,450 94, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,900 86, , , , ,778 81, , , , , ,365 Mean 3

4 A trend in the employment of professional engineers is the increasing number opting to practice as contract engineers. Employers of professional engineers are making greater use of such arrangements as a means of meeting peak workloads or to engage contract professionals for specific projects or tasks. The Australian Bureau of Statistics estimates that up to 20 per cent of the workforce is now engaged in non-standard work arrangements with professionals operating as independent contractors or consultants among the fastest growing group. Ultimately, the hourly rate charged depends on the market for the service provided and there is no substitute for specific knowledge of the particular industry and the value of the service being offered to a client, but these rates can be used as a benchmark to ensure that contractors don t undercharge for their services. These hourly rates should be read in conjunction with Professionals Australia s Standard Terms of Engagement and Professionals Australia s Guide to Writing Contracts for Independent Contractors and Consultants. Both documents take account of important issues arising from changes to Personal Services Income rules effective July The changes will potentially impact on contractors and consultants engaged on an hourly basis. These documents are available to members from Professionals Australia s website at The hourly rate for contract engineers takes into account the conditions of employment which apply to employee professional engineers, as contract professional employees must meet this cost themselves. Professional engineer employees have access to the Australian Industrial Relations Commission and receive annual leave, sick leave, paid public holidays, long service leave, superannuation, jury leave, compassionate leave, family leave, professional development and retrenchment/ redundancy provisions. The contract engineer may be engaged on an hourly basis and generally does not have access to these provisions. The contract engineer must take such provisions into account when determining the hourly fee to be charged. Based on a 38 hour week, the hourly fee is calculated using a 1980 hour year (i.e. 38 hours by 52.1 weeks) and deducting from the year the following factors: Public Holidays 12 days 92 hours Annual Leave 20 days 152 hours Long Service Leave 4.3 days 33 hours Sick Leave 10 days 76 hours Salary Continuance 3% 60 hours Superannuation 10% 198 hours Professional Indemnity (inc pub. liability) 3% 60 hours Misc. leave (family, jury, etc) 3 days 23 hours Professional Development 5 days 38 hours Termination/Redundancy 5 days 38 hours 770 hours Thus the hourly rate should be calculated on the basis of about 1210 hours ( ). Base Salary GRAPH 8 - COMPONENTS OF HOURLY RATE FOR CONTRACT WORK Superannuation Professional Development Sick Leave Annual Leave Miscellaneous Leave Public Holidays Long Service Leave Salary Continuance Professional Indemnity Termination/Redundancy Any travel costs and workers compensation would be on top of these rates, and it may be necessary to factor in an additional charge to cover legal and accounting fees. Care should also be taken to allow for rising professional indemnity insurance premiums. ASIC fees may also need to be covered depending on the particular business entity or structure the consultant or contractor has in place. If the contract engineer is engaged on a short-term basis, a further factor should be included to allow for the time and overheads involved in seeking contracts. A factor of 20% would not be unreasonable for this purpose. The hourly rate should then be based on 1000 hours. Using the formula described here, a contract engineer seeking a salary equivalent of say $100,000 per annum would calculate the hourly fee as follows: Short-term contract Long-term contract $100,000/1000 hours = $ p/h $100,000/1210 hours = $82.65 p/h Market Rates The survey found the median hourly rate of pay for short-term contractors was $125 compared to $115 for long-term contractors. These rates do not include GST. SHORT TERM ($ p/h) LONG TERM ($ p/h) Level Level Level Level Level Contract Agency Rates If the contract engineer is engaged through a contract agency, some components such as workers compensation/ disability insurance and superannuation contributions would normally be paid for by the agency. These components would be removed from calculations. The result would be to increase the number of hours upon which an hourly calculation is based. A typical calculation made by a contract agency might see the annualised hours rise to around 1600, so that the hourly rate for an equivalent $100,000 employee salary would be $100,000/1600 hours = $62.50 per hour. 4

5 RESPONSIBILITY LEVELS DEFINITIONS Level 1 Professional Engineer The graduate engineer (as defined) commencement level. The engineer undertakes initial professional engineering tasks of limited scope and complexity, such as minor phases of broader assignments, in office, plant, field or laboratory work. Under supervision from higher-level professional engineers as to method of approach and requirements, the professional engineer performs normal professional engineering work and exercises individual judgement and initiative in the application of engineering principles, techniques and methods. In assisting more senior professional engineers by carrying out tasks requiring accuracy and adherence to prescribed methods of engineering analysis, design or computation, the engineer draws upon advanced techniques and methods learned during and after the undergraduate course. Training, development and experience using a variety of standard engineering methods and procedures enable the professional engineer to develop increasing professional judgement and apply it progressively to more difficult tasks at Level 2. Decisions are related to tasks performed, relying upon precedent or defined procedures for guidance. Recommendations are related to solution of problems in connection to the tasks performed. Work is reviewed by higher-level professional engineers for validity, adequacy, methods and procedures. With professional development and experience, work receives less review, and the professional engineer progressively exercises more individual judgement until the level of competence at Level 2 is achieved. The professional engineer may assign and check work of technical staff assigned to work on a common project. Level 2 Professional Engineer Following development through Level 1 he/she is an experienced engineer (as defined) who plans and conducts professional engineering work without detailed supervision, but with guidance on unusual features and who is usually engaged on more responsible engineering assignments requiring substantial professional experience. Level 3 Professional Engineer A professional engineer performing duties requiring the application of mature professional engineering knowledge. With scope for individual accomplishment and co-ordination of more difficult assignments, the professional deals with problems for which it is necessary to modify established guides and devise new approaches. The professional engineer may make some original contribution or apply new professional engineering approaches and techniques to the design or development of equipment or special aspects of products, facilities and buildings. Recommendations may be reviewed for soundness of judgement but are usually regarded as technically accurate and feasible. The professional engineer makes responsible decisions on matters assigned, including the establishment of professional engineering standards and procedures, consults, recommends and advises in speciality engineering areas. Work is carried out within broad guidelines requiring conformity with overall objectives, relative priorities and necessary cooperation with other units. Informed professional engineering guidance may be available. The professional engineer outlines and assigns work, reviews it for technical accuracy and adequacy, and may plan, direct, co-ordinate and supervise the work of other professional and technical staff. Level 4 Professional Engineer A professional engineer required to perform professional engineering work involving considerable independence in approach, demanding a considerable degree of originality, ingenuity and judgement, and knowledge of more than one field of, or expertise (for example, acts as his/her organisation s technical reference authority) in a particular field of professional engineering. The professional engineer: initiates or participates in short-range or long-range planning and makes independent decisions on engineering policies and procedures within an overall program; gives technical advice to management and operating departments; may take detailed technical responsibility for product development and provision of specialised engineering systems, facilities and functions; co-ordinates work programs; and directs or advises on use of equipment and material. The professional engineer makes responsible decisions not usually subject to technical review, decides courses of action necessary to expedite the successful accomplishment of assigned projects, and may make recommendations involving large sums or long-range objectives. Duties are assigned only in terms of broad objectives and are reviewed for policy, soundness of approach, accomplishment and general effectiveness. The professional engineer supervises a group or groups including professional engineers and other staff, or exercises authority and technical control over a group of professional staff, in both instances engaged in complex engineering applications. Level 5 Professional Engineer A professional engineer usually responsible for an engineering administrative function, directing several professional and other groups engaged in inter-related engineering responsibilities, or as an engineering consultant. Achieving recognition as an authority in an engineering field of major importance to the organisation. The professional engineer independently conceives programs and problems to be investigated and participates in discussions determining basic operating policies, devising ways of reaching program objectives in the most economical manner and of meeting any unusual conditions affecting work progress. The professional engineer makes responsible decisions on all matters, including the establishment of policies and expenditures of large sums of money and/or implementation of major programs, subject only to overall policy and financial controls. The professional engineer receives administrative direction based on organisation policies and objectives. Work is reviewed to ensure conformity with policy and co-ordination with other functions. The professional engineer reviews and evaluates technical work; selects, schedules, and co-ordinates to attain program objectives: and/or as administrator, makes decisions concerning selection, training, rating, discipline and remuneration of staff. 5

6 TERMS USED For the purposes of analysis, the following statistics were used: decile the value below which 10% of data was recorded. quartile (Q1) the value below which 25% of data was recorded. the value below which 50% of data was recorded. quartile (Q3) the value below which 75% of data was recorded. decile the value below which 90% of data was recorded. Mean the sum of individual values divided by the number of data items. Base salary annual salary excluding allowances or noncash benefits Total Package annual salary plus the value of all components of remuneration items such as motor vehicle, performance pay, superannuation, overtime & award allowances. ONLINE ACCESS Members of Professionals Australia and subscribers to the Professional Engineer Remuneration Survey Report are able to access salary results on the Professionals Australia website. Users can select a combination of position-related parameters and query the database to return specific remuneration levels related to the query. Parameters by which analysis may be performed include state, industry, qualification, years of experience, employment sector, engineering discipline and responsibility level. The Professional Engineers Salary Calculator is available at Members will need to use their membership number to login. ABOUT THE SURVEY The June 2015 Professional Engineer Remuneration Survey was conducted during March/April 2015 using professional engineer members of Professional Australia. 1,439 completed questionnaires were returned and were used for the analyses contained in the report. HOW TO ORDER This extract is a summary of the full 128-page Professional Engineer Remuneration Survey Report. Non-members can purchase a single issue for $330 (inc. GST). Professionals Australia members receive a significant discount on these prices, but cannot purchase the report on behalf of any third party at the discount price. June 2015 Professional Engineer Remuneration Survey Report For more information about purchasing the Professional Engineer Remuneration Survey Report, visit the Professionals Australia website at financial-edge/salary-survey-reports/professional-engineers/ where you can download and complete an order form or order online via secure ecommerce. If you have any questions, please contact the Surveys Unit via survey@professionalsaustralia.org.au or phone (03) Copyright 2015 by The Association of Professional Engineers, Scientists & Managers, Australia All rights reserved. No part of this work may be reproduced or stored in any form, especially typographically, electronically and including photocopying, without written permission of the publisher. The use of material for private study, research or criticism is excepted from the reservation and may be undertaken within the accepted meaning of fair dealing. The publisher makes no representation, in any form, as to the accuracy of the information contained in this work and cannot accept any legal responsibility for errors, omissions or consequences of any action taken by readers. ISSN (previously ISSN ) Professionals Australia (formerly APESMA) GPO Box 1272 Melbourne VIC 3001 Ph: (03) Fax: (03) survey@professionalsaustralia.org.au Website: 6