PROFESSIONAL ENGINEER REMUNERATION SURVEY REPORT

JUNE 2005

JUNE 2005 PROFESSIONAL ENGINEER REMUNERATION SURVEY SUMMARY REPORT

Professional Engineer salaries gain momentum
Evidence of the impact of shortages in skilled engineering labour emerged as salaries paid to professional engineers increased markedly over the last twelve months according to the results of the latest APESMA / Engineers Australia Professional Engineer Remuneration Survey.

The survey, conducted in March of this year, reported an average annual increase in professional engineer salaries of 5.25%. This compares to an average annual increase of 4.7% reported at the same time last year. By comparison, the Australian Bureau of Statistics Consumer Price Index rose by 2.4% in the twelve months to the end of March 2005, whilst the Average Weekly Earnings series reported an average rise of 3.6% in the twelve months to the end of November 2004. According to the survey, base salaries rose by an average of 5.8% in the private sector, whilst base salaries rose by an average of 4.7% in the public sector. The Manufacturing sector reported increases of 5.0% on average, whilst the non-Manufacturing sector recorded increases of 5.3% on average. The average annual increases reported by specific industry were as follows:
average annual increase (%)

GRAPH 1 - ANNUAL SALARY INCREASES BY EMPLOYMENT SECTOR VS ECONOMIC INDICATORS

6 5 4 3 2 1 0

5.25

5.8 4.7

5.0

5.3 3.6 2.4

All

Private

Public

Mfg

Non-Mfg

Sector

AWE (Nov '04)

CPI (March '05)

GRAPH 2 - AVERAGE ANNUAL SALARY INCREASES BY INDUSTRY

Mining or Quarrying Steel Production Consulting & Tech Services Water, Sewerage & Drainage Electricity & Gas supply Oil/Gas Explrtn/Prodn Construction, Contract, Maint. Industrial Machinery Defence Other Manufacturing Other Non-Manufacturing Public Admin Chemical & Petroleum Transport Equipment Appliances and Electricals Transport & Storage Communication inc Telstra TOTAL
0 1 7.7 7.0 6.7 5.8 5.5 5.3 5.2 5.0 4.9 4.8 4.8 4.5 4.5 4.5 4.2 4.1 3.3 5.25 2 3 4 5 6 7 8

average increase (%)

APESMA / Engineers Australia Professional Engineer Remuneration Survey Summary Report APESMA June 2005

GRAPH 3 - MEDIAN TOTAL PACKAGE BY RESPONSIBILITY LEVEL

175,000 150,000 125,000
annual salary

100,000 75,000 50,000 25,000 0 53,384 Level 1 69,760 83,055 103,144 118,296 162,205

Graph 3 illustrates the relationship between remuneration and responsibility level, and shows respondents above Level 5 earning approximately three 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.

Level 2

Level 3

Level 4

Level 5

Above 5

responsibility level

GRAPH 4 - GRADUATE COMMENCING SALARIES

50,000 40,000
annual salary ($)

30,000 20,000 10,000 0 Lower Decile Lower Quartile Median Upper Quartile Upper Decile 35,000 39,000 41,951 45,769 50,000

Graph 4 shows graduate engineer respondents commencing work during the last twelve months earned a median base salary of $41,951 on commencement. These amount are exclusive of superannuation and other benefits. Over 90% of graduate respondents began on salaries higher than minimum rates prescribed in the major professional engineer awards.

GRAPH 5 - MEAN ANNUAL INCREASE BY STATE/TERRITORY

8 7
annual increase (%)

6 5 4 3 2 1 0 WA TAS NT QLD ACT VIC SA NSW 7.0 5.7 5.5 5.5 5.3 5.0 4.9 4.9

Graph 5 shows that respondents located in Western Australia recorded significant increases, with the highest average annual increase in base salaries of all States at 7%. Interestingly, smaller States and Territories received greater increases on average than larger States, suggesting a premium labour price was necessary in order to attract and retain suitable employees in less populated regions.

State/Territory

GRAPH 6 - MEAN ANNUAL INCREASE BY ENGINEERING DISCIPLINE

Environmental Metallurgical Double degree Chemical Other disciplines combined Mechanical Civil and Structural Electrical Aeronautical Electronic/Comm Computer Systems 0 1 2 4.3 4.3 3 4 5 annual increase (%) 6 7 8 4.6 5.6 5.4 5.2 5.1 6.3 7.8 7.3 6.9

Graph 6 shows that, based on engineering discipline, Environmental engineers recorded the highest average annual increase in base salaries of 7.8%, whilst Electronic/Communications engineers and Computer Systems engineers reported the lowest average annual increase of 4.3%.

APESMA / Engineers Australia Professional Engineer Remuneration Survey Summary Report APESMA June 2005

TABLE 1 - MEDIAN BASE SALARY & TOTAL PACKAGE - ALL SECTORS - ALL FULL-TIME RESPONDENTS
Level 1 BASE Consulting & Tech Services Construction, Contract, Maint. Mining or Quarrying Oil/Gas Explrtn/Prodn Electricity & Gas supply Water, Sewerage & Drainage Communication inc Telstra Defence Public Admin Transport & Storage Education Other Non-Manufacturing Food, Beverage & Tobacco Chemical & Petroleum Non-Metallic Minerals Basic Metal Products Steel Production Fabricated Metal Transport Equipment Appliances and Electricals Industrial Machinery Other Manufacturing TOTAL 42,987 45,000 52,000 48,500 52,447 44,500 42,000 47,287 47,068 44,776 47,316 42,000 50,000 42,500 40,500 48,310 45,000 42,000 48,838 39,500 43,800 42,000 45,000 TOTAL 49,300 55,458 60,572 71,950 58,955 50,816 56,786 52,320 54,782 57,173 52,684 51,970 67,716 55,269 45,360 59,707 64,555 57,770 53,804 44,555 52,613 52,643 53,358 65,000 59,500 46,139 58,436 58,200 75,500 70,756 60,172 67,610 69,760 Level 2 BASE 53,499 55,000 51,700 64,000 62,088 58,000 56,289 58,000 60,811 60,000 59,952 61,000 60,000 51,260 . 60,000 63,998 TOTAL 62,694 68,200 63,900 77,982 71,500 70,442 75,188 69,035 73,959 68,670 66,754 70,850 65,400 76,765 . 70,245 85,642 Level 3 BASE 68,071 69,856 72,500 76,500 72,431 66,750 72,000 75,368 67,357 73,729 66,500 70,000 67,500 73,332 71,885 70,000 70,375 65,000 74,000 70,000 70,500 69,187 70,000 TOTAL 78,125 84,993 86,765 83,024 80,336 84,609 84,623 83,783 84,017 74,045 82,760 83,400 80,500 97,235 82,600 96,280 77,913 90,173 78,164 79,046 76,181 83,055 80,000 123,337 80,000 106,447 86,923 100,545 88,580 114,057 93,600 104,404 97,000 115,607 96,500 131,639 98,000 129,270 83,000 98,770 114,000 130,793 Level 4 BASE TOTAL Level 5 BASE TOTAL Above Level 5 BASE TOTAL

Median Median Median Median Median Median Median Median Median Median Median Median 87,500 103,588 106,265 128,801 142,500 159,530 83,500 103,550 92,250 120,241 143,000 185,450 95,000 110,851 125,000 157,126 127,000 150,150 93,050 111,550 99,000 120,979 135,750 173,670 80,716 98,138 87,400 112,122 101,000 126,299 92,000 104,125 93,500 113,562 130,993 174,476 91,960 105,554 100,000 113,088 123,000 146,432 80,500 69,973 97,032 84,799 90,290 111,611 121,000 162,046 93,518 104,129 . . 90,000 102,201 99,870 123,809 127,800 155,083 86,520 103,904 90,279 108,674 184,500 215,792 81,000 108,184 90,000 120,406 147,000 210,280 86,791 116,120 100,455 136,242 70,000 92,622 95,000 120,750 97,500 122,282 . . . . . . . . . . . . . . . . . .

92,466 102,000 121,546 95,323 117,574 139,000 178,908

86,001 103,150 95,000 118,295 134,000 162,364

TABLE 2 - BASE SALARY & TOTAL PACKAGE BY YEARS OF EXPERIENCE - ALL SECTORS - ALL FULL-TIME RESPONDENTS
BASE SALARY N 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 10 10 to less than 12 12 to less than 14 14 to less than 16 16 to less than 18 18 to less than 20 20 to less than 25 25 to less than 30 30 to less than 35 35 or more TOTAL 70 127 78 78 78 76 66 73 78 69 149 100 131 94 103 269 282 261 138 Lower Lower Decile Quartile 39,500 39,800 42,000 44,500 46,865 52,575 52,500 55,000 58,626 60,000 59,000 59,500 65,000 65,685 65,000 67,250 65,338 69,052 67,254 41,209 41,690 45,000 49,875 51,308 57,700 62,000 62,000 63,000 65,000 68,000 70,000 72,000 74,511 74,204 75,000 75,000 78,000 80,029 63,000 Median 43,060 45,000 50,000 55,000 59,500 65,500 70,000 69,000 72,000 74,267 75,370 81,650 80,300 88,000 87,000 90,000 88,100 90,000 94,979 78,000 Upper Quartile 47,001 50,000 58,520 64,000 70,000 77,000 80,000 82,500 83,000 85,000 87,000 93,050 90,000 100,000 100,000 103,684 102,508 109,000 110,000 94,000 Upper Decile 50,115 58,000 75,000 75,000 90,000 86,000 86,000 100,000 100,032 102,000 96,000 101,500 106,000 128,875 124,600 134,000 127,000 142,900 114,000 Mean 44,335 46,731 53,664 57,680 63,502 68,020 70,713 74,366 75,369 78,261 79,104 80,971 83,443 92,498 90,310 94,601 93,859 97,436 81,676 Lower Lower Decile Quartile 43,600 43,600 49,022 52,191 54,500 59,950 61,240 59,950 71,000 69,035 72,791 71,507 77,035 77,942 78,850 77,422 81,812 82,396 58,213 45,780 46,345 52,333 57,343 59,999 65,400 72,895 71,466 77,728 81,599 80,615 85,584 85,196 87,585 93,118 90,660 91,562 92,819 93,161 76,150 TOTAL PACKAGE Median 51,253 52,684 62,705 66,697 70,215 77,453 84,320 82,906 89,035 90,000 91,750 96,970 98,684 102,657 102,180 109,194 107,477 108,775 113,699 94,742 Upper Quartile 58,185 63,220 74,580 77,913 87,566 94,130 97,984 106,895 103,552 104,114 111,868 116,801 111,223 125,550 124,692 128,027 125,169 134,540 139,520 116,408 Upper Decile 66,307 74,331 94,350 95,244 111,966 105,218 106,476 124,740 140,121 127,706 129,944 Mean 53,368 56,703 66,441 70,698 77,483 80,483 85,993 89,847 94,928 95,925 98,476

132,330 102,664 127,530 101,664 164,220 111,840 158,038 113,099 162,364 115,547 155,699 116,146 164,671 119,671 200,823 124,643 143,479 100,319

155,000 102,238 79,594

2320 48,763

APESMA / Engineers Australia Professional Engineer Remuneration Survey Summary Report APESMA June 2005

CONTRACT RATES
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 are 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 dont undercharge for their services. These hourly rates should be read in conjunction with APESMAs Standard Terms of Engagement and APESMAs 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 2000. The changes will potentially impact on contractors and consultants engaged on an hourly basis. These documents are available to members from APESMAs website at http://www.apesma.asn.au. 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 Annual Leave Long Service Leave Sick Leave Salary Continuance Superannuation Professional Indemnity (inc public liability) Misc. leave (family, jury, etc) Professional Development Termination/Redundancy TOTAL 12 days 20 days 4.3 days 10 days 3% 10% 3% 3 days 5 days 5 days 92 hours 152 hours 33 hours 76 hours 60 hours 198 hours 60 hours 23 hours 38 hours 38 hours 770 hours
Base Salary

GRAPH 7 - 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

Thus the hourly rate should be calculated on the basis of about 1210 hours (1980 - 770). If relevant, 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 when 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 through a contract agency, such as ETM Placements Pty Ltd, their workers compensation/disability insurance and superannuation contributions (of 9%) are paid for by the agency and these components in the above calculations would be altered accordingly. 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. To use the formula described here, should a contract engineer seek a salary equivalent of say $50,000 per annum then the hourly fee would be as follows: Short-term contract Long-term contract $50,000/1000 hours = $50.00 p/h $50,000/1210 hours = $41.30 p/h

The survey found little movement in the median hourly rate of pay compared to the previous survey. For short-term contractors a rate of $73 was reported compared to $67 for long-term contractors. These rates do not include GST.
SHORT TERM ($ p/h) Level 1 Level 2 Level 3 Level 4 Level 5 45-55 60-80 65-85 70-90 80-130 LONG TERM ($ p/h) 40-50 50-70 60-80 70-90 75-125

APESMA / Engineers Australia Professional Engineer Remuneration Survey Summary Report APESMA June 2005

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. Classification Level definition 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 Classification Level definition 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 Classification Level definition 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 co-operation 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. APESMA / Engineers Australia Professional Engineer Remuneration Survey Summary Report APESMA June 2005 LEVEL 5 - PROFESSIONAL ENGINEER Classification Level Definition A professional engineer usually responsible for an engineering administrative function, directing several professional and other groups engaged in interrelated 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. LEVEL 4 - PROFESSIONAL ENGINEER Classification Level definition 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 organisations 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.

TERMS USED For the purposes of analysis, the following statistics were used: Lower decile - the value below which 10% of data was recorded. Lower quartile (Q1) - the value below which 25% of data was recorded. Median - the value below which 50% of data was recorded. Upper quartile (Q3) - the value below which 75% of data was recorded. Upper 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 non-cash benefits Total Package - annual salary plus the value of all components of remuneration items such as motor vehicle, performance pay, superannuation, overtime and award allowances.

ABOUT THE SURVEY The Autumn 2005 Professional Engineer Remuneration Survey was conducted during March 2005 using a random selection of members of the Association of Professional Engineers, Scientists and Managers, Australia and the Institution of Engineers, Australia. Two thousand, nine hundred and forty nine 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 132-page Professional Engineer Remuneration Survey Report. Non-members can purchase a single issue for $250.00 (inc. GST), or can subscribe for a full year (two editions) for $395.00 (inc. GST). APESMA members receive a significant discount on these prices, but cannot purchase the report on behalf of any third party at the discount price. For more information about purchasing the Professional Engineer Remuneration Survey Report, visit the APESMA website at http://www.apesma.asn.au/surveys/engineers/, where you can download and complete an order form or order online via our secure e-commerce facility. If you have any questions, please contact the Surveys Unit at survey@apesma.asn.au or phone (03) 9695 8800. Copyright 2005 by The Association of Professional Engineers, Scientists and Managers, Australia. All rights reserved. No part of this work may be reproduced, used 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 1444-7495 The Association of Professional Engineers, Scientists and Managers, Australia (APESMA) GPO Box 1272L MELBOURNE VIC 3001 Ph: (03) 9695 8800 Fax: (03) 9695 8954 Email: survey@apesma.asn.au Website: http://www.apesma.asn.au

ONLINE ACCCESS Members of APESMA and subscribers to the Professional Engineer Remuneration Survey Report are able to access salary results on the APESMA 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, scientific discipline and responsibility level. The Professional Engineer Remuneration Survey Report Online is available at http://www.apesma.asn.au/online_surveys. Members will need to use their membership number to login.

REMUNERATION SURVEYS
Surveys > Online Surveys > Professional Engineer Remuneration Survey

PROFESSIONAL ENGINEER ONLINE SALARY SURVEY To establish a query, select a combination of parameters from the list below. Try to keep the number of parameters chosen to a minimum as the inclusion of each additional parameter will reduce the sample size. The analysis is based on the results of the June 2005 Professional Engineer Remuneration Survey. State: Location: Qualifications: Discipline: Years of Experience: Job Description: Level of Responsibility: Sector: Industry: Private Company Turnover: All Any All All All All All All All Industries Any turnover Calculate Reset
Responsibility level definitions

APESMA / Engineers Australia Professional Engineer Remuneration Survey Summary Report APESMA June 2005