What a remuneration policy is (and isn't)

A remuneration policy is the document that explains how your organisation decides what to pay people. It covers base salary, variable pay, benefits, superannuation or KiwiSaver contributions, equity, and any other form of compensation and the principles and processes that sit behind those decisions.

It is not a list of salaries. It is the rulebook that determines how those salaries get set, reviewed, and changed. A good policy means decisions are consistent, defensible, and aligned with your strategy. A bad one (or no policy at all) means pay drifts according to who negotiates hardest, which managers shout loudest, and which biases go unchecked.

In listed companies and regulated industries, having a formal remuneration policy is effectively a requirement. In private companies the legal requirement is lighter, but a formal policy is still strongly worth doing once you're past about 30–50 employees, because that's when ad-hoc decisions start producing real problems.

Before you start: the prep work

Skipping this step is the single most common reason remuneration policies fail. You need four things in place before drafting anything.

1. Clarity on your compensation philosophy. This is the strategic layer. Are you aiming to pay at the market median, the 75th percentile, or above? Do you weight base salary heavily or lean on variable pay and equity? Do you reward individual performance, team outcomes, or company performance? There is no universally right answer: a high-growth Auckland or Sydney tech scale-up competing for senior engineers will make different choices than a mature manufacturer in the regions. But you need to decide.

2. Salary benchmarking data. You cannot write a credible policy without knowing what comparable roles pay in your market. Find the data source that best fits your company's size, stage, sector, and geography: what works for a global enterprise will be overkill (and probably wrong) for a fast-growing scale-up, and vice versa. Options range from annual published surveys, to industry associations and recruiter networks, to real-time benchmarking platforms.

The refresh cadence matters more than people realise. Annual surveys can be six to eighteen months out of date by the time you use them, fine for stable roles in stable sectors, a serious problem for fast-moving ones. For organisations operating in New Zealand and Australia, LiveRem can help you out. It's a real-time benchmarking tool whose data updates every day, and customers tell us it's the only benchmarking provider whose data is truly reflective of today's market rather than last year's.

Whichever source you choose, define your peer group carefully: by sector, geography, company size, and stage, because a benchmark is only as good as the comparator set behind it. Pay attention also to the trans-Tasman question: NZ and Australian markets are linked but not identical, and roles in technology, finance, and senior leadership often have to be benchmarked across both.

3. A methodology for sizing roles. Benchmark data is only useful if you have a consistent way to match each role in your organisation to a comparable role in the market. This is where many policies quietly fall apart, without a clear sizing methodology, you end up with managers arguing about levels, inconsistent matches across teams, and benchmarks that don't really apply to the role in front of you.

The most practical modern approach is job-description matching: take the actual JD for the role and match it against a library of benchmark roles to find the closest fit. It's fast, it stays current as roles evolve, and it produces a transparent match that managers and employees can actually look at and discuss. For most knowledge-work organisations this is the right starting point.

A close cousin is skills-based sizing, which breaks each role into its constituent skills and prices each one against the market. This works particularly well where roles are hybrid, evolving, or don't map cleanly to traditional job families, increasingly the norm rather than the exception.

The older approach is formal job evaluation — frameworks like Hay, Mercer, Korn Ferry, or Willis Towers Watson Global Grading, which score roles against factors like know-how, problem-solving, and accountability to produce a points-based size. These were designed for a more static world of clearly bounded job families and stable hierarchies. They're still in use, particularly in large enterprises, public service, and parts of the state-owned and Crown sector. But they're heavy to implement, slow to maintain, and increasingly struggle with the kinds of cross-functional, fast-changing roles most organisations are now creating. Unless you have a specific reason to use one (regulatory expectation, existing investment, very stable role landscape), a JD- or skills-based approach will get you to a good answer faster and keep you there with less effort.

4. An inventory of current practice. Pull together what you actually pay people today, broken down by role, level, location, gender, and tenure. You will almost certainly find inconsistencies. Better to know now than have them surface during a pay review, a personal grievance under the NZ Employment Relations Act, an Australian Fair Work claim. This is something you can quickly do in LiveRem.

The core components of a remuneration policy

A complete policy covers the following sections. Adapt the depth to your size and sector.

1. Purpose and scope

State plainly what the policy is for and who it applies to. Typically all employees, but you may carve out executives (often a separate executive remuneration policy), non-executive directors, and contractors. Reference the legal and regulatory framework that governs it in your jurisdiction:

For trans-Tasman businesses, note that disclosure expectations and gender pay gap reporting obligations differ - Australian executive remuneration disclosure is significantly more granular than New Zealand's, and Australian employers with 100 or more staff must report to WGEA annually.

2. Guiding principles

A short list, usually four to six, describing what your policy is trying to achieve. Common principles include: fairness and internal equity, market competitiveness, pay-for-performance, simplicity and transparency, alignment with long-term strategy, and compliance with equal pay and pay equity law. These principles should be referenced throughout the rest of the document so every specific rule traces back to a stated principle.

3. Pay structure

This is the architectural heart of the policy: how, in concrete terms, you decide what a given role is worth.

The cleanest modern approach is a clearly defined, market-driven philosophy, for example, "we pay at the midpoint of our peer group benchmark for every role." It's simple, transparent, and easy to defend.

The more traditional approach is banding: roles are slotted into levels (often 5–12 bands), each with a minimum, midpoint, and maximum, and people progress through the range over time. Banding still has its place, particularly in larger or more hierarchical organisations, but it's increasingly seen as a bit dated, and many growing companies find it adds bureaucracy without improving decisions.

Whichever you choose, the policy should make clear how roles are mapped to the structure (using the sizing methodology you chose in the prep section), how the structure is reviewed and updated, and what triggers a change in pay.

4. Fixed pay (base salary)

Cover: how base salary is set on hiring, how it is reviewed (typically annually, often aligned to the financial year end), the criteria for increases (cost of living, performance, market adjustment, promotion), the approval process, and any geographic differentials (Auckland vs Wellington vs regions; Sydney/Melbourne vs other capitals vs regional). Be explicit about who has authority to approve what — for example, line manager recommends, HR validates, department head approves, with anything above the band maximum requiring CFO or CEO sign-off.

5. Variable pay

If you offer bonuses, commission, or other incentive pay, explain:

• Who is eligible and why

• The performance metrics used (company, team, individual, and the weighting between them)

• Target and maximum amounts (often expressed as a percentage of base salary)

• How outcomes are measured and approved

• Payment timing and any clawback or malus provisions (an explicit APRA CPS 511 expectation for financial services in Australia)

For sales commission specifically, you may want a separate detailed plan document referenced by the policy.

6. Long-term incentives and equity

Where applicable, cover share options, performance share rights, restricted share units, or other long-term arrangements. Specify eligibility, grant sizes (usually tied to level), vesting schedules, performance conditions, leaver provisions (what happens to unvested equity when someone resigns, is dismissed, or is made redundant), and any dilution limits.

For NZ companies, be aware of the income tax treatment of employee share schemes which are complex enough that policy drafting should be done with tax advice.

7. Benefits and superannuation / KiwiSaver

Mandatory and discretionary benefits including:

• Australia: Superannuation Guarantee contributions (12% from 1 July 2025), and any additional employer top-up. Salary sacrifice arrangements are common.

• New Zealand: KiwiSaver employer contributions (minimum 3.5%, with many employers offering more), and whether contributions are paid on top of salary or as part of "total remuneration".

• Health insurance, life insurance, income protection, parental leave top-ups (NZ's Paid Parental Leave Act and Australia's Paid Parental Leave Act both provide statutory minimums that many employers top up)

• Annual leave (NZ statutory minimum 4 weeks; Australia minimum 4 weeks plus leave loading in many awards/agreements), long service leave (varies by state in Australia; not statutory in NZ but offered by some employers)

• Wellness allowances, learning budgets, flexible working benefits, and any other non-cash benefits

Distinguish between core benefits everyone gets and flex benefits people can choose. Be explicit about the "total remuneration" question: are KiwiSaver/super contributions part of the headline number, or paid on top? This is a common source of dispute and miscommunication, particularly in NZ where the "total remuneration" approach has been challenged in court.

8. Pay review process

The annual rhythm: when reviews happen (NZ often aligns to the 31 March financial year end or the calendar year; Australian companies frequently use 30 June), who participates, what data managers receive, the calibration process (cross-team discussions to ensure consistency), how decisions are communicated, and how appeals work.

9. Promotions and role changes

How pay adjusts when someone is promoted, takes on a larger role without promotion, or moves laterally. A common approach: promotions trigger a move to the new band with an increase of at least a defined minimum (say 8–10%), unless the person is already above the new band's minimum, in which case the increase is calibrated case by case.

10. Special situations

Counter-offers, retention bonuses, sign-on bonuses, relocation packages (particularly relevant given trans-Tasman moves), expatriate assignments, internships, and any other non-standard arrangements. Be explicit about when these can be used and who must approve them - these are where policies most often fray.

11. Equal pay, pay equity, and pay gap reporting

A standalone section is worth the effort, and the legal context in both countries makes it non-optional in substance:

• Australia: Equal Remuneration provisions in the Fair Work Act, the Workplace Gender Equality Act 2012, and the publication of employer-level gender pay gaps by WGEA (for employers with 100+ employees) mean that pay equity is now a public matter. Employers with 500+ employees must have policies or strategies for each of the six Gender Equality Indicators and must select and demonstrate improvement against gender equality targets under the 2025 amendments.

• New Zealand: the Equal Pay Act 1972 (substantially amended in 2020 and again subsequently) introduced a pay equity claims process where female-dominated work can be compared to dissimilar male-dominated work. The framework continues to evolve; keep current with the latest amendments.

Commit to equal pay for equal work, describe how you monitor pay equity, and explain the steps taken to identify and address unjustified disparities. If you're an Australian employer above WGEA's threshold, reference your reporting obligations and what you do with the results.

12. Transparency

Explain what you share with employees and what you don't. Some organisations publish full salary bands; others share only the band an individual sits in; others keep everything confidential. Whatever you choose, be deliberate about it - secrecy and lip-service to transparency are both worse than a clear stance.

Note that pay secrecy clauses in Australian employment contracts entered into from 7 December 2022 are unenforceable under amendments to the Fair Work Act - employees have a positive right to discuss their pay if they choose. New Zealand has no equivalent statutory prohibition, but pay secrecy clauses are increasingly seen as poor practice.

13. Governance

Who owns the policy, who approves changes, how often it is reviewed (annually is standard), and what role the board or remuneration committee plays. For ASX-listed companies and APRA-regulated entities the remuneration committee is essentially mandatory and its composition is prescribed. For NZX-listed issuers, the Code recommends a remuneration committee operating under a written charter. For private companies, a remuneration committee is optional but increasingly common once you're past 100+ employees or have institutional investors.

A note on alternatives to banding

Banding is the default for good reasons - it's familiar to boards, auditors, and regulators, and it scales well. But it isn't the only option. Some organisations price every role directly to a market percentile, some use explicit pay formulas, some operate fully transparent or self-set salary systems, and many run a hybrid (light bands with a strict market-rate rule layered on top). Each has real trade-offs around fairness, flexibility, transparency, and the ability to reward individual performance.

The drafting process

Writing the policy itself is the easy part once the prep is done. A workable sequence:

Start with a one-page summary of the philosophy and principles, agreed by your leadership team before any detail is written. If you can't get alignment at this level, you'll never get it on specifics.

Draft each section, ideally with input from HR, finance, legal, and a sample of line managers. Managers are the ones who'll actually have to apply the policy, and their input on what's practical is invaluable.

Pressure-test it with scenarios. Walk through real cases - a high performer asking for a raise, a counter-offer from an Australian competitor offering 30% more in AUD, a promotion into a band the person already overlaps with, a parental leave return, a pay equity comparison request. If the policy doesn't give a clear answer, refine it.

Review with legal counsel, particularly on equal pay and pay equity, anti-discrimination obligations, the Privacy Act 2020 (NZ) or Privacy Act 1988 (Australia) implications of processing pay data for analysis, and any sector-specific regulatory requirements (APRA CPS 511, FMA expectations, RBNZ for registered banks).

Get formal approval from your board or remuneration committee.

Implementation

A policy in a drawer changes nothing. To make it real:

Train managers. They are the front line of pay decisions, and most of them have never been taught how to think about compensation. A 90-minute workshop covering the philosophy, the bands, how to have pay conversations, and common pitfalls pays back many times over.

Communicate to employees. At minimum, publish the policy on the intranet and explain it at all-hands. Better: walk people through what it means for them personally, which band they sit in, how progression works, what they need to do to move up.

Audit existing pay against the new framework. You will find anomalies. Some you'll fix immediately (typically underpayments, especially where they correlate with gender or other protected attributes, particularly important given WGEA publication of Australian gender pay gap data and the NZ pay equity regime). Others you'll address through future pay reviews. Document your remediation plan.

Embed it in HR systems. Your HRIS, applicant tracking system, and approval workflows should reflect the policy, not sit alongside it. Every offer letter, every promotion form, every annual review template should flow from the policy.

Common pitfalls

A few failure modes worth flagging:

• Writing a policy that's aspirational rather than operational. If your actual decisions don't follow the policy, the policy is worse than useless - it becomes evidence against you in a personal grievance (NZ) or Fair Work dispute (Australia).

• Forgetting to fund it. A market-competitive policy implies a salary budget. If finance won't fund movement to your stated market position, change the policy or change the position.

• Ignoring the geography question. Remote work and trans-Tasman hiring have made this acute. Decide whether you pay by location, by role, or a blend, and be ready to defend it.

• Treating equity as a free currency. Especially in start-ups. Generous equity grants without proper dilution discipline come back to haunt later rounds, and the ESS/ESOP tax treatment in both countries makes design choices consequential.

• Reviewing it once and forgetting. Markets move, your strategy moves, regulation moves (NZ's pay equity framework and Australia's WGEA targets regime are both active areas), and the policy must too. An annual review with a substantive refresh every two to three years is about right.

A minimal viable version

If you're a small company writing your first policy and the above feels like a lot — it is. A workable minimum viable policy is around 5–8 pages and covers: philosophy and principles, pay bands (even just a rough version), how base salary is set and reviewed, bonus structure if any, KiwiSaver/superannuation and core benefits, the annual review process, and equal pay commitment. You can add governance, long-term incentives, and special situations as you grow. The discipline of writing it down — even imperfectly — is what matters most.