PROFESSIONAL ENGINEER REMUNERATION SURVEY REPORT

DECEMBER 2006

DECEMBER 2006 PROFESSIONAL ENGINEER REMUNERATION SURVEY SUMMARY REPORT

PAY CLIMB CONTINUES
The impact on salaries of continuing shortages in the supply of professional engineers appear evident in the latest results of the APESMA / Engineers Australia Professional Engineer Remuneration Survey.

average annual increase (%)

The survey, conducted in September this year, reported an average annual increase in professional engineer salaries of 5.7%. This was the same level of increase reported at the same time last year. By comparison, the Australian Bureau of Statistics Consumer Price Index rose by 3.9% in the twelve months to the end of September 2006, whilst the ABS Average Weekly Earnings series reported an average rise of 3.5% in the twelve months to the end of May 2006. According to the survey, base salaries rose by an average of 6.4% in the private sector, whilst base salaries rose by an average of 4.8% in the public sector.

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

7 6 5 4 3 2 1 0 All Private Public Mfg Non-Mfg AWE (May '06) CPI (Sep '06)

5.7

6.4 4.8 5.0

5.8 3.5 3.9

Sector

The manufacturing sector reported increases of 5% on average, whilst the non-manufacturing sector recorded increases of 5.8% on average. The average annual increases reported by specific industry were as follows:
GRAPH 2 - AVERAGE ANNUAL SALARY INCREASES BY INDUSTRY
Consulting & Tech Services Mining or Quarrying Basic Metal Products Steel Production Defence Construction, Contract, Maint. Electricity & Gas supply Other Non-Manufacturing Water, Sewerage & Drainage Public Admin Food, Beverage & Tobacco Transport & Storage Chemical & Petroleum Industrial Machinery Other Manufacturing Transport Equipment Appliances and Electricals Communication inc Telstra Total 0 1 2

7.7 7.5 6.8 6.5 5.9 5.8 5.5 5.5 5.2 4.8 4.7 4.7 4.7 4.7 4.5 4.3 4.2 4.2 5.7
3 4 average increase (%) 5 6 7 8

APESMA / Engineers Australia Professional Engineer Remuneration Survey Summary Report APESMA December 2006

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 57,390 Level 1 77,278 91,960 114,528 136,607

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

198,911

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 40,000 42,576 46,000 50,000 59,000

Graph 4 shows graduate engineer respondents commencing work during the last twelve months earned a median base salary of $46,000 on commencement. These amounts are exclusive of superannuation and other benefits. Over 95% 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 QLD TAS VIC SA NSW ACT NT 7.1

6.2

5.6

5.6

5.6

5.3

5.0

4.5

Graph 5 shows that respondents located in the resource-rich states of Western Australia and Queensland recorded the highest annual average increase in base salaries of 7.1% and 6.2% respectively.

State/Territory

GRAPH 6 - MEAN ANNUAL INCREASE BY ENGINEERING DISCIPLINE

7 6
annual increase (%)

5 4 3 2 1 0
Other Chemical Civil and Structural Mechanical Aeronautical Electrical Computer Electronic/Comm Systems

6.9

6.4

5.7

5.6

5.6

5.5

5.1

4.5

Graph 6 shows annual increases in salary based on engineering discipline. Engineers outside of the major engineering disciplines recorded the highest average increase in base salary of 6.9%, whilst Electronic/ Communications engineers reported the lowest average increase of 4.5%.

Discipline

APESMA / Engineers Australia Professional Engineer Remuneration Survey Summary Report APESMA December 2006

TABLE 1 - MEDIAN BASE SALARY & TOTAL PACKAGE - ALL SECTORS - ALL FULL-TIME RESPONDENTS
Level 1 BASE Median 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 Other Non-Manufacturing Food, Beverage & Tobacco Wood and Paper Products Chemical & Petroleum Non-Metallic Minerals Basic Metal Products Steel Production Fabricated Metal Transport Equipment Appliances and Electricals Industrial Machinery Other Manufacturing TOTAL 47,716 49,500 58,000 50,000 52,925 48,000 . 50,000 49,000 48,000 46,625 45,000 . . . . 50,000 . 61,000 . 45,850 53,000 49,000 TOTAL Median 56,135 65,154 63,220 57,000 60,225 53,446 . 56,786 54,710 63,178 64,415 53,746 . . . . 61,237 . 67,311 . 49,977 58,483 57,390 Level 2 BASE Median 63,000 62,500 72,000 70,000 83,734 60,000 57,615 63,000 60,000 64,500 57,500 58,000 . 64,710 81,500 . 70,500 54,000 68,500 56,000 59,250 57,761 63,000 TOTAL Median 74,210 83,368 92,650 85,838 99,655 71,020 64,553 73,868 72,473 81,594 63,907 63,220 . 72,635 90,873 . 92,190 67,753 75,587 64,350 82,109 64,864 77,410 Level 3 BASE Median 74,500 75,379 83,029 106,000 83,125 72,187 80,000 75,000 69,413 80,000 79,614 73,500 80,000 92,000 85,000 75,000 76,750 70,020 83,000 67,800 70,325 74,318 76,905 TOTAL Median 85,933 96,974 102,894 120,990 101,194 85,181 93,463 91,560 87,787 99,312 92,190 84,845 99,611 105,512 111,340 84,750 106,125 86,906 95,469 76,120 103,769 88,745 91,960 Level 4 BASE Median 102,625 96,000 120,000 127,855 102,000 85,000 103,426 90,000 80,000 98,320 94,000 100,732 94,950 100,000 . 110,500 82,294 75,000 94,000 86,000 85,452 90,000 94,041 TOTAL Median 119,900 118,781 147,761 152,855 125,660 105,314 128,321 105,810 98,837 119,900 114,864 126,310 116,366 124,578 . 127,363 103,299 109,022 119,663 109,000 118,191 116,190 114,686 109,000 135,000 115,000 112,000 98,500 107,000 120,000 107,807 176,313 161,842 146,464 152,349 121,979 144,643 168,000 136,607 Level 5 BASE Median 115,000 103,000 150,000 161,000 120,000 103,500 108,885 104,636 95,900 109,500 106,000 120,000 TOTAL Median 144,983 136,950 189,000 207,248 156,059 133,066 134,873 117,514 119,578 136,097 128,210 142,128 Above Level 5 BASE Median 145,000 164,900 200,000 . 158,000 155,000 . 175,000 140,500 175,000 185,000 . . . . . . . . . . . 162,500 TOTAL Median 174,842 207,763 280,865 . 206,525 189,168 . 219,917 177,741 225,750 207,012 . . . . . . . . . . . 198,911

TABLE 2 - BASE SALARY & TOTAL PACKAGE BY YEARS OF EXPERIENCE - ALL SECTORS - ALL FULL-TIME RESPONDENTS
BASE SALARY Lower Decile 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 43,899 41,000 45,871 49,000 53,000 53,000 58,480 63,000 59,850 65,000 63,000 65,200 67,650 68,000 67,442 71,000 75,000 74,000 69,703 55,000 Lower Quartile 46,000 44,800 48,000 54,500 57,200 60,500 64,220 69,420 68,000 71,822 74,000 72,137 80,700 78,000 78,000 83,000 86,000 83,600 82,830 70,000 Median 48,000 48,482 54,000 60,000 63,089 69,336 72,000 78,000 75,000 81,500 83,311 85,198 96,000 91,534 91,896 100,000 102,000 101,000 99,000 87,000 Upper Quartile 52,000 53,350 62,000 72,000 73,500 84,750 81,206 95,000 89,900 89,850 100,000 100,000 110,500 112,456 115,000 120,000 122,500 125,000 122,000 108,623 Upper Decile 58,000 63,700 72,500 87,000 85,000 94,000 95,650 110,000 103,500 110,000 120,000 113,000 130,000 141,000 138,000 150,000 150,000 160,000 167,446 135,000 Mean 49,681 50,747 57,204 66,067 66,601 75,549 74,854 82,538 79,263 83,767 88,446 88,685 100,386 99,578 98,382 106,679 109,102 107,948 107,742 93,251 Lower Decile 48,289 46,870 52,083 57,711 59,950 59,950 68,504 74,602 73,229 75,518 75,174 80,040 84,475 86,760 79,795 84,623 92,417 87,118 82,425 66,208 Lower Quartile 51,775 50,794 55,833 64,443 64,990 71,565 75,755 81,750 79,906 85,893 87,575 87,870 99,373 95,512 92,821 99,000 104,331 100,969 99,876 85,476 TOTAL PACKAGE Median 56,680 56,733 65,250 72,473 76,968 84,686 87,195 98,467 89,677 94,794 101,625 102,563 119,900 114,927 114,220 120,444 125,541 119,140 119,383 107,127 Upper Quartile 65,101 66,901 77,445 88,110 92,650 98,650 100,770 114,592 113,090 113,706 122,815 121,710 144,442 137,397 139,956 147,963 152,100 150,040 147,222 134,352 Upper Decile 75,422 82,760 95,215 108,163 114,182 116,943 115,650 139,459 132,840 144,930 153,186 141,700 179,695 170,820 180,069 189,594 192,421 199,069 195,129 170,280 Mean 59,095 61,708 70,128 80,747 82,320 90,664 90,168 102,503 97,500 102,947 108,700 108,978 126,342 123,510 121,412 131,527 135,978 132,271 131,850 114,884

APESMA / Engineers Australia Professional Engineer Remuneration Survey Summary Report APESMA December 2006

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 GRAPH 7 - COMPONENTS OF HOURLY RATE FOR CONTRACT WORK
Superannuation Professional Development Sick Leave Annual Leave Miscellaneous Leave

Public Holidays Base Salary 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 the median hourly rate of pay compared to the previous survey. For short-term contractors a rate of $80 was reported compared to $75 for long-term contractors. These rates do not include GST. SHORT TERM ($ p/h) Level 1 Level 2 Level 3 Level 4 Level 5 45-55 60-80 70-90 80-100 80-150 LONG TERM ($ p/h) 40-50 50-80 70-90 75-100 75-140

APESMA / Engineers Australia Professional Engineer Remuneration Survey Summary Report APESMA December 2006

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 December 2006 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 Spring 2006 Professional Engineer Remuneration Survey was conducted during September/October 2006 using a random selection of members of the Association of Professional Engineers, Scientists and Managers,Australia and the Institution of Engineers, Australia. Three thousand,six hundred and eight 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 $275.00 (inc. GST), or can subscribe for a full year (two editions) for $440.00 (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 2006 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 1272 MELBOURNE VIC 8060 Ph: (03) 9695 8800 Fax: (03) 9695 8846 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 December 2006 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 December 2006