What is 'salary packaging'?

Salary packaging refers to the arrangement where employers offer non-monetary benefits in addition to an employee's salary. This practice allows employees to receive perks or benefits that are often tax-effective, which can enhance their overall compensation without increasing their taxable income. Common components of salary packaging include items such as cars, private health insurance, extra superannuation contributions, or additional leave.

By providing these benefits, employers can attract and retain talent more effectively, as employees often appreciate having more flexibility and options in how their remuneration is structured. The correct choice captures the essence of salary packaging as a strategy that goes beyond just monetary wages to include a variety of benefits that can add significant value for employees.

Other options do not align with the definition of salary packaging; for instance, offering an hourly wage or adjusting salaries are not related to the concept of providing additional non-monetary benefits, while performance-based financial bonuses pertain to a different compensation model altogether.