- Published
On 3rd June 2024, the Fair Work Commission (FWC) announced their decision to increase Modern Award wages and some allowances by 3.75%. This will apply from the first pay period commencing on or after 1 July 2024.
The decision will also see National Minimum Wage increase to $24.10 per hour or $915.90 per week.
We encourage all employers to read this update as there will be significant impacts for businesses.
ECONOMIC CONSIDERATIONS
Earlier this year the Australia Council of Trade Unions advocated for a 5% increase to minimum and award wages deeming it fair and reasonable in light of the of ongoing cost-of-living challenges. They argued that such an increase on top of the billions of dollars in the cost-of-living relief that the Albanese Government is rolling out is warranted given the inflation rises.
Business and employer groups including the Australian Chamber of Commerce and Industry, urged for a more conservative approach, proposing a on wage increases. Andrew McKellar, the chambers chief executive, stressed the strain on wage hikes above inflation place on businesses, emphasising the need for productivity gains to support increases.
Sally McManus, secretary of the Trade Union, highlighted the disparity between inflation and wage adjustments “When inflation goes up, businesses are able to adjust their prices to protect their margins, but workers’ pay does not move so easily,”.
In announcing the decision on the 3rd June, FWC president Adam Hatcher emphasised the commission’s stance on not significantly surpassing inflation rates in wage adjustments, referring to stagnant labour productivity levels over the past four years. He acknowledged the strength of the labour market and business profit growth, but recognised challenges faced by sectors relying heavily on modern award employees.
Despite differing viewpoints, the 3.75% increase FWC deemed reasonable, aligning with projected wage growth for 2024 and expected to have a moderate impact overall.
SUPERANNUATION INCREASE
Also from 1 July 2024, super guarantee (compulsory employer contributions) will increase from 11% to 11.5%.
Employer contributions will continue to increase by 0.5% each financial year until contributions reach 12% in 2025. You can find out more about the further increases on the ATO website.
It is prudent for all employers to ensure their payroll system applies this change from 1 July 2024, noting that it may fall part-way through a pay cycle.
WHAT DO EMPLOYERS NEED TO DO?
Our quick tips for ensuring compliance are below:
- Do not assume this doesn’t apply to you – take it as your opportunity to review your remuneration practices for compliance. Rememer that the national wage theft legislation comes in to effect from 1 January 2025, so now is the time to review and improve your practices. You can read our Quick Guide to Wage Theft & Underpayments here.
- If your employees are covered by national minimum wage or an Award, familiarise yourself with the new rates before the 1 July 2024 effective date, then ensure any necessary changes are passed on by the first full pay period starting on or after 1 July 2024.
- Take the opportunity to check that each employee is correctly classified under the Award level applicable for the work they perform and is receiving any applicable allowances or other relevant entitlements.
- Any changes to employment details, pay rates or entitlements should be confirmed in writing for each employee, and adjusted in your payroll system. If you intend to issue new employment contracts, seek advice about doing so to ensure you have clauses that cover the upcoming changes to casual employment and the right to disconnect.
- Check that your payroll system is setup to pay superannuation correctly from 1 July 2024.
- Read more about paying above-award, allowances, flat rates and salaries in the FAQ’s below.
- This should not be a set and forget exercise. Speak with Edwards HR about undertaking a wage assessment periodically or attending our workshops to ensure you are meeting your employer compliance obligations.
- Familiarise yourself with the upcoming employment law changes (IR Reforms) here.
FREQUENTLY ASKED QUESTIONS
We have provided the answers to some frequently asked questions below and will provide another update for employers when Modern Awards and their corresponding Pay Guides have been updated in the coming weeks.
The FWC’s decision announcement can be found here.
An updated version of the Fair Work Information Statement will also be available from 1 July 2024.
WHY IS THIS IMPORTANT?
Wage compliance is a significant area of focus for the Fair Work Ombudsman so it’s important you get it right. There are heavy penalties and costly backpay obligations that may result if employers do not act on these changes. From 1 January 2025, wage theft also become a criminal offence, with increased penalties.
WHAT IF I PAY ABOVE AWARD?
If you currently pay above the award minimum rate, we recommend checking the new (increased) pay rates and ensuring the current pay rate for each employee is still at or above the new minimum.
You are not required to increase pay rates if they remain the same as or better than the new minimum rates (however, you can if you wish to).
ARE ALLOWANCES IMPACTED?
Some allowances will also be impacted by the increase. Where an allowance is expressed as a percentage of the ‘standard’ rate (which is linked to the wage of a particular classification in the Award) or considered an ‘all-purpose allowance’, these allowances will generally increase in line with the ‘standard rate’.
You should check the allowances applicable to your team once the Fair Work Commission has updated the Awards and pay guides, and also check that any applicable superannuation is calculating correctly.
WHAT ABOUT ENTERPRISE AGREEMENTS?
Employers should undertake a review of their enterprise agreement (EA) rates to ensure the increased Award rates don’t ‘leapfrog’ the enterprise agreement rates. Where they fall behind, EA rates should be increased to (at least) match the new Award minimum rates.
Employers who have committed to annual wage increases in their Enterprise Agreements should also review these provisions and take action accordingly.
WHAT ABOUT FLAT RATES & IFA’s?
If you pay any employees a flat rate, loaded rate or have an Individual Flexibility Arrangement in place to cover another arrangement, you are required to ensure the employee/s remain better off overall when compared to the new minimum rates and allowances. We recommend undertaking an assessment of each arrangement to ensure compliance.
WHAT ABOUT ANNUAL SALARIES?
Employees paid annual salaries may be impacted in different ways depending, for example, on whether they are:
- Covered by an Award or EA;
- Award free; or
- Covered by an Award containing ‘annualised wage’ provisions.
We recommend reviewing the above, along with individual employee circumstances to ensure compliance.
WHERE CAN I GET HELP?
This is a yet another change for employers this year, and wage compliance remains a significant area of focus for the Fair Work Ombudsman so it’s important you get it right. Unfortunately, it’s also tedious and time consuming so let us help you!
Contact the Edwards HR team to understand how this decision may impact your business or to discuss how we can look after your wage assessment compliance needs.
Stay up to date with all the upcoming changes via our Linkedin or sign up to our ‘Employer Update’ newsletter.
For more information about the changes, you can view updates on the Fair Work Ombudsman website here.
For more guidance about this update, or to find out how Edwards HR can support your business, contact our team today on 07 3568 0866.
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