On 16 June 2020, the Fair Work Commission announced their decision to increase the National Minimum Wage and Award wages by 2.5%.
This will see National Minimum Wage increase to $20.33 per hour / $772.60 per week.
All Modern Awards will be impacted, but the increases will occur in 3 stages as outlined below. The increases take effect from the first full pay period commencing on or after the dates listed.
1. 1 July 2021: All Awards except those listed below.
2. 1 September 2021: General Retail Industry Award only.
3. 1 November 2021: the following Awards only:
Air Pilots Award
Aircraft Cabin Crew Award
Airline Operations – Ground Staff Award
Airport Employees Award
Airservices Australia Enterprise Award
Alpine Resorts Award
Amusement, Events and Recreation Award
Dry Cleaning and Laundry Industry Award
Fitness Industry Award
Hair and Beauty Industry Award
Hospitality Industry (General) Award
Live Performance Award
Mannequins and Models Award
Marine Tourism and Charter Vessels Award
Racing Clubs Events Award
Racing Industry Ground Maintenance Award
Registered and Licensed Clubs Award
Restaurant Industry Award
Sporting Organisations Award
Travelling Shows Award
Wine Industry Award
The Fair Work Ombudsman Announcement can be found here.
Also from 1 July 2021, super guarantee (compulsory employer contributions) will increase from 9.5% to 10%.
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.
Employers should also be aware that from 1 July 2022 (next year), the $450 minimum income threshold will be removed. This means all employees will have an equal entitlement to superannuation contributions by their employer, regardless of their income. Read more on the ATO website here.
WHAT DO EMPLOYERS NEED TO DO?
1. If your employees are covered by national minimum wage or an award, familiarise yourself with the new rates and effective dates then ensure any necessary changes are passed on by the first full pay period starting on or after the relevant effective date.
2. Now is also a good time to check that each employee is correctly classified under the Award level applicable for the work they perform and is receiving any applicable allowances.
3. Any changes to employment details or entitlements should be confirmed in writing for each employee.
4. Check that your payroll system is setup to pay superannuation correctly from 1 July 2021.
WHY IS THIS IMPORTANT?
Wage compliance is a significant area of focus for the Fair Work Commission 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.
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 your pay rates if they remain the same as or better than the new minimum rates.
ARE ALLOWANCES IMPACTED?
Some allowances will also be impacted by the increases. 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 rates to ensure the 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.
WHAT ABOUT FLAT RATES and IFA’s?
If you pay any employees a flat rate or have an Individual Flexibility Arrangement in place, 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;
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?
Wage compliance is a significant area of focus for the Fair Work Commission so it’s important you get it right. Unfortunately, it’s also complicated, 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.
As always, the team at Edwards HR are here to answer your questions and provide support across all areas of HR.
You can reach us on the details below: