Published June 2023
WAGES AND SUPER TO INCREASE FROM 1 JULY 2023
On 2nd June 2023, the Fair Work Commission announced their decision to increase Modern Award wages by 5.75% from the first pay period commencing on or after 1 July 2023.
We encourage all employers to read this update as there will be significant impacts for businesses.
The increase will see National Minimum Wage increase to $23.23 per hour or $882.80 per week.
A technical change has also been made to the base rate of minimum award level C14. These employees will see an increase of 8.6% to National Minimum Wage as outlined above.
During the consultation period, the ACTU had proposed 7%, and employer and employer associations had proposed 3 – 3.8%. The Fair Work Commission handed down the decision noting that “we emphasise that the Annual Wage Review process is not one of adjudication between competing proposals. While we have taken the submissions made into account, ultimately our statutory task is to make our own assessment of what constitutes a safety net of fair minimum wages.”
Please note that for employers impacted by the 15% wage increase applied to some classifications within the Nurses Award, SCHADS Award and Aged Care Awards from 30 June 2023 – the additional increase of 5.75% also applies from 1 July 2023 as described above. You can read our update about these changes here and there is more information on the Fair Work Ombudsman website here.
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 decision announcement can be found here.
Also from 1 July 2023, super guarantee (compulsory employer contributions) will increase from 10.5% to 11%.
Employer contributions will continue to increase by 0.5% each financial ear until contributions reach 12% in 2025. You can find out more about the further increases on the ATO website.
WHAT DO EMPLOYERS NEED TO DO?
- If your employees are covered by national minimum wage or an Award, familiarise yourself with the new rates before the 1 July 2023 effective date, then ensure any necessary changes are passed on by the first full pay period starting on or after 1 July 2023.
- 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.
- Any changes to employment details, pay rates or entitlements should be confirmed in writing for each employee, and adjusted in your payroll system.
- Check that your payroll system is setup to pay superannuation correctly from 1 July 2023.
- Read more about paying above-award, allowances, flat rates and salaries in the FAQ’s below.
- Speak with Edwards HR about undertaking an annual wage assessment to ensure you are meeting your employer compliance obligations.
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.
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 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 act 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.
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.
Feel free to share this update with others in your network.