As most of you will now be well aware, the Fair Work Commission recently announced an increase of $40 to the National Minimum Wage, which amounts to an increase of 5.2 per cent.
We analysed the response to the announcement, the impact we think this will have on business and what employers need to do moving forward.
The National Minimum Wage will be increased to $812.60 per week or $21.38 per hour.
FWC President Iain Ross further announced an increase to modern award minimum wages by 4.6 per cent subject to a minimum increase for adult award classifications of $40 per week.
The $40 per week increase is based on a 38-hour week for a full-time employee. In effect, modern award minimum wage rates above $869.60 per week will receive a 4.6 per cent adjustment, wage rates below $869.60 per week will be adjusted by $40 per week.
In most modern awards the effect of the FWC decision will be that the 4.6 per cent adjustment will cut in around the C10, or trade level, and the flat $40 increase will apply to the lower classifications.
The FWC acknowledged that the increases determined will mean a real wage cut for some award-reliant employees, but noted that this is an issue that can be addressed in subsequent Reviews.
Since the decision of the FWC, the Unions have declared that it is ‘also time to revive the collective bargaining system’. Sally McManus from the ACTU said:
“The other big driver of pay increases is collective bargaining, where coverage had fallen from about 30% twelve years ago to 15% now”.
This response, combined with the new Labor Government’s renewed focus on collective bargaining (via its upcoming “employment summit”), suggests that we are likely to see a drive towards collective bargaining in industries with high union participation.
Employers should also note that all affected modern award wages will be adjusted accordingly from 1 July 2022. However, employers with modern awards in the aviation, tourism and hospitality sectors with variation determinations in respect of the following awards will operate from 1 October 2022:
- Aircraft Cabin Crew Award 2020
- Airline Operations – Ground Staff Award 2020
- Air Pilots Award 2020
- Airport Employees Award 2020
- Airservices Australia Enterprise Award 2016
- Alpine Resorts Award 2020
- Hospitality Industry (General) Award 2020
- Marine Tourism and Charter Vessels Award 2020
- Registered and Licensed Clubs Award 2020
- Restaurant Industry Award 2020
We recommend that employers should:
- conduct an audit of your employees current wage and entitlements and assess the impact of the FWC’s pay decision;
- review your employees’ current employment contracts and pay rates now to ensure as a business you are ready to start paying employees the new minimum rates effective from 1 July 2022 and then for those in the aviation, tourism and hospitality sectors from 1 October 2022. This is the safest way to ensure that Employers do not underpay employees going into the new financial year;
- take the time to strategise your workforce within your business and consider the importance of your overall business goals, your workforce hours and pay rates and compliance with the new wage increases.
A minimum wage increase can help improve employee relations within your business. Financial stress is a significant issue and with the sharp rise in the cost of living and strengthening of the labour market, the increase in minimum wages across the sectors should help to improve employee retention for local businesses.
With the increase to the minimum wages, the super guarantee rate will also increase from 10% to 10.5% on 1 July 2022. Employers will need to use the new rate to calculate super on payments made to employees on or after 1 July 2022.
As always, if you require assistance, please do not hesitate to contact one of Workplace Law team members.
For further information please contact Danny Clifford, Director.
The assistance of Nicole Ferraro, Law Clerk in researching this article is gratefully acknowledged.