As part of the annual wage review, the Fair Work Commission has today ordered a 5.2% wage increase to the national minimum wage, and a $40 or 4.6% increase to award wages.
Minimum Wage Increase
As part of the annual wage review, the Fair Work Commission has today ordered a 5.2% wage increase to the national minimum wage.
The new national minimum wage will be $812.60 per week or $21.38 per hour. This constitutes an increase of $40.00 per week to the weekly rate, or $1.05 per hour to the hourly rate.
This rate is significantly higher than the 2.5% increase last year.
The 5.2% minimum wage increase is just higher than the current 5.1% CPI. However, given the projections that inflation will climb above 7% later this year this means that those on minimum wages will still go backwards.
While this significant wage rise will be appreciated by employees, it also represents an additional burden on employers struggling to deal with inflationary pressures.
The reality for most employers is that given employee shortages across most industries, the actual increase to minimum wages may have little impact, as employers are paying well above minimum wages to attract and retain staff at the present time.
Modern Award Increases
In an unusual concession, the Fair Work Commission recommended a different increase to the minimum wages in modern awards.
For employees covered by modern award wages the minimum increase for a full-time employee will be $40 a week (also $1.05 per hour) or 4.6% – whichever is higher.
This has the effect that those earning $869.60 or more per week (or $22.88 per hour) will receive a 4.6% increase.
The decision provides a backstop that all weekly wages will increase by at least $40.00.
Timing of the increase
Historically, increases to the national minimum wage and modern award minimum wages have typically taken effect from the first full pay period on or after 1 July.
However, similar to the last 2 years, the Fair Work Commission considered that it was once again necessary to activate the ‘exceptional circumstances’ clause in the Fair Work Act 2009 to delay the operative date for increases for some industries – specifically, the aviation, tourism and hospitality sectors.
The modern awards in Group 1 cover industries that have generally recovered from the pandemic, or are firmly on the path to recovery. These are all the awards not listed below.
For these industries the increases above will take effect from the first full pay period on or after 1 July 2022.
The modern awards in Group 2 are considered industries still adversely impacted by the pandemic, namely the aviation, tourism and hospitality industries.
For those covered by the following awards, the increases above will take effect from the first full pay period on or after 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
What Should You Do?
From 1 July 2022 (or 1 October 2022, depending on the industry), employers must satisfy the new minimum payment obligations for all relevant staff.
Employers should now carefully review their wage arrangements and implement the necessary wage increases to ensure minimum wage rates are at least commensurate with the underpinning modern award.
Employers paying above-award payments should also review such arrangements to ensure that they are high enough to accommodate the increases (provided they are also supported by the necessary individual flexibility or other agreements).
Some employers may now be facing a second modern award rate increase in the last 12 months, due to the delayed operation of the minimum wage increases in the 2021-22 financial year.
Further, as a minimum, from 1 July 2022 employers’ minimum superannuation contributions will be increased to 10.5% which must be paid into the employees’ complying funds, calculated against Ordinary Time Earnings, to avoid liability to pay the Superannuation Guarantee Charge. Further, the $450 per month eligibility threshold for when superannuation is paid is being removed, meaning additional superannuation liabilities for low-earning employees in the coming financial year.
If you have any questions regarding your minimum pay obligations, minimum superannuation contributions or penalty rates, do not hesitate to contact HR Legal.