Legal Insights

Complying with the new minimum wage

By Meaghan Bare, Michael Nicolazzo

• 15 June 2022 • 3 min read
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Fair Work Commission announces 5.2% increase to the national minimum wage

Today the Fair Work Commission announced a 5.2% increase to the national minimum wage, and an increase to award rates of the greater of 4.6% or $40 per week. The decision reflects anticipated rises in inflation and concerns that real wages have fallen in recent times. What should you be doing to ensure you comply? Read on for some insights by the Maddocks’ Employment Team.

The Australian Council of Trade Unions had proposed a 5.5% increase and the Australian Chamber of Commerce and Industry, Australian Industry Group and a number of other employer bodies had proposed an increase to minimum wages of between 2.5% and 3%. The Federal Government had submitted that the Fair Work Commission should ensure that real wages of low-paid workers did not go backwards.

National minimum wage increase

The national minimum wage applies to employees not covered by an award or registered agreement. The new national minimum wage as of 1 July 2022 is $812.60 per week or $21.38 per hour. This is an increase of $40 per week.

Award minimums increased

Minimum wages in awards will increase by the greater of 4.6% percent or $40 per week. In effect, modern award minimum wage rates above $869.60 per week will increase by 4.6% and wage rates below $869.60 per week will be adjusted by $40 per week.

In the case of most awards, the changes will begin on the first full pay period on or after 1 July 2022. The Fair Work Commission will publish updates to each of those awards over the coming weeks. In the case of 10 awards in the aviation, tourism and hospitality sectors, the Fair Work Commission was satisfied exceptional circumstances exist and therefore delayed the increase until 1 October 2022.

What should you be doing to ensure compliance?

  1. Check that all employees are being paid at least the minimum wage.
  2. For employees that are award covered, ensure that employees are paid at least the increased minimum award rates from the first full pay period starting on, or after, 1 July 2022 (or 1 October 2022 if covered by one of the awards subject to the exception).
  3. Where employees are covered by an enterprise agreement, ensure that the base rates of pay provided under that agreement are at least equivalent to the new minimum rates of pay under the applicable award or the minimum wage order.
  4. Employers who use ‘all-inclusive’ salaries (such as via set-off clauses in their employment contracts or by using annualised salary arrangements) need to ensure that the salary “buffer” is sufficient to cover off all of the employees’ minimum entitlements each pay period, taking into account the increased minimum wages.

Please note that there is not necessarily an obligation to pass on a wage increase to all employees. Where you pay an employee above the minimum wage rates, it may be possible for the increases to be absorbed without wages actually increasing. However, with larger increases to the underlying awards than we have seen in recent years mean that you should check this carefully to ensure your wage rates are still compliant.

Consequences

Significant penalties exist under federal law and, in some cases, state laws for getting wage rates wrong. The Maddocks Employment, Safety and People team have extensive expertise in navigating wage compliance matters. Please get in touch with us if you have any questions about wage compliance.

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