The Fair Work Commission handed down a decision earlier this month that increased the national minimum wage by 5.2% for workers not covered by an award or registered agreement.
Similarly, modern award minimum wages have been increased by 4.6% subject to a minimum increase for adult award classifications of $40 per week.
In summary, as of 1 July 2022:
- the national minimum wage will be $21.38 per hour or $812.60 per week for award/agreement-free workers; and
- modern award minimum wage rates above $869.60 per week will receive a 4.6% adjustment, and wage rates below $869.60 per week will be adjusted by $40 per week (the increases in the hospitality, tourism and aviation industries will start 1 October 2022).
This decision was made in accordance with the legislative framework set by the Fair Work Act 2009 (Cth), which requires the Commission, constituted by an expert panel, to conduct and complete an annual wage review each financial year.
In reaching this decision, the Commission received submissions from unions, employers and employers’ organisations, the Australian Government, several state governments, and other entities and individuals.
In its submission to the Commission, the Australian Government noted that high and rising inflation and falling real wages were creating cost-of-living pressures, particularly for Australia’s low-paid workers, and submitted that the real wages of Australia’s low-paid workers should not go backwards.
The strengthening of the labour market and a sharp increase in the cost of living were cited by the Commission as significant economic changes between this year and last year weighing in favour of an increase in the national minimum wage and in modern award minimum wages. The Commission further observed that “this level of increase will protect the real value of the wages of the lowest-paid workers”.
This decision will affect up to 2.7 million workers as well as other employees whose employment is governed by enterprise agreements and individual pay setting arrangements.
Key Action Points for Human Resources and In-house Counsel
- In light of this decision, employers are encouraged to review their current pay arrangements to ensure that employee wages satisfy the new national minimum wage.
- Employers covered by a modern award should pay careful attention to an employee’s classification under the award and their weekly wage rates, which will determine whether the employee is to receive a $40 per week wage increase or a 4.6% adjustment. The modern award minimum wages increase will also be replicated in the rates and allowances under the award.
- Employers who pay employees “all-inclusive” or “annualised” salaries are encouraged to assess whether current salaries continue to satisfy and compensate employees for all the monetary benefits they are entitled to under the applicable award.
- Employers covered by a registered agreement that has wages directly linked to wage review decisions are encouraged to review their current pay arrangements to ensure that employee wages satisfy the new national minimum wage, and if relevant, the modern award minimum wage increase.