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National minimum wage set to increase

18 June 2021

#Workplace Relations & Safety

Published by:

Natasha Jones, Sladjana Skoric, Olivia Lawrence

National minimum wage set to increase

On 16 June 2021, the Fair Work Commission (FWC) handed down its decision in the Annual Wage Review 2020-21. The decision will increase the National Minimum Wage (NMW) and the modern award minimum wages by 2.5 per cent. Similar to the FWC’s approach to last year’s Annual Wage Review, the commencement of the increase will be staggered in three stages for different modern awards with increases taking effect from either 1 July, 1 September or 1 November 2021.

The key changes from the Annual Wage Review are:

  • 2.5 per cent increase to the NWM. The new NMW will be $772.60 per week or $20.33 per hour. This constitutes an increase of $18.80 per week to the weekly rate or 49 cents per hour to the hourly rate.
  • 2.5 per cent increase to modern award minimum wages. The FWC will publish draft determinations varying the modern award minimum wages in the coming week;
  • the increase will occur in the following three stages:
    • an increase to the NMW and all modern award wages (except for modern awards in particular industries as indicated below) will be operative from 1 July 2021;
    • an increase to the General Retail Industry Award 2020 will be operative from 1 September 2021; and
    • an increase to certain aviation, tourism, fitness and retail trade awards (set out in the schedule below this article) will be operative from 1 November 2021
  • the current casual loading figure for award/agreement free employees will remain at 25 per cent.

Relevant considerations

As was the case last year, the FWC noted that the Annual Wage Review was being undertaken during a global pandemic. The Australian Council of Trade Unions (ACTU) submitted that a 3.5 per cent increase was appropriate, while a collection of industry groups proposed a 1.1 per cent increase. The FWC’s decision to increase the NMW and modern award minimum wages by 2.5 per cent took into account:

  • ‘the broad consensus from submissions’ that the performance from the economy was exceeding expectations and that economic recovery was underway;
  • its finding that awarding a rate as high as proposed by the ACTU would pose a real risk of disemployment and of adversely affecting the employment opportunities of low-skilled and young workers;
  • that an increase that was less than increases in prices and living costs would amount to a real wage cut, which would adversely affect many award-reliant employees, particularly lowly paid employees and place some households at a great risk of poverty. In this regard, the FWC referred to data indicating a decline in disposable income relative to the 60 per cent median income poverty line between December 2019 and 2020;
  • the 0.5 per cent increase in the Superannuation Guarantee Rate, which will come into effect from 1 July 2021. However, did not apply a direct, quantifiable, discount to the minimum wage increase; and
  • in relation to the impact of the pandemic, the FWC noted that:
    • the improved economy was fuelled largely by strong household spending and public demand, as well as better health outcomes and the continued expansion of monetary and fiscal policies;
    • the localised outbreaks of COVID-19 are effectively controlled;
    • the lifting of domestic activity restrictions has and will continue to support consumer and business activity;
    • there are no extended or sustained state border restrictions in place over the forecast period; and
    • international travel is expected to gradually recover in mid-2022.

The FWC was also satisfied that the staggered operative dates provided a balance between the interests of employers and employees taking into account the impact that the pandemic had on particular industries, including the aviation, tourism, fitness and retail sectors.

Key takeaways for employers

The increases to minimum wages will take effect for employers from the first full pay period on or after the operative dates set out above.

The 2.5 per cent increase to the NMW applies to employees who are award free (but does not confer an increase for employees who are paid above the NMW). The increase also applies to employees who are covered by modern awards and paid in accordance with the minimum rates of pay set out under those awards or an enterprise agreement. The FWC is expected to hand down determinations setting out the new modern award minimum rates of pay (based on a 2.5 per cent increase) for each of the modern awards later this week.

The increase in the modern award minimum wages will have a flow on effect to loadings, penalties, allowances and overtime payments under the modern awards that are calculated with reference to the modern award minimum wages.

Employers should review their current pay arrangements to ensure that:

  • any employee not covered by a modern award or enterprise agreement (award/agreement-free employees) will from the first full pay period on or after 1 July 2021 be paid in accordance with the new minimum wage rates (the NMW) (including the casual loadings in respect of casual employees);
  • from the first full pay period on or after the relevant operative date, any employees covered by a modern award are paid not less than the new modern award minimum rates of pay in respect of the employee’s classification under the modern award. This also includes casual loading and other loadings, penalties, allowances or overtime which are calculated by reference to the modern award minimum rates of pay. If an employee receives an all-inclusive salary, the increase to the minimum rate may affect the lawfulness of that all-inclusive salary, if it is no longer adequate to compensate them for their award entitlements;
  • from the first full pay period on or after the relevant operative date, for any employees to whom an enterprise agreement applies, that they are paid base rates of pay under the enterprise agreement that are:
    • for employees not covered by a modern award – not less than that the NMW rates; or
    • in the case of an employee covered by a modern award – not less than the modern award minimum rates of pay in respect of an employee’s classification under a modern award;
  • employers who intend to guarantee pay above the high income threshold for certain employees should review whether the annual rate of earnings paid to the relevant employees exceeds the high income threshold. Employers should note that the high income threshold will increase on 1 July 2021.

You can read the Annual Wage Review 2021 decision here and a summary here.

Modern awards with delayed minimum wage increases

Modern awards with minimum wage increases operative from 1 September 2021

  • General Retail Industry Award 2020

Modern awards with minimum wage increases operative from 1 November 2021

  • Air Plots Award 2020
  • Aircraft Cabin Crew Award 2020
  • Airline Operations - Ground Staff Award 2020
  • Airport Employees Award 2020
  • Airservices Australia Enterprise Award 2016
  • Alpine Resorts Award 2020
  • Amusement, Events and Recreation Award 2020
  • Dry Cleaning and Laundry Industry Award 2020
  • Fitness Industry Award 2020
  • Hair and Beauty Industry Award 2020
  • Hospitality Industry (General) Award 2020
  • Live Performance Award 2020
  • Mannequins and Models Award 2020
  • Marine Tourism and Charter Vessels Award 2020
  • Nursery Award 2020
  • Racing Clubs Events Award 2020
  • Racing Industry Ground Maintenance Award 2020
  • Registered and Licensed Clubs Award 2020
  • Restaurant Industry Award 2020
  • Sporting Organisations Award 2020
  • Travelling Shows Award 2020
  • Wine Industry Award 2020

Authors: Michael Selinger, Natasha Jones, Sladjana Skoric & Olivia Lawrence

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Natasha Jones, Sladjana Skoric, Olivia Lawrence

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