On 15 June 2022, the Fair Work Commission (FWC) Expert Panel handed down its decision in the Annual Wage Review for 2021-22. The decision will increase the national minimum wage by 5.2 per cent and modern award minimum wage by 4.6 per cent, subject to a minimum increase for adult award classifications of $40 per week.
Similar to the approach of the FWC in the 2019-20 and 2020-21 Annual Wage Reviews, the commencement of the increase will be staggered in two stages for different modern awards.
The key outcomes for the 2022 Annual Wage Review are as follows:
- a 5.2 per cent increase will apply to the national minimum wage, which will see:
- the current weekly minimum wage increase from $772.60 to $812.60 (an increase of $40.00 per week), and
- the current hourly minimum wage increased from $20.33 to $21.38 (an increase of $1.05 per hour).
- a 4.6 per cent increase will apply to modern award minimum wages, subject to a minimum increase for adult award classifications of $40 per week. In effect, this means:
- award wage rates above $869.60 per week will increase by 4.6 per cent per week
- award wage rates below $869.60 per week will increase by $40 per week.
- the current casual loading figure for award or agreement-free employees will remain at 25 per cent. The annual wage review decision did not address the casual loading for modern award-covered employees.
In coming to this decision, the FWC’s Expert Panel considered many economic factors and the “real value” of wages. The Panel considered the “sharp rise” in cost of living and the strength of the labour market, which is predicted to continue for the period ahead.
While the Panel acknowledged that inflation had an impact on both workers and businesses, the economic context weighed in favour of an increase in wages. The Panel noted the following:
- at the time of the 2020-21 Annual Wage Review, the CPI and trimmed mean measure of inflation stood at 1.1 per cent, whereas this year, the comparable figures are 5.1 per cent and 3.7 per cent, respectively
- non-discretionary components of the CPI (such as goods or services purchased because they meet a basic need like food, shelter or healthcare) have increased by 6.6 per cent over the last year to the March 2022 quarter
- there was a need to constrain inflationary pressures
- the 0.5 per cent increase in the Superannuation Guarantee rate, removal of the $450/month superannuation threshold, and the 2022-23 Budget measures were moderating factors.
The Panel also acknowledged that the sharp increase in cost of living would disproportionally affect low-income earners. Therefore, the decision to implement a “minimum increase for adult award classifications of $40 per week” was to provide greater relief to those workers.
Timing of wage increases
The wage increases will take effect for employers from the first full pay period on or after 1 July 2022, except for employers in the aviation, tourism and hospitality industries with applicable modern awards (see list below).
For employers and employees covered by modern awards relating to the aviation, tourism and hospitality industries, the Panel was satisfied that exceptional circumstances exist and as such, the modern award wage increases will take effect from 1 October 2022.
The following modern awards will have a 1 October 2022 operation commencement date:
- 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.
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 increases will also have a flow-on effect to all loadings, penalties, allowances and overtime payments under the awards that are calculated with reference to the minimum wage.
Employers should review their current pay arrangements to ensure that:
- award/agreement-free employees: Any employee not covered by a modern award or enterprise agreement will, from the first full pay period on or after 1 July 2022, be entitled to a minimum weekly wage for 38 hours of work equal to $812.60, or $21.38 an hour (plus the 25 per cent casual loading in respect of casual employees)
- modern award covered 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 wage 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. The FWC will hand down further decisions setting out the New Modern Award Wage for each modern award to assist employers
- all-inclusive salary employee: Review salary packages of employees who receive “all-inclusive salaries”. The increase may affect the lawfulness of that all-inclusive salary if it is no longer adequate to compensate them for their award entitlements. You also need to bear in mind the increase in the Superannuation Guarantee rate to 10.5 per cent on and from 1 July 2022
- enterprise agreement covered employees: 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 the national minimum wage
- in the case of an employee covered by a modern award – not less than the wage specified 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 2022.
You can read the full Annual Wage Review 2022 decision here.
If you have any questions about how the increase could impact existing employment contracts or your business, please contact us below or get in touch with our team here.
Authors: Michael Selinger, Charles Power & Olivia Lawrence
The information in this article 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 article is accurate at the date it is received or that it will continue to be accurate in the future