On 2 June 2023, the Fair Work Commission (FWC) Expert Panel handed down its decision in the Annual Wage Review for 2022-23. The decision will increase the national minimum wage (NMW) and modern award minimum wages by 5.75 per cent.
Importantly, in their decision, the FWC Expert Panel ended the alignment between the NMW and the C14 classification wage rate in modern awards. Rather, for the purpose of this review, the Expert Panel aligned the NMW with the higher C13 classification wage rate, which in nearly all relevant awards is the lowest modern award classification rate applicable to ongoing employment. The result of this decision is a “once-off” higher increase to the NMW, being a “real wage increase” of 8.65 per cent for those workers who are paid at the NMW.
In coming to their decision, the FWC Expert Panel placed particular weight on the effect of inflation on those on NMW and modern award minimum wages.
Key outcomes
The key outcomes for the 2023 Annual Wage Review are as follows:
- the NMW rate was aligned with the C13 modern award classification (currently $834.80 per week or $21.97 per hour) and a 5.75 per cent increase will apply to those rates, which will see:
- the current weekly minimum wage increase from $812.60 to $882.80 (an increase of $70.20 per week)
- the current hourly minimum wage increased from $21.38 to $23.23 (an increase of $1.85 per hour).
- a 5.75 per cent increase will apply to modern award minimum wages across the board
- 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.
Reasons
In coming to this decision, the FWC’s Expert Panel noted that the “current combination of economic circumstances, namely low unemployment, falling real wages and high inflation” presented a particular challenge to their review. The Panel considered the further challenge of the expected “sharp slowdown” in economic growth predicted over the next year.
While the Panel acknowledged that inflation had impacted both workers and businesses, the economic context weighed in favour of increasing wages. The Panel noted the following:
- that inflation had increased dramatically since the last annual wage review
- that this increase in minimum wages went some way to addressing gender pay disparity, given that many women are award-reliant, but does not go all the way to addressing this disparity and that the FWC would be looking to do a review into wage gender inequity
- that, while this minimum wage increase will not maintain the real value of modern award minimum wages nor reverse the reduction in real value which has occurred over recent years due to inflation, the level of wage increase the FWC Expert Panel determined is what they consider to be the most that can reasonably be justified in the current economic circumstances
- that only 0.7 per cent of workers nationally are paid NMW and therefore the increase will not have discernible macro-economic effects
- 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 to 7.2 per cent over the previous years to the March 2023 quarter
- the need to constrain inflationary pressures.
In coming to their decision, the FWC Expert Panel also considered the following to be moderating factors:
- the scheduled 0.5 per cent increase in the Superannuation Guarantee rate
- forecasts of continually low unemployment and high levels of participation
- that a large proportion of modern award reliant employees work in sectors which would likely be affected by a reduction in discretionary expenditure associated with an economic slowdown
- that casual employees are likely to constitute the category of employees most immediately and significantly affected by any decline in demand for labour via a reduction in their hours of work, and almost half of all modern award-reliant employees are casually employed
- a reluctance to adopt a wage indexation approach when it comes to assessing increases to the modern award minimum wage rates
- the fact that productivity performance in Australia remains poor.
Takeaways for employers
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 2023, be entitled to a minimum weekly wage for 38 hours of work equal to $882.80, or $23.23 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 1 July 2023, any employees covered by a modern award are paid no less than the new modern award wage in respect of the employee’s classification under the modern award. This change also includes casual loading and other loadings, penalties, allowances or overtime, which are calculated by reference to the modern award minimum pay rates. 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 11 per cent on and from 1 July 2023
- enterprise agreement covered employees: From the first full pay period on or after 1 July 2023, any employees to whom an enterprise agreement applies should be 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 2023.
You can read the full Annual Wage Review Decision 2022-23 here and the summary of the decision here.
If you have any questions about this announcement, please get in touch with a member of our Workplace Relations & Safety team below.
Disclaimer
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.
Share this
