In its Annual Wage Review decision, released on Friday 19 June 2020, the Fair Work Commission (FWC) announced that the national minimum wage (NMW) and modern award minimum wages will increase by 1.75 per cent.[1] The FWC has taken the unusual step to stagger the operative date of the NMW and modern award minimum wage increases to reflect the economic impact of the COVID-19 pandemic on particular industries.
The key changes from the Annual Wage Review are:
- 1.75 per cent increase to the NMW.[2] The NMW will increase to $753.80 per week or $19.84 per hour. This constitutes an increase of $13.00 per week to the weekly rate or 35 cents per hour to the hourly rate. This increase will take effect from the first full pay cycle on or after 1 July 2020
- 1.75 per cent increase to modern award minimum wages with staggered increases for Group 1 Awards on 1 July 2020, Group 2 on 1 November 2020 and Group 3 on 1 February 2021
- The current causal loading for award and agreement-free employees and in the modern awards will remain at 25 per cent.
The increase to the NMW and modern award minimum wages for this year falls short of last year’s minimum wage increase of 3.00 per cent. The majority decision of the FWC to increase the NMW and modern award minimum wages took into account:
- the prevailing economic circumstances and uncertain economic outlook, including the high level of unemployment, limited capacity for employers to absorb or pass on wage increases to consumers, the impact of wage increases on national economic performance and the highly uncertain economic outlook and unknown fiscal support to the domestic economy (including through JobKeeper) and the risk of a second wave of COVID-19 infection and the reimposition of extensive restrictions. The majority held that those factors weighed in favour of greater moderation
- the minimum wages objective and the modern awards objective and other mandatory statutory considerations, which require the Panel to take into account a number of factors to inform the evaluation of what might constitute “a fair and relevant minimum safety net of terms and conditions” and “a safety net of fair minimum wages” from the perspective of employees and employers.
The FWC was satisfied that the increases of 1.75 per cent are likely to maintain the real value of the wages of NMW and award-reliant employees.
The NMW increase will take effect from the first full pay period on or after 1 July 2020. The modern awards have been broken into three groups with staggered operative dates as follows:
- Group 1 – modern awards which cover industries which have been less affected by the pandemic than those covered in Groups 2 and 3, and includes modern awards that apply to ‘frontline’ health workers, teachers and childcare workers and employees engaged in other essential services, who have continued working throughout the pandemic to keep the community safe, to protect the vulnerable and those at risk, and to keep the economy functioning.[3] The new minimum rates of pay for Group 1 Awards will take effect from the first full pay period on or after 1 July 2020
- Group 2 – modern awards adversely impacted by the pandemic, but not to the same extent as sectors in Group 3 and includes, for example, the Clerks - Private Sector Award 2020. The new minimum rates of pay for Group 2 Awards will take effect from the first full pay period on or after 1 November 2020
- Group 3 – modern awards covering industry sectors which have been most adversely affected by the pandemic and includes the aviation and hospitality industries among others. The new minimum rates of pay for Group 3 Awards will take effect from the first full pay period on or after 1 February 2021.
A list of the modern awards in each Group is set out at the end of this article.
The increased modern award minimum wage will also have a flow on effect to all loadings, penalties, allowances and overtime payments under the modern awards that are calculated with reference to the modern award minimum wage.
The FWC has also now made its determinations varying the rates of pay under the modern awards in Groups 1 to 3, which can be accessed here.
Increased high income threshold
Employers should also note that the high income threshold for the purpose of guarantees of annual earnings and protection from unfair dismissal has increased to $153,600 (previously $148,700) from 1 July 2020.
Steps for employers to take now
In light of these increases, 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 2020 be paid in accordance with the new minimum wage rates (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 in accordance with 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.
Employers who intend to guarantee pay above the high income threshold for certain employees should review whether the annual rate of earnings paid to relevant employees exceeds the high income threshold of $153,600.
Group 1 Awards
Group 2 Awards
Group 3 Awards
Authors: Michael Selinger & Natasha Jones
[1] Annual Wage Review 2019–20 Decision [2020] FWCFB 3500
[2] The NMW applies to employees who are not covered by a modern award or enterprise agreement (award/agreement-free employees), but does not apply to junior employees, employees to whom a training arrangement applies, and employees with a disability, all of whom receive a special minimum wage.
[3] [2020] FWCFB 3500 at [162]
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.
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