On 15 June 2022, the Fair Work Commission announced their decision to increase the National Minimum Wage and Award wages. We encourage all employers to read this update as there will be significant impacts for businesses.
This will see the National Minimum Wage increase from $20.33 to $21.38 per hour / $812.60 per week, constituting an increase of $1.05 per hour or $40 per week.
Modern Award minimum wages will be increased by split percentages as summarised below:
- Award wage rates in excess of $869.60 per week will increase by 4.6%.
- Award wage rates under $869.60 per week will increase by 5.2%.
The increases will take effect from the first full pay period commencing on or after the 1 July 2022 for most awards.
For the awards listed below only, the effective date will be deferred until 1 October 2022:
- 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.
The Fair Work Ombudsman Announcement can be found here.
Also from 1 July 2022, super guarantee (compulsory employer contributions) will increase from 10% to 10.5%.
Employer contributions will continue to increase by 0.5% each financial ear until contributions reach 12% in 2025. You can find out more about the further increases on the ATO website.
Employers should also be aware that from 1 July 2022, the $450 minimum income threshold will be removed. This means all employees will have an equal entitlement to superannuation contributions by their employer, regardless of their income.
Read more on the ATO website here.
WHAT DO EMPLOYERS NEED TO DO?
- If your employees are covered by national minimum wage or an award, familiarise yourself with the new rates and effective dates when they are available, then ensure any necessary changes are passed on by the first full pay period starting on or after 1 July 2022.
- Now is also a good time to check that each employee is correctly classified under the Award level applicable for the work they perform and is receiving any applicable allowances.
- Any changes to employment details, pay rates or entitlements should be confirmed in writing for each employee.
- Check that your payroll system is setup to pay superannuation correctly from 1 July 2022.
OTHER FAQ’SWHY IS THIS IMPORTANT?
Wage compliance is a significant area of focus for the Fair Work Ombudsman so it’s important you get it right.
There are heavy penalties and costly backpay obligations that may result if employers do not act on these changes.
WHAT IF I PAY ABOVE AWARD?
If you currently pay above the award minimum rate, we recommend checking the new (increased) pay rates and ensuring the current pay rate for each employee is still at or above the new minimum.
You are not required to increase pay rates if they remain the same as or better than the new minimum rates (however, you can if you wish to).
ARE ALLOWANCES IMPACTED?
Some allowances will also be impacted by the increases. Where an allowance is expressed as a percentage of the ‘standard’ rate (which is linked to the wage of a particular classification in the Award) or considered an ‘all-purpose allowance’, these allowances will generally increase in line with the ‘standard rate’.
You should check the allowances applicable to your team once the Fair Work Commission has updated the Awards and pay guides, and also check that any applicable superannuation is calculating correctly.
WHAT ABOUT ENTERPRISE AGREEMENTS?
Employers should undertake a review of their enterprise agreement rates to ensure the increased Award rates don’t ‘leapfrog’ the enterprise agreement rates. Where they fall behind, EA rates should be increased to (at least) match the new Award minimum rates.
Employers who have committed to annual wage increases in their Enterprise Agreements should also review these provisions.
WHAT ABOUT FLAT RATES and IFA’s?
If you pay any employees a flat rate or have an Individual Flexibility Arrangement in place, you are required to ensure the employee/s remain better off overall when compared to the new minimum rates and allowances.
We recommend undertaking an assessment of each arrangement to ensure compliance.
WHAT ABOUT ANNUAL SALARIES?
Employees paid annual salaries may be impacted in different ways depending, for example, on whether they are:
- Covered by an Award or EA;
- Award free and;
- Covered by an Award containing ‘annualised wage’ provisions.
We recommend reviewing the above, along with individual employee circumstances to ensure compliance.
WHERE CAN I GET HELP?
This is a complicated change for employers, and wage compliance is a significant area of focus for the Fair Work Commission so it’s important you get it right.
Unfortunately, it’s also tedious and time-consuming so let us help you!
Contact the Edwards HR team to understand how this decision may impact your business or to discuss how we can look after your wage assessment compliance needs.