On 19 June 2020, the Fair Work Commission announced a modest 1.75 percent increase to minimum wages, as compared to the 3 percent minimum wage increase awarded last year.
The decision represents a middle ground between employers’ calls for a pay freeze as a result of the coronavirus pandemic’s impact on businesses and unions’ push for a 4 percent increase to bolster the economy.
National minimum wage increase
This amounts to a national minimum wage of $753.80 per week or $19.84 per hour, resulting in an increase of $13 per week or 35 cents an hour. The increase is lower than the latest consumer price inflation figure of 2.2 percent.
Even award-free employees must receive at least the national minimum wage.
Award minimums increased
Minimum wages in awards will also increase by 1.75 percent. Weekly wages will be rounded to the nearest 10 cents.
The Commission divided workers covered by modern awards into three distinct groups based on the pandemic’s relative effect on different industries. The effective date of the increase will depend on those groups as follows:
|Award Group||Operative Date|
|Group 1 Awards||Start of the first full pay period on or after 1 July 2020|
|Group 2 Awards||Start of the first full pay period on or after 1 November 2020|
|Group 3 Awards||Start of the first full pay period on or after 1 February 2021|
Group 1 Awards were determined by the Commission to have been less affected by the coronavirus pandemic and include industries relating to essential workers and front-line services. Examples include:
- Banking, Finance and Insurance Award 2020;
- Children’s Services Award 2010;
- Educational Services (Schools) General Staff Award 2020;
- Educational Services (Teachers) Award 2010;
- Health Professionals and Support Services Award 2020;
- Medical Practitioners Award 2020;
- Nurses Award 2010; and
- Social, Community, Home Care and Disability Services Industry Award 2010
Group 2 Awards cover industry sectors adversely impacted by the coronavirus pandemic, but not to the same extent as the sectors covered by Group 3 and include:
- Building and Construction General On-site Award 2010;
- Clerks—Private Sector Award 2020;
- Educational Services (Post-Secondary Education) Award 2020;
- Food, Beverage and Tobacco Manufacturing Award 2010;
- Higher Education Industry Academic Staff Award 2020;
- Horticulture Award 2010;
- Professional Employees Award 2020;
- Real Estate Industry Award 2020;
- Security Services Industry Award 2020; and
- Textile, Clothing, Footwear and Associated Industries Award 2010.
Group 3 Awards cover industries most affected by the coronavirus pandemic. These include:
- Amusement, Events and Recreation Award 2020;
- Fast Food Industry Award 2010;
- Fitness Industry Award 2010;
- Hospitality Industry (General) Award 2020; and
- Restaurant Industry Award 2020.
For a full list of the modern awards in each of Groups 1 – 3 please see the Decision at pages 41 to 45.
What does this mean for employers?
Employers will need to review their pay rates to check that employees are being paid at least the minimum wage at all times.
Employers also need to assess which modern awards apply to their workforce and whether those awards fall in Groups 1, 2 or 3. Employers will then need to ensure that employees are paid at least the increased minimum award rates from the first full pay period starting on, or after, 1 July 2020, 1 November 2020 or 1 February 2021 respectively.
Employers should ensure that their payroll is set up to make payments of the increased wages from the first full pay period on, or after those dates.
Penalties apply to employers who fail to meet minimum wage obligations.
What about employers with enterprise agreements, or with employees being paid ‘all-in’ salaries?
Even where the employer is a party to an enterprise agreement, it must ensure that the base rates of pay provided under that agreement are at least equivalent to the new minimum rates of pay.
Employers who have set-off clauses in their employment contracts where they pay employees ‘all-inclusive’ salaries will also need to make sure that they are paying enough to cover their employees’ minimum entitlements each pay period, including the increased national minimum wage (or their respective modern award wage).
This also includes any entitlements that the employee may have under any applicable award, taking into account the working patterns of employees.
Employers who utilise annualised salary arrangements permitted by some awards should compare the annualised salary against the updated award to ensure that employees are receiving sufficient remuneration.
Please also be aware that a number of modern awards have recently been amended with regards to annualised salary requirements, and to seek legal advice if these provisions may be relevant to you or your business.
Increased high income threshold for unfair dismissal
The unfair dismissal high income threshold will rise to $153,600 from 1 July 2020. The high income threshold excludes employees from making an unfair dismissal claim if they earn more than the threshold, and are not covered by an industrial instrument such as a modern award or enterprise agreement.
However, the rules about what types of remuneration counts towards the high income threshold are complex. For example, compulsory superannuation contributions do not count towards the high income threshold. As a result, advice should be obtained in determining if an employee is covered by unfair dismissal laws.
For more information or advice, please contact a member of our Employment and Workplace Relations team on (03) 8600 8888.
Note: This update is a guide only and is not intended to constitute legal advice.