The Fair Work Commission handed down its Annual Wage Review decision on 2 June 2023. There has been considerable interest in the Fair Work Commission’s annual wage review given recent inflationary concerns expressed by the Reserve Bank Governor. The FWC Panel decided to:
• increase all modern award rates by 5.75% (the rise last year was 4.6%);
• effectively increase the National Minimum Wage on a one off basis by $70.20 (8.6%) per week.
The reason for the difference is that the FWC decided that the National Minimum Wage should not be tied to the C14 wage rate in modern awards which is the lowest modern award minimum wage rate. The FWC said this rate was only ever intended to be a transitional entry rate for new employees and was not a proper minimum wage safety net for award/agreement free employees in continuing employment. In reaching their decision the Fair Work Commission considered:
• the significant impact of current inflation rates on the ability of employees to meet their basic financial needs;
• the recent robustness of the labour market;
• that the increase would provide a disproportionate benefit to female workers and may contribute to narrowing the gender pay gap;
• moderating factors included the forthcoming increase in the SGC rate to 11%, the effect of the expected weakening in the labour market on casual employees and the need to avoid a perceived wage indexation approach along with recent weak productivity growth.
The FWC considered the increase to be the most that could reasonably be justified in the current economic circumstances whilst acknowledging the increase would not maintain the real value of award minimum wages. The FWC said a return to minimum wages maintaining their real value and increasing in line with national productivity growth would be possible in a lower inflationary environment. The National Minimum Wage and award rate increases will take effect from the first full pay period on or after 1 July 2023. This means that the federal weekly minimum full time wage will increase from 1 July 2023 from $812.60 per week ($21.38 per hour) to $882.80 per week ($23.23 per hour) and there will also be smaller award increases from this date and allowances will also be affected. It is important to check your particular award for commencement of the increase.
A summary of the Commission’s decision can be found at FWC Annual Wage Review 2022-2023 Summary of Decision. Employers should check the Fair Work Commission website (www.fwc.gov.au) for pay rate revisions to their particular modern award/s and implementation dates. You can also subscribe to electronic award updates from the Commission. The Fair Work Ombudsman also has online pay checking resources (www.fairwork.gov.au/pay).
Remember that employees cannot be paid less than required by an applicable modern award (including overtime, penalty rates and allowances). It is only trainees, apprentices and junior employees, employees to whom training arrangements apply and employees with a disability who may be paid less than these minimum rates and then only if specified in an applicable award or enterprise agreement. For non award employees, the obligation is for employers to ensure that an employee is being paid more than the minimum wage rate for all their hours of work. Care also needs to be taken in relation to annualised wage and common law salary arrangements.
Also, from 1 July 2023, the compulsory employer Superannuation Guarantee rate will increase from 10.5% to 11%. Finally, the unfair dismissal high income threshold (the annual remuneration level, above which award free employees cannot bring unfair dismissal claims) will increase to $167,500 (from $162,000 and excluding superannuation and non guaranteed amounts, eg commission) and the maximum compensation for unfair dismissals will increase to $83,750. Please contact us if you would like any further information or help.