2018 Minimum Wage Decision AnnouncedJune 1, 2018
The Fair Work Commission’s Minimum Wage Panel (“Panel”) has today handed down its minimum wage decision which increased the National Minimum Wage, together with all Modern Award minimum rates of pay, by 3.5%.
The Panel considered the current economic environment and reasoned that economic indicators now point to a healthy national economic environment and employment growth particularly compared to last year.
Despite this the ACTU had pushed for a record $50 a week increase proposing to raise the minimum wage to $744.90 per week, or $19.60 per hour in light of the increased cost of living in Australia. Employer groups such as the Australian Retailers Association proposed a modest increase of 1.9% a week. The ARA submitted that a ‘modest’ increase was warranted in order to bring balance back into an already difficult operating environment.
The Panel considered that low wage growth would have a significant negative social and economic impact and handed down a minimum wage increase greater than last year to improve the real income of those employees reliant on the National Minimum Wage and Modern Awards.
From the first pay period commencing on or after 1 July 2018, the National Minimum Wage will increase to $719.20 per week, or $18.93 per hour.
What this means for you
Employers who pay their employees at the National Minimum Wage or Modern Award rates of pay will need to apply the increase in the first full pay period on or after 1 July 2018.
Annualised Salaries and Individual Flexibility Agreements
If you have implemented Individual Flexibility Agreements, you will need to reassess those agreements to ensure employees remain “better off overall” when compared to the newly increased Modern Award rates. Employers who use annualised salary arrangements will need to conduct an audit of those annualised salaries against the new Award rates and working patterns to ensure the annual salary compensates for award entitlements.
The new Modern Award rates will also form the baseline for “better off overall” testing new Enterprise Agreements (EA). If you have an EA in place, you will need to ensure the minimum base rates in the EA remain at a minimum equal to the new Modern Award rates. If not, EA rates will need to be increased to match the Modern Award.
Today’s decision will impact some allowances as well as base rates. A number of Modern Award allowances are expressed as a percentage of the “standard rate”, which is linked to the wage rate of a specific classification in the award. These allowances will therefore increase in line with the increase in the standard rate.
High Income Guarantee
Although not directly related to today’s decision, the High Income Threshold will also increase from 1 July 2018. Any employers who sidestep Award conditions by using High Income Guarantees will need to check their agreed terms, to ensure they remain compliant and above the new threshold. If guarantee levels fall below the threshold, or lapse for another reason, minimum entitlements will revert to those in the Award (including, for example, overtime and penalty rates).
FCB can help you understand how this decision affects your business, including explaining how it works, auditing and calculating pay rates and assisting you implement an appropriate strategy.
Whether it is to ensure compliance, review flexibility in your workplace or to factor the increase into any budgeting, forecasts or salary reviews, employers will need to act quickly as the minimum wage increase will come into effect on 1 July 2018.
If you would like assistance with any of these matters, call FCB on (02) 9922 5188 or (03) 9098 9400.