FWA orders 3.4% increase in minimum wages

Fri, 3 Jun 2011

In its second Minimum Wage Decision the Minimum Wage Panel ("the Panel") of Fair Work Australia this morning increased all Modern Award minimum wage rates, and the Federal Minimum Wage, by 3.4%. The Panel flagged during last year's decision that it would consider a return to percentage increases as opposed to flat rate increases as flat rate increases had "compressed relativities in the award classification structures".

The wage increase takes the national minimum wage from $569.90 to $589.30 per week, or $15.51 per hour. The increase will have effect from the first pay period commencing on or after 1 July 2011. Business will also need to be prepared for the second phase of the transition between pre-Modern Awards and Modern Awards, which will take effect at the same time as the increase.

In dollar terms, this decision came in near to the mid-point between what employer bodies and the ACTU had sought. The Panel relied on an economy that is performing "reasonably well", growing labour productivity, relatively low underlying inflation and growing employment. The Panel also rejected calls for deferment of the increase for employers in areas impacted by natural disasters and those who were experiencing labour cost increases as a result of Award Modernisation.

Impact on business

Awards & Agreements

The decision will directly impact on businesses operating under Modern Awards and Enterprise Awards. Businesses with enterprise agreements (or transitional agreements) need to ensure that the minimum or base rates of pay in those agreements are at least equal to the relevant rate in the applicable Modern Award as increased by the decision.

Annualised Salaries and Individual Flexibility Agreements

Businesses who apply annualised salary arrangements for their Modern Award covered employees need to consider the impact of the increase on those annualised salaries. Businesses who have implemented Individual Flexibility Agreements need to reassess these agreements to ensure that new employees are better off overall when compared to the applicable Modern Award. FCB Workplace Law can assist in carrying out these assessments and developing appropriate and compliant arrangements.

Allowances

The decision will also impact on allowances under Modern Awards. A number of Modern Award allowances are expressed as a percentage of the "standard rate", which is the rate applicable to the trades equivalent classification in the award. These allowance will therefore increase in line with the increase in the standard rate. Expense related allowances will increase in line with the relevant CPI index.

High Income Guarantee

While not linked to the decision, the High Income Threshold, which applies for the purposes of the High Income Guarantee, will also increase from 1 July 2011.

Staying ahead of the game

Businesses will need to act swiftly to identify and address any changes that need to be implemented as a result of the decision. Those who do act swiftly will be best positioned to avoid compliance issues and negative impacts on flexibility strategies.

Whether to ensure compliance, address the implications for flexibility strategies or to assist you before your mid-year salary reviews, FCB can help you understand how this decision affects your business, including explaining the decision, auditing and calculating pay rates and assisting you implement an appropriate strategy. If you would like assistance with any of these matters, call FCB on (02) 9922 5188 or (03) 9614 3900.