The Fair Work Commission (‘FWC’) has handed down its much anticipated Annual Wage Review Decision. 

Industry groups had advocated for an increase within the range of 3.5% and 4%, arguing that anything beyond this would jeopardise the bottom line of small businesses. Whereas the Australian Council of Trade Unions (‘ACTU’) argued that Australia’s minimum wages should rise by 7% to keep up with inflation.

The ACTU, in its submission to the FWC’s Annual Wage Review, stated that workers who are dependent on the national minimum wage or the modern award minimum wage should not go backwards in the rising cost of living. 

The decision provides workers with the most significant raise in decades and is naturally influenced by the unique inflationary conditions currently experienced in Australia.  

The FWC has decided to increase wages as follows: 

• Although a 5.75% increase in the national minimum wage is reported, individuals earning the national minimum wage will actually experience a boost of 8.65%. 

• This adjustment is a result of aligning the minimum wage with a higher wage classification. Historically, the national minimum wage has been tied to the C14 classification, which serves as an introductory or training wage outlined in certain modern awards. However, the FWC has shifted the national minimum wage to the C13 classification. The C13 wage level represents the lowest classification for ongoing employment in the majority of modern awards. 
   
• The change from C14 to C13 and implementing a 5.75% increase, sees the national minimum wage increased from $812.60 to $882.80 (by approximately $70/week) and from $21.38 to $23.23 per hour, based on a 38-hour week – an overall increase of 8.65%. 
   
• Minimum wages in all modern awards will increase by 5.75%. In effect, these workers will see their hourly rate increase by $1.23 from $21.38 to $23.23 and $46.72/week to $859.32. 

What does this mean for employers? 

For employees who are paid on award or the national minimum wage, employers must ensure that these employees are given the appropriate pay increase from 1 July 2023. 

Employers who pay their employees according to an enterprise agreement, should assess the rates specified in this instrument to guarantee compliance with the minimum wage rates. 

Employers who pay their employees greater than the minimum award rates and implement set-off clauses or annualised wage arrangements, must review and evaluate the implications of the minimum wage hikes. Specifically, employers should determine whether such increases can be absorbed under these arrangements, or if adjustments to remuneration arrangements are required.

While evaluating the effects of the minimum wage increase and conducting a comprehensive review of remuneration arrangements, employers should also consider the upcoming increase in the superannuation guarantee percentage, set to rise to 11% from 1 July 2023. 

Cecilia White, HR Consulting Director of Perks People Solutions, encourages all employers to note these increases and states that, “it’s important for business owners to be aware of which group their award or minimum wage employees fall into and to keep a close eye on their payroll over coming months to ensure they aren’t caught out by these changes.” 

“Most business owners are honest – the last thing they want is to underpay their employees and the penalties for non-compliance are severe,” she says. 

The FWC’s decision can be viewed here and a summary of the decision is available here. 

If you have any questions regarding employment and HR or would like to conduct a remuneration audit in your business, contact Cecilia White and the team at Perks People Solutions.