3.5% increase to the minimum wage from 1 July 2018

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By Lisa Anaf, Partner and Sarah Saliba, Lawyer

The Fair Work Commission has delivered its decision with respect to the 2017/2018 annual wage review.

Following its review, the Commission has decided to increase minimum rates from the first full pay period on or after 1 July 2018 as follows:

  • the national minimum wage will increase by 3.5% to $719.20 per week or $18.93 per hour, resulting in an increase of $24.30 per week or 64 cents an hour; and
  • modern award minimum wages will also increase by 3.5% (with weekly wages rounded to the nearest 10 cents); and
  • the C10 rate in the Manufacturing and Associated Industries and Occupations Award 2010 will increase by $28.30 to $837.60.

This is compared to the 3.3% minimum wage increase awarded last year.

In reaching its decision, the Commission considered the healthy national economy with real GDP increasing by 2.4% and the labour market with employment growth over 3%. The Commission also considered that “modest and regular minimum wage increases do not result in disemployment effects or inhibit workforce participation”. Consistent with the view the Commission has taken in the past, it has not taken into account the measures proposed in the recent Budget which are yet to be legislated.

The wage increase is higher than the modest 1.8% increase sought by the Australian Industry Group.   In comparison, the ACTU was seeking an increase in the national minimum wage of 7.2%, equivalent to $50.00 per week.  The Commission determined that such a significant increase would carry “substantial risk of adverse employment effects” and that such adverse effects would “impact on those groups who are already marginalised in the labour market, with a corresponding impact on the vulnerability of households to poverty due to loss of employment or hours”.

Minimum wage obligations – are you ready for 1 July?

Over 2.3 million employees or 22.7% of all employees have their wage set by a modern award.

Following the Commission’s decision, employers should review their pay scales to ensure that employees are at all times being paid the minimum wage.  Harsh penalties of up to $126,000 apply to employers who fail to meet their minimum wage obligations so we encourage employers to immediately audit their employees’ pay to ensure they comply on 1 July.

For employees paid in accordance with minimum wages in modern awards (or the national minimum wage), this means ensuring that payroll systems are ready to pass on the increased wages from the first full pay period on or after 1 July 2018.

Employers with enterprise agreements will need to ensure that the base rate of pay payable to employees under the agreement does not fall below the applicable base rate of pay under the relevant modern award (or the national minimum wage, if applicable).

For employees on annualised salaries, employers will need to consider whether that salary is still sufficient to cover the employees’ minimum entitlements taking into account the increased national minimum wage (or their respective modern award wage).

For further information, please do not hesitate to contact us.

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