FWC Announcement - Minimum Wage to Increase by 2.5%

On 16 June 2021, the Fair Work Commission’s announced that the national minimum wage, and minimum wages set out in modern awards, will increase by 2.5%. Similar to last year, the dates the increases come into effect will be staggered, with industries most impacted by COVID-19 being given more time before the increase becomes law. Businesses will have to comply with the increase on one of three dates, as explained further below.

Group 1: 1 July 2021 increase date

Although the majority of employees in Australia are covered by a modern award, there are still many employees who are “award-free”. These employees are subject to the “National Minimum Wage”. This will increase on the first full pay period on or after 1 July 2021 to $772.60 per week, or $20.33 per hour, equalling an increase of $18.80 per week or $0.49 per hour. Employees covered by any modern award not listed in Group 2 or Group 3 below will also see the minimum wages in their award increase by 2.5% on the first full pay period on or after 1 July 2021.

Group 2: 1 September 2021 increase date

The increase will be delayed until the first full pay period on or after 1 September 2021 for businesses covered by the General Retail Industry Award.

Group 3: 1 November 2021 increase date

The increase will be delayed until the first full pay period on or after 1 November 2021 for employers covered by the modern awards listed below. These awards were determined to cover businesses in the aviation, tourism and fitness industries deemed to be most affected by COVID-19.

What about employers covered by enterprise agreements?

The Fair Work Act 2009 operates so that the base rate of pay under an enterprise cannot fall below the base rate of pay in the modern award that would apply to an employee if they were not covered by the enterprise agreement (subject to the enterprise agreement having more beneficial terms on wage increases). This means that for any business who operates under an enterprise agreement, it is important that they are aware of which modern awards underpin their agreement, and that they determine whether the 2.5% award increases mean that the award rate has overtaken the enterprise agreement rate. If it has, then the award rate must be paid instead.

What about allowances?

A decision on new allowance rates under modern awards is expected soon.

We’re already paying above the award rate. Do we need to increase rates of pay?

Minimum rates in modern awards are exactly that, minimum rates. If you are already paying “above award” rates there will be no need to increase rates, unless of course the increase will mean that the new award rates overtakes what you are currently paying.

Super rates are also increasing on 1 July 2021

Employers should also be aware that the superannuation guarantee rate is increasing by 0.5% from 9.5% to 10% on 1 July 2021.This is part of a staged increase that will see the rate increase to 12% over the next 5 years. It may be possible for employers to arrange matters so that these increases are absorbed into employees’ salaries if an employee’s contract clearly states that they are paid a total salary package inclusive of superannuation and that when the superannuation rate increases, their overall salary package will remain the same. Please contact us if you require further advice in this area.

Need Help Further?

If you need further help determining which modern award(s) apply to your business, or assistance in working out how the minimum wage increase will affect your business (including if you operate under an enterprise agreement), please contact Employment Innovations.

About Employment Innovations

Employment Innovations is one of Australia’s leading providers of employment services designed to increase productivity and ensure compliance. Its services and solutions include all the tools that every Australian small to medium sized employer needs – including workplace advice, legal services, payroll solutions, migration, human resource management and HR software. If you require any assistance with this process, or to access the template letters you will be required to issue employees, please contact Employment Innovations.

Disclaimer

The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact Employment Innovations for advice.

FWC Announcement – Minimum Wage to Increase by 2.5%