Your Guide to Minimum Pay as an Employer

Your employees’ pay is likely to be a significant proportion of your business’s expenses.

Unlike some other aspects of your business, there are legal baselines dictating the minimum you can pay on your employees.

Depending on what contract or award covers your employee, this will often determine how much they get paid and if they are entitled to a pay rise.

Read on to find out the main factors that influence what you can pay your employees.

Read along! 

Table of Contents

What is the National Minimum Wage

The national minimum wage is the lowest that you can pay your employees in Australia.  An enterprise agreement determines the base rate of pay. It can’t be less than the national minimum wage, regulated by the Fair Work Act 2009 (Cth).

The minimum wage will be lifted from the 1st of July 2022.

It will increase by $40 per week, which amounts to an increase of 5.2%.

Therefore, the new National Minimum wage will be $812.60 per week or $21.38 per hour.

If your employees are covered by an award, the Fair Work Commission (FWC) has announced that minimum award wages will increase by 4.6%.

This is subject to a minimum increase for award classifications of $40 per week and based on a 38-hour week for a full-time employee.

This means minimum award wages:

  • above $869.60 per week, will get a 4.6% increase
  • below $869.60 per week, will get a $40 increase.

Modern Awards

A ‘Modern Award’ specifies the minimum pay and conditions that you can pay and applies on an industry basis. Modern Awards apply to specific industries, and if covered then you will have to follow the award. The Fair Work Commission’s tool can help you figure out if your industry is covered by a Modern Award.

Example

In the Fitness Industry Award 2010 a level 2 employee who is full time or part-time receives $19.47 per hour for weekdays. This employee would have done over 456 hours of work at level 1, be a swimming teacher and have duties which don’t require direct supervision.

In contrast, A level 5 will receive $25.34 an hour and they will have a Fitness Industry AQF Diploma. They will usually be employed as a fitness specialist.

Enterprise Agreement

Some employees are covered by an enterprise agreement. It is an agreement between yourself, the employer and the employee regarding the terms and conditions of the employment. Depending on the particular business, the employee is in a better position than they would be under an award. 

Enterprise agreements replace any awards which may apply. However, keep in mind that, the minimum pay rate under the enterprise agreement must not go below the rates of an applicable award or the National Minimum Wage. 

Employment Contract

At the end of the day, the employment contract you have with an employee will establish the minimum rate of which you can pay them.

Therefore you should use the minimum rate of pay as a guide to what you should pay your employees. If your industry requires highly specialised individuals, you will likely have to pay more to attract and retain talent.

Keep in mind, that pay is not the only way to attract talent or reward your employees. An engaging work culture or interesting work can assist you to attract skilled employees while keeping your costs down.

Conclusion

By knowing the minimum rate you can pay your employees, you can ensure that you pay your employees legally for their work.

Moreover, you will also have to comply with employment conditions such as leave entitlements in addition to minimum rates of pay.

If you are unsure about whether you are paying your employees correctly, get in touch with an employment lawyer for legal advice.

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