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The Minimum Wage to Rise by 3.75%: What Does This Mean For Me?

Introduction

The Fair Work Commission (FWC) has announced a 3.75 per cent increase to both the minimum and award wages, effective from July 1. This decision will raise the national minimum wage to $24.10 per hour, or $915.91 per week, based on a full-time, 38-hour working week. The FWC estimates that this change will impact approximately 2.6 million workers, or 20.7 percent of the national workforce.

Why has the Fair Work Commission decided to raise the minimum wage?

“In determining this level of increase, a primary consideration has been the cost-of-living pressures that modern-award-reliant employees, particularly those who are low paid and live in low-income households, continue to experience notwithstanding that inflation is considerably lower than it was at the time of last year’s review,” the FWC said. 

The FWC noted that while the labour market and business profit growth remain strong overall, some industry sectors with a large proportion of modern-award-reliant employees may face challenges. The commission also took into account the upcoming stage 3 tax cuts and budget cost-of-living measures, which are expected to increase real household disposable incomes over the next 12 months.

This decision will benefit employees who rely on modern award minimum wage rates, who are predominantly women, part-time workers, and casual employees. The FWC acknowledged that these workers are more likely to be low-paid and have experienced a decline in real wages over the past five years. The commission also noted that modern award minimum wages remain lower in real terms compared to five years ago.

The decision has been met with mixed reactions from various stakeholders. While unions and workers’ advocates have welcomed the move as a step towards addressing cost-of-living pressures and improving living standards for low-paid employees, business groups have expressed concerns about the potential impact on small businesses already grappling with rising costs and a challenging economic environment.

Nonetheless, the FWC’s decision is not unexpected given past decisions.

How is the minimum wage decided?

In Australia, the FWC is responsible for determining and adjusting minimum wages. The process of increasing the minimum wages involves an annual wage review conducted by the FWC. This review takes into account various factors, such as:

  1. Economic conditions: The FWC considers the overall state of the Australian economy, including productivity, business competitiveness, inflation, and employment growth.
  2. Social considerations: The review also takes into account the needs of the low-paid, their relative living standards, and the impact of any wage adjustments on their ability to meet basic living expenses.
  3. Submissions from stakeholders: The FWC invites submissions from interested parties, such as unions, employer organizations, and government bodies, to provide evidence and arguments for or against wage adjustments.

After considering these factors, the FWC determines the national minimum wage, which applies to employees not covered by an award or enterprise agreement. The Commission also reviews and adjusts minimum wages for employees covered by modern awards, which are industry or occupation-specific minimum employment standards.

The FWC’s wage review decisions generally take effect from the first full pay period on or after 1 July each year. In exceptional circumstances, such as during the COVID-19 pandemic, the FWC may delay or stagger wage increases for certain industries or sectors.

The annual wage review process ensures that minimum wages are regularly assessed and adjusted in line with changing economic and social conditions.

For awards, wage increases correspond to the FWC’s annual decision. Additionally, increases may be implemented following the FWC’s review of modern awards, which takes places every four years. There is currently a review of modern awards underway, and it should soon be concluded. During this review, the FWC considers similar factors to those above. It may also choose to grant different wage increases to different awards, depending on the specific circumstances of each industry or occupation. This can result in some awards receiving higher or lower wage increases than others.

What do I have to do?

Employers should review all of their minimum-wage and award-rate employment contracts and implement increase to the rates, effective 1 July. It is advised that such changes are made before 1 July, so they are ready to be implemented on that date. You can implement a salary increase by notifying your employees with a document such as Lawpath’s Salary Increase Letter.

Employees should review their employment contracts and ensure that their wages on 1 July will be at, or above, the minimum wage or award rate, whichever is applicable. Your employer is legally prohibited from taking negative action against you in the workplace in response to inquiring about or upholding your rights.

The stakes for ensuring minimum wages are complied with are about to be raised. Underpayment will soon be criminalised. Read more here.

Conclusion

The Fair Work Commission’s decision to raise the minimum wage by 3.75 percent is a significant step towards addressing the cost-of-living pressures faced by low-paid workers in Australia. The FWC’s decision serves as a reminder of the ongoing need to balance the interests of workers and businesses, promoting a fair and equitable labour market in Australia.

Employers must now review their minimum-wage and award-rate employment contracts and implement the necessary increases by July 1. Employees should also ensure that their wages comply with the new minimum wage or award rates. 

Lawpath provides a range of employment documents to help meet you business needs.

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