Fair Work Minimum Wage Increase

Minimum Wage Increase

Following on from the annual Fair Work Commission’s minimum wage review, the Fair Work Commission president Adam Hatcher has announced that Australia’s lowest-paid workers will be receiving a 5.75% pay increase and that the national minimum wage would also be increasing to $23.23 an hour or equivalent to $882.80 for a 38-hour week. In comparison, last year’s minimum wage increase was 5.2%.


Up till the first full pay period starting on or after the 1st of July 2023, the minimum wage is $21.38 an hour or equivalent to $812.60 for a 38-hour week.


The changes to the national minimum wage will impact 184,000 employees across Australia who are not on modern awards. Whereas the 5.75% increase for employees on the minimum wage under a modern award will impact 2.7 million employees.


Today, we are going to explore some details regarding the most recent fair work minimum wage increase.


What is the minimum wage?

The minimum wage is the lowest that you can pay an employee and it applies to all employees in Australia. An employee’s minimum pay can either be established according to the national minimum wage or a modern award or agreement. Different modern awards and agreements will have set minimum pay based on the role and duties that an employee fulfills. The other varying factors are age, employment type (casual vs part-time), or qualifications and experience.


Inflation and unions

The Australian Council of Trade Unions (ACTU) had requested a 7% increase from the Fair Work Commission’s Expert Panel but was happy with the outcome despite the 5.75% increase being short of what they requested. In comparison, employer groups lobbied for a 4% increase.


Whilst the latest inflation figure is at 6.8% in the year to April according to the SBS, the FWC President stated that the decision balanced the need of the nation’s lowest-paid workers and the need to avoid adding to inflation.


What is the national minimum wage?

The national minimum wage applies to employees who don’t fall under a modern award coverage or registered agreement. In simple terms, the national minimum wage is the lowest that you can pay an employee that falls under the National Workplace Relations System.


What is the award minimum wage increase?

Modern awards set out the minimum terms and conditions of employment in addition to the National Employment Standards (NES). Modern awards have been around since 2010. Furthermore, a modern award sets the minimum wage entitlements for an employee that is covered by one. Different industries and occupations are covered by different modern awards and apply to employees who perform work covered by that award.


In some cases, senior managers or employees on big salaries might not be covered by a modern award even if one does apply to the industry, they are in. An employer may decide to pay their employee(s) more than the award minimum rate in order to be award-free, but it is crucial to understand the other implications if that’s the desired approach.


Note that enterprise agreements often rely on modern awards as a basis for negotiations and often act as a baseline for minimum terms and conditions of employment. Therefore, an approved enterprise agreement by the Fair Work Commission may still be subject to modern awards changes. Equally, a common law employment contract can also provide a higher rate of pay than the national minimum wage or applicable modern award rate, however, it cannot be lower.


What are other upcoming changes to consider?

From the 6th of June 2023 and as per the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022, there will also be changes related to being able to request flexible working arrangements, as well as agreement making, bargaining, and extended unpaid parental leave. We are also going to find supported employment service award changes including minimum rates, supported wage assessments, and classifications.


The aged care sector is also going to see some changes

There will be a 15% wage increase starting on the 30th of June 2023 for most senior food services employees (levels 4-7) as well as direct care employees. This change is separate from the FWC annual wage review.


This increase applies to eligible employees covered by the following modern awards – Aged Care Award, Social, Community, Home Care and Disability Services Industry (SCHADS) Award, and Nurses Award.


Direct care employees include –

• Aged Care Award: personal care workers (PCWs) and recreation/lifestyle activities officers

• Nurses Award: nursing assistants, enrolled nurses, registered nurses, nurse practitioners working in aged care

• SCHADS Award: home care workers working in aged care.


The superannuation guarantee rate

From the 1st of July 2023, there will be a superannuation guarantee rate increase from 10.5% to 11%. It is important for people to understand their super obligations and entitlements.


Are all businesses impacted by the wage increase?

The minimum wage increase impacts a majority of Australian businesses and employees that fall under the National Workplace Relations System, which is a collection of legislation that includes the Fair Work Act 2009, the National Employment Standards, registered agreements and awards.


Most private businesses in Australia are covered by the Fair Work Act 2009 and these businesses will need to provide the minimum wage increase.


Are part-time employees also included in this increase?

All part-time employees are entitled to these minimum wage increases on a pro-rata basis, and this means that anyone even if they only work half the time of a full-time employee, is also going to be entitled to a pro-rata of this increase based on the hours worked.


Does the increase apply to junior employees and apprentices?

The increase does apply to both junior employees and apprentices. Typically, a junior employee will receive a percentage of the wage of an adult employee and in general terms apply up till the age of 21.


Apprentices will also be entitled to a minimum rate of pay which is dependent on their apprenticeship and the applicable modern award. Like junior employees, apprentices have different rates of pay compared to adult employees. An apprentice receives a lower rate of pay till they are classified as an adult apprentice from the age of 21.


The best approach would be to refer to the applicable modern award or agreement that the business operates under.


Final thoughts

Remember that it is crucial for businesses to review their pay rates according to the latest changes to the national minimum wage increase and the modern award or agreement prior to the 1st of July deadline. To avoid underpayment and ensure compliance, employees’ rates of pay need to be reviewed and updated accordingly if required. If you aren’t sure what applies, our team provides HR Consulting in Melbourne and across Australia to help navigate you through the process, call us today if you need assistance, we would love to work with you.