How will the Annual Wage Review impact your business?

Key Points 
  • The Fair Work Commission has recently handed down its decision on the Annual Wage Review 2019–20.
  • The national minimum wage will increase by 1.75%
Background
The Fair Work Commission (FWC) is responsible for reviewing and setting the national minimum wage and the modern award minimum wage. Each financial year the FWC conducts an annual wage review and issues a decision and national minimum wage order for employees not covered by an award or agreement.
National Minimum Wage (employees not covered by an award or an agreement)
With effect 1 July 2020, the national minimum wage will increase to:
  • $753.80 per week; or
  • $19.84 per hour.
This represents a $13.00 increase to the national minimum wage each week for award-free employees.
Award Covered Employees
Employees who are covered by an award will have their award base rates increased by 1.75%. Wage increases are set to commence on one of three dates:

1 July 2020: Group 1: includes industries less affected by the COVID-19 pandemic and that are considered essential services. This includes the:
  • Aged Care Award 2010;
  • Children's Services Award 2010;
  • Cleaning Services Award 2020; and
  • Social, Community, Home Care and Disability Services Industry Award 2010;

1 November 2020: Group 2: includes industries affected by the COVID-19 pandemic, which includes the: 
  • Building and Construction General On-site Award 2010;
  • Clerks—Private Sector Award 2010;
  • Graphic Arts, Printing and Publishing Award 2010;
  • Joinery and Building Trades Award 2010;
  • Manufacturing and Associated Industries and Occupations Award 2020; and
  • Timber Industry Award 2010; and
1 February 2021: Group 3: includes industries most adversely affected by the COVID-19 pandemic, which includes the: 
  • Commercial Sales Award 2020;
  • Fast Food Industry Award 2010;
  • Fitness Industry Award 2010;
  • General Retail Industry Award 2010;
  • Registered and Licensed Clubs Award 2010;
  • Restaurant Industry Award 2020; and
  • Vehicle Repair, Services and Retail Award 2020.
For a full list of each of the awards and the date of effect of the rate increases, please refer to the FWO’s website.
Employees Covered by Enterprise Agreements and Employers Paying Above Award/Minimum Wage Rates
Please note: 
  • employers who have enterprise agreements (EAs) in place, the terms of the EA determine what, if any, pay rise has to be applied to covered employees; whilst
  • employers who pay rates higher than the minimum prescribed award rates and minimum wage rates may well NOT have to pass on the 1.75% increase. 
However, employers should check that the rates being paid to employees are higher than the new minimum rate AND employers should check employment contracts to verify that no other pay increase obligation is owed to employees.
Takeaway
Employers will have to comply with the FWC’s annual wage review decision based on award coverage.
 
To avoid underpayment claims, employers: 
  • who know which award applies, should keep an eye out for the FWC’s award pay guides, which will be updated to reflect the wage increase decision in the near future; OR
  • who are not sure what, if any award, covers their employees, can speak to one of our Workplace Relations team members today, who can assist in identifying what award may apply to their staff.

Post by Partner, Warwick Ryan, and Solicitor, Saasha Greeney.
 

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