|Following the Labor Party’s recent win and Anthony Albanese’s stance to support a wage rise in line with inflation, the Fair Work Commission (“FWC”) handed down a rare split increase decision on Wednesday, 15 June 2022. |
According to the new government, this decision will assist individuals with the increasing cost of living and ensure that people who are on the minimum wage, do not “go backwards” – many of which were adversely affected throughout the pandemic.
What will it look like?
In light of this, the following changes will take place for the majority of workers on 1 July 2022:
The FWC has ordered a 5.2% increase to the national minimum wage, which will impact 184,000 workers. The new national minimum wage will be $812.60 per week or $21.38 per hour. This constitutes an increase of $40 per week or $1.05 per hour.
The minimum increase for the 2.6 million workers on higher-award rates will be $40 per week or 4.6% – depending on which one is higher.
In short, this means that the modern award minimum wage rates will increase by 4.6% for wage rates above $869.60 per week, or by 5.2% ($40 per week) for wage rates below $869.60 per week. The 5.2% rise in the national minimum wage is the highest increase since 2006, and the 4.6% award rate increase is the highest since 2010.
When will it happen?
Increases to both the national minimum wage and modern award minimum wage are set to take place for the majority of sectors from 1 July 2022. However, the FWC has considered it necessary to activate the ‘exceptional circumstances ‘clause to delay the start date of the wage increases for specific industries. Sectors that can expect to experience these increases have been separated into two groups as follows:
Covers industries that have recovered from the pandemic or are on the path to recovery. These industries will see an increase from 1 July 2022.
Covers industries still being impacted by the pandemic. The FWC stated it ‘was satisfied that exceptional circumstances exist’ for these sectors as a result of the pandemic, and that these circumstances warrant such a delay. This includes industries such as tourism, hospitality, and aviation. These industries won’t experience an increase until 1 October 2022.
Further impacts and challenges
Concerns have been raised by business groups stressing the increase of labour costs coming at the same time as other inflationary pressures.
Andrew McKellar, the head of the Australian Chamber of Commerce and Industry, stated that this change will “add $7.9 billion in costs to the affected businesses over the year ahead”. This is a burden that those businesses will either have to take to their bottom line or pass onto their customers. Mr McKellar also noted that “it comes at a time when inflation is emerging as one of the most urgent challenges facing the Australian economy”.
While the wage increase coincides with increasing inflation, the FWC maintains that it will not adversely impact the economy. This has been supported by Sally McManus, head of the Australian Council of Trade Unions, who stated, “this decision is one that is reasonable and fair” and will assist low-paid workers most affected by rising inflation.
Notwithstanding this, the impact of increased labour costs come at a time where inflation pressures are projected to intensify after the Reserve Bank anticipated that the rate of inflation will increase to 7% by years end.
Should this wage increase ruling raise any questions for your or your company, please do not hesitate to contact us as we now offer a Modern Award Audit Package. This package has been developed to provide employers with ‘peace of mind’ by reviewing your Company’s compliance with relevant Modern Awards. This package will ensure your company correctly implements the new minimum wage requirements and underlying employment law legislation and regulations.
For more information on the Modern Award package please see our website, or contact Nick Stevens, Daphne Klianis or Josh Hoggett on 9222 1691.