Australian Minimum wage increases to stimulate post-pandemic economy
At approximately 3:30pm on 16 June 2021, the Fair Work Commission (the Commission) handed down its heavily awaited annual minimum wage ruling, unanimously approving a 2.5% increase in all award rates. Concurrently, the Commission has put wage increases on hold for a handful of sectors most affected by the COVID-19 pandemic.
What is the New National Minimum Wage?
Up to and including 30 June 2021, the national minimum wage (NMW) will be $19.84 per hour or $753.80 per 38-hour week (before tax). The 25% casual loading is additional to these rates.
From 1 July 2021, the new NMW will be $20.33 per hour or $772.60 per 38-hour week. The substantive difference is therefore $0.49 per hour, or $18.80 per 38-hour week.
The Commission's ruling also determined that retail award workers would wait until 1 September 2021 for rate increases, and employees covered by 20+ awards in areas such as aviation, tourism, fitness, and some areas of retail trade will need to wait until 1 November 2021. The relevant awards are listed below.
1 July 2021
All modern awards other than those specified below
1 September 2021
General Retail Industry Award 2020
1 November 2021
Air Pilots Award 2020, Aircraft Cabin Crew Award 2020, Airline Operations – Ground Staff Award 2020, Airport Employees Award 2020, Airservices Australia Enterprise Award 2016, Alpine Resorts Award 2020, Amusement, Events and Recreation Award 2020, Dry Cleaning and Laundry Industry Award 2020, Fitness Industry Award 2020, Hair and Beauty Industry Award 2010, Hospitality Industry (General) Award 2020, Live Performance Award 2020, Mannequins and Models Award 2020, Marine Tourism and Charter Vessels Award 2020, Nursery Award 2020 and Racing Clubs Events Award 2020, Racing Industry Ground Maintenance Award 2020, Registered and Licensed Clubs Award 2020, Restaurant Industry Award 2020, Sporting Organisations Award 2020, Travelling Shows Award 2020 and Wine Industry Award 2020.
How did we get here?
In 2020, following a push from employers and unions for a 3.5% rise to the NMW to stimulate the economy, University of Melbourne economist Professor Mark Wooden dissented from the majority ruling that might have achieved that result. Professor Wooden instead promoted a 1.75% increase to the NMW in addition to a potential wage freeze. Meanwhile, the Australian Council of Trade Unions (ACTU) sought a 3.5% increase across all award rates. Employer bodies sought either a wage freeze or for rate increases corresponding with the Consumer Price Index (CPI).
Through the research of University of Melbourne labour economist Jeff Borland, we are afforded some understanding of why there has been such a divergence of views on this matter. His research indicated that:
- three (3) sectors of the economy are ‘lagging', indicated by their employment remaining down by 5%-10% compared to pre-pandemic levels. These include:
- accommodation and food services;
- transport, postal and warehousing; and
- information, media and telecommunications;
- five (5) sectors of the economy are ‘almost recovered', indicated by their employment only being 1%-2% lower than the comparable period. These include:
- wholesale trade,
- education and training' and
- arts and recreation services; and
- all other sectors are fully recovered.
In addition to these factors, the Commission also considered in its decision the 0.5% rise in the superannuation levy set to occur from 1 July 2021 (taking it from 9.5% to 10%) and the Treasury's May 2021 ruling, which projected a 1.75% increase in the cost of living within the 2021-2022 financial year.
Needless to say the 2021 annual minimum wage ruling has required a significant balancing act by the Commission between the interests of multiple stakeholders during a period of ongoing economic turbulence. It has also required recognition that the challenges of the COVID-19 pandemic have not been uniform across all sectors of the economy, and that one size will not fit all if Australia as a whole is to properly economically recover from the last 18 months.
Unfair Dismissal High Income Threshold increase & Compensation limit
The high income threshold for unfair dismissal applications will increase from $153,600 to $158,500 from 1 July 2021.
For dismissals that occur on or after 1 July 2021, the compensation limit will be $79,250 (increase from $76,800).
Fair Work Application fee increase
For unfair dismissals, general protections and bullying at work applications, the application fee will increase from $74.50 to $74.90.
Superannuation Guarantee rate increase
From 1 July 2020, the superannuation rate will increase to 10% from the current rate of 9.5%. This means that employers need to ensure that as at 1 July 2021, they are correctly paying their employees according to the increased super rate. There will be a 0.5% increase each year until 2025 when it reaches 12%.
More information about what this increase means for employers and how it should properly be introduced to avoid liability will follow in an article on the topic to come shortly.
What does this mean for employers?
Employers will need to remain cognisant of the dates from which the changes determined by the Commission will come into effect. Accordingly, employers will need to prepare to make any adjustments to employee wages that are implicated by these changes and do so by appropriate consultation with the relevant employee/s.
The failure of an employer to satisfy the new minimum wage after 1 July 2021 and/or other adjusted award rates to follow will place that employer at risk of underpayment and liability for failure to meet its legal obligations.
Employers should also keep in mind the above additional changes in the event that they become applicable.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.