Insights

In brief - Fair Work Commission delivers annual wage review decision

The Fair Work Commission has published its annual wage review decision, increasing the federal minimum wage rates by 2.6%. The new minimum wage rates commence on the first pay cycle after 1 July 2013.

Will the 2.6% increase affect the rates of pay for your business?

If your business operates under a modern award, you are required to comply with the 2.6% increase in minimum wage rates. This increase affects not only the minimum hourly wage rates, but may also filter through to any annualised salaries under the relevant modern award.

Will the increase affect the payment of work-related allowances?

Generally, work-related allowances are calculated as a percentage of the minimum rate of pay in the relevant modern award. Employers will need to make the appropriate adjustments to ensure that the 2.6% increase flows through any work-related allowances.

What if you already pay above the minimum wage?

If you are currently paying above minimum wage rates, you will still need to review your rates of pay to ensure that the business is meeting its minimum requirements under the relevant modern award.

For example, if the business is currently paying 2.3% above the modern award wage rate, wage rates paid to employees after the first pay period from 1 July 2013 will need to increase. Otherwise, your wage rates will fall below the new increased minimum wage rate under the modern award.

What happens if your business is covered by an enterprise agreement?

It is still necessary to review the relevant terms and conditions of the enterprise agreement. At all times, an enterprise agreement must provide a base rate of pay that is no less than the relevant modern award pay rate or, if no award applies, the national minimum wage.

What is the situation if your business is covered by a transitional instrument?

Employers will not be required to pay the increased modern award minimum wage rates immediately if the applicable rate of pay under a transitional industrial instrument - for example, a Notional Agreement Preserving State Awards (NAPSA) or collective agreement - was lower.

Instead, the modern award minimum wage rates, including any annual increases, are to be phased in over a period of four years at the rate of 20% per year. This will provide a gradual increase in labour costs to the employer and, by 1 July 2014, all employers should be paying the modern award minimum wage rates.

Does it matter if you don't comply with the increase?

Ensuring compliance with the 2.6% wage increase is a complex matter and requires each business to take numerous factors into account. If you implement the wage increase incorrectly, this could result in significant consequences for the business, including:

• Underpayment claims by employees

• Breaches of the Fair Work Act 2009, with fines of up to $51,000 for each breach

If you are unsure of your obligations in implementing the wage increase, best practice would dictate that you obtain the relevant legal advice to avoid any disputes and future penalties under the Fair Work Act 2009.

This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal advice. Please seek your own legal advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.​