Annual wage review decision – 3.5% increase

THINGS YOU NEED TO KNOW

• The Fair Work Commission (FWC) has increased the National Minimum Wage (NMW) and modern award minimum rates by 3.5%.

WHAT YOU NEED TO DO

• Review rates of pay for affected employees to ensure compliance.

The Fair Work Commission’s Expert Panel (Panel) handed down its Annual Wage Review 2017–18 decision this morning. This decision granted a 3.5% pay increase to Australia’s minimum wage reliant and modern award covered employees, to commence from 1 July 2018.

Decision

The Panel’s decision will affect the estimated 2.3 million or 22.7% of all employees reliant on minimum rates of pay.

Consistent with previous decisions, the Panel said that it ‘remain[s] of the view that modest and regular minimum wage increases do not result in disemployment effects or inhibit workforce participation.’

From 1 July 2018, the NMW will be $719.20 per week, or $18.93 per hour. This is an increase of $24.30 per week to the weekly rate or $0.64 per hour to the hourly rate.

In its statement the Panel said that the ‘economic indicators now point more unequivocally to a healthy national economy and labour market. The recent data has shown strong growth in full-time employment together with a high participation rate.’

The Panel cited the latest data from the Australian Bureau of Statistics which shows Consumer Price Index growth was at 1.9% for the year to the December Quarter 2017, and annual wages growth to the Wage Price Index was at 2.1% to the March Quarter 2018.

What to do

The decision to increase minimum rates of pay, including under modern awards, means that all employees currently reliant on minimum wages will receive a pay rise from 1 July. Employers covered by modern awards or with employees receiving payments based on the NMW will need to review their arrangements to ensure that employees are paid correctly.

Employers covered by an enterprise agreement will need to make sure that the base rate of pay* under their enterprise agreement is not less than the base rate of pay that would be payable under the relevant modern award.

The increase will also affect applications for approval of an enterprise agreement currently before the FWC when it considers whether the agreement passes the better off overall test. Agreements currently before the FWC may require undertakings before they can be approved to ensure that employees that would be covered by the agreement receive a base rate of pay that is not less than the base rate of pay that would be payable under the relevant modern award.

_{* ‘base rate of pay’ means the rate of pay payable to the employee for his or her ordinary hours of work, but does not include:}

_{• incentive-based payments and bonuses
• loadings
• monetary allowances
• overtime or penalty rates, and
• any other separately identifiable amounts.}

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.