The Fair Work Commission’s Minimum Wage Panel has increased all Modern Award minimum wage rates and the Federal Minimum Wage by 3%. From the first pay period commencing on or after 1 July 2014, the national minimum wage will increase by $18.70 per week to $640.90 per week, or $16.87 per hour.
The Panel indicated the increase was lower than it otherwise would have been due to the rise in the superannuation guarantee rate from 9.25% to 9.5% which also takes effect on 1 July. The Panel rejected applying differential treatment for different awards, saying claims by some industries for exceptional circumstances were not supported by the available evidence.
What this means for you
Modern Awards
If a business applies Modern Award rates, it will need to increase those rates to comply with this decision. Importantly, the “transitional” phasing in of wage and penalty arrangements ends this year, so from 1 July 2014 all wage rates and penalties will need to match the applicable Modern Award and classifications.
Annualised Salaries and Individual Flexibility Agreements
If a business has implemented Individual Flexibility Agreements, a reassessment of those agreements is needed to ensure employees remain “better off overall” when compared to the newly increased Modern Award rates. Employers who use annualised salary arrangements under Modern Awards should also check the Award requirements.
Allowances
The decision will impact allowances as well as base rates. A number of Modern Award allowances are expressed as a percentage of the “standard rate”, which is the rate applicable to the trades’ equivalent classification in the award. These allowances will therefore increase in line with the increase in the standard rate. Expense related allowances will increase in line with the relevant CPI index.
High Income Guarantee
In addition, the High Income Threshold will also increase from 1 July to $133,000. If a business uses High Income Guarantees, check agreed terms, to ensure they remain compliant and above the new threshold. If guarantee levels fall below the threshold, or lapse for another reason, minimum entitlements will revert to those in the Award (including, for example, overtime and penalty rates). Note that the compensation limit under unfair dismissal increases to $66,500.
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