Focus: Fair Work Commission's Annual Wage Review released
Industry Focus: Agribusiness, Energy & infrastructure, Financial services, Insurance, Life sciences & healthcare, Property

Each year, the Fair Work Commission (FWC) is required to review the minimum wages specified in the modern awards, as well as the national minimum wage for employees who are not covered by an award or enterprise agreement.

Today, the Minimum Wage Panel of the FWC has ruled that from the first pay period after 1 July 2015:

  1. the national minimum wage for award/agreement free employees will increase to $656.90 per week ($17.29 per hour); and
  2. modern award minimum wages will increase by 2.5%.

Enterprise agreements

In the context of the Annual Wage Review decision, it is important for employers covered by an enterprise agreement to be aware of their obligations relating to minimum rates of pay.

Section 206 of the Fair Work Act 2009 (Cth) (FW Act) requires that the base rate of pay specified in an enterprise agreement must be at least equal to the applicable modern award rate. If the enterprise agreement rates are less than those required under the relevant modern award, the agreement operates as if its base rates were equal to those under the modern award.

In our experience, employers may be at risk of underpayment claims if their enterprise agreement provides for annual wage increases that are less than the increases applied to the modern award rates pursuant to the annual wage review decision. This is particularly an issue where the current rates of pay under the enterprise agreement are equal to, or only marginally above, the relevant modern award base rates.

What should employers do?

  1. Employers should review the pay rates in their enterprise agreements in comparison with the applicable rates of pay under the relevant modern award following the increase announced today. In particular, employers should make sure that all employees are being paid at least the applicable modern award rate. If this is not the case, employee underpayment claims could potentially arise and specific advice should be sought.
  2. Where employees are paid a 'blended' rate, inclusive of some or all allowances, employers must ensure that the base rate is at least equal to or higher than the relevant modern award rate. This may be problematic in some instances where the relevant base rate cannot be clearly distinguished from the allowances included in the blended rate.
  3. Employers who pay their employees an annual salary or annualised wage should also ensure their employees' salaries continue to be equal to, or higher than, the remuneration that the employee would otherwise be entitled to for the hours they usually work under an applicable enterprise agreement or modern award.

Employers should also be reminded that employer superannuation contributions are currently capped at 9.5%. The Federal Government announced in 2014 that superannuation contributions will remain the same until 30 June 2021, after which contributions will increase by 0.5% each year until it plateaus at 12% on 1 July 2025.

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.