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:
the national minimum wage for award/agreement free employees
will increase to $656.90 per week ($17.29 per hour); and
modern award minimum wages will increase by 2.5%.
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
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?
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.
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.
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.
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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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