As usual with the start of a new financial year, there are a number of increases affecting minimum rates and allowances, high income thresholds and superannuation contribution bases. These increases are either the result of annual indexing or have been increased by Fair Work Australia ('FWA') in its annual wage review.

Increases to modern award pay rates and Allowances

On June 3 2011, FWA handed down its Annual Wage Review Decision for 2010 / 2011. The resulting increases apply from the first full pay period on or after 1 July 2011. This decision increased rates of pay in Modern Awards and pre-reform pay scales by 3.4%. Reimbursement allowances in Modern Awards will also increase according to the increase in the relevant consumer price index component and other allowances will increased by 3.4%.

FWA has also increased the national minimum wage to $589.30 per week, calculated on the basis of a week of 38 ordinary hours, or $15.51 per hour and the casual loading for award / agreement free employees is now 22%.

Employers should note that due to phasing in as part of the transitional provisions in modern awards the actual increase to minimum rates and allowances payable to employees may not be 3.4%. For employers transitioning from a NAPSA or previous award where such monetary entitlements were higher / lower than the modern award rate the transitional amount will be added or subtracted. These adjustments also take effect on or after 1 July 2011. Penalties and loadings (including casual loadings) in modern awards are also subject to transitional provisions and will increase or decrease by 20% of the transitional percentage from the first full pay period on or after 1 July 2011.

Following its decision, FWA has issued orders updating each modern award with the new rate. Employers covered by awards should review these rates and allowances to ensure they are paying their employees correctly and are meeting their obligations under the Fair Work Act 2009 ('FWA Act').

High income thresholds increased

From 1 July 2011 the high income threshold increases from $113,800 per annum to $118,100 per annum. This means that from 1 July employees who are not covered by an award or agreement and earn in excess of $118,100 and who are terminated from their employment will be excluded from the unfair dismissal provisions in the FWA Act.

A modern award covered employee with guaranteed annual earnings above the high income threshold can also be excluded from the provisions of the applicable modern award that would otherwise apply following written notification by their employer.

Accordingly, employers should check that employees for whom they have previously utilised such exclusions have guaranteed annual earnings above $118,100 to avoid any uncertainty regarding the application of the modern award provisions to their employment conditions.

Paid parental leave scheme increases

From the first full pay period on or after 1 July 2011 the national minimum wage paid under the national paid parental leave scheme increases to $589.30. Under this scheme working mothers who have been employed for at least 12 months prior to the birth or adoption of a child will be entitled to 18 weeks pay at this rate. The scheme is government funded, however, from 1 July 2011 the employer will pay the money to the employee and be reimbursed by the Family Assistance Office.

Implications for employers

Following the 1 July changes, employers should ensure they make any necessary adjustments to payroll and affected employment conditions of their employees to ensure they are meeting their obligations under the FWA Act.

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.