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The Minimum Wage In Australia.

The Minimum Wage In Australia.

Understanding minimum wages in Australia is one of the most important elements to maintaining an effective cost structure when running a business. There are certain standards set in place by Fair Work Australia which dictate minimum grades of pay for different job roles across all industries, and if you aren’t fully aware of each of your employees’ minimum wages, you could find yourself underpaying them.

What Is The Current Minimum Wage In Australia?

While there are different minimum wages for different job types and awards, each of these stems from one core minimum wage which all businesses in Australia must abide by. The current National Minimum Wage is $17.70 per hour, or $672.70 per 38-hour week (before tax). If you employ casual workers, they are covered by this national minimum wage, but they also must receive at least 25% casual loading.

Outside of this National Minimum Wage order, an employee’s base rate of pay (their minimum wage) is calculated based on their ordinary hours worked and relates to the relevant Modern Award or Enterprise Agreement which they work under.

However, when it comes to working out what your employees’ minimum wages are, you also need to factor in their minimum entitlements under the relevant Award or Agreement. These entitlements are differentiated across a variety of factors such as industry, job type, experience in the role etc and hold potential repercussions if they are not met. So it is important that employers investigate each of their employees’ Awards and Agreements to understand the minimum entitlements.

Employers should also know that if they have employees who are not covered by an Award or Agreement, they will have their wage set by the National Minimum Wage order.

Who Determines Minimum Wages?

In the interest of Australia’s employees and businesses alike, the base wage, or minimum wage, received by employees in the national workplace relations system are determined by a specialist panel within the Fair Work Commission. These minimum wage rates are reassessed on an annual basis to guarantee that employees of Australia are awarded their fair income.

Upon the annual assessment of minimum wages, if any determinations are made to change or vary wages in Modern Awards or a National Minimum Wage order, they will apply from the first full pay period on or after 1 July each year. But prior to this implementation, the Fair Work Commission must publish any adjusted wage rates in a Modern Award before 1 July each year. This is to guarantee that employers, and employees alike, have enough notice to make the adjustments to their own business operations. So even if you are fully aware of your employees’ minimum wages one year, you still need to stay on top of any potential changes on an annual basis.

Minimum Wages Under Modern Awards.

There are a lot of factors which come into determining Minimum Wages, some of which may include:

  • Wage rates for adults, in some cases, at different rates according to experience and qualifications
  • Wage rates for juniors, employees with a disability, and employees to whom training arrangements apply
  • Casual loadings
  • Piece rates (i.e the employee gets a pay rate for the amount picked, packed, pruned or made)

It should go without saying, but employers must know that an employee cannot be paid less than the base rate of pay that would be payable to them under their associated Modern Award.

What Happens If an Employee Is Paid Above the Award Wage?

Under a Modern Award, the wages for each classification are the lowest possible wage rate. This means that as an employer, you cannot pay employees any lower than the minimum wage outlined in their respective Award – however, it is at your own discretion if you would like to pay more.

If an employer would like to pay above the minimum wage rate, both the employer and employee/s need to be aware of any increases to the award wage each year when the Fair Work Commission release adjustments. This is important because as long as the employee is being paid above the award wage, the employer does not need to increase the employee/s’ wages on 1 July because the base requirement is already being met. However, when the time comes that the employee’s wage is less than the base wage, the wages paid must increase to at least the minimum wage.

What About Employees Who Are Not Covered Under a Modern Award – What Wages Do They Need To Be Paid?

While most employees in Australia are covered by Modern Awards, some are not. If you have employees who are not covered by a Modern Award then you need to understand what wages they are to be paid. The Fair Work Commission also adjusts the National Minimum Wage Order (the order) on an annual basis, and likewise any adjustment needs to be checked each year as it provides the base wage for employees who are not covered under a Modern Award or Enterprise Agreement. Any employees who are not covered under a Modern Award cannot be paid less than this wage order.

What Else Needs to Be Added To The Base Rate Of Pay?

  • Penalty rates
    Employees often get higher rates when they work late nights, early mornings, weekends or public holidays. Penalty rates come from the Modern Award or Enterprise Agreement and they are different for each industry and job. Employees who are not covered by an Award or Agreement and who are covered by the National Minimum Wage, do not get penalty rates unless their contract says they should.
  • Overtime
    What is considered overtime is different under each Award or Agreement. Overtime is usually any work in excess of 38 hours a week, or outside the ordinary hours listed. Overtime is often paid at a higher wage (such as time and a half). Instead of being paid an overtime rate, an employee may be able to take time off instead. This is called time in lieu (TOIL). Employees who are not covered by an Award or Agreement will not be paid overtime unless their contract says they do.
  • Allowances
    Allowances are additional payments made to employees for a variety of reasons such as doing certain tasks, using certain skills, working under certain conditions or using personal tools at work. For example, an employer may decide to pay an employee an allowance using their own car to carry work materials or wearing a special uniform that requires cleaning. It’s important that you always check the relevant Award or Agreement for the specific employee because allowances in each industry will vary.

Being fully aware of Australia’s Minimum Wage order and wage rates within different industries is something that is vitally important to running a business. Employsure can take the hassle out of understanding these minimum wage requirements and other entitlements for your industry. We ensure you are aware of your obligations under the Fair Work Act and remain up to date on any legislative changes that will impact your business.

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