The Fair Work Commission (FWC) today delivered its annual wage review. This decision will have a significant impact on all businesses and industries and over 2.3 million employees who are paid at the National Minimum Wage or minimum Modern Award rates.
From the first full pay period commencing after 1 July 2017:
The Commission’s decision only confirms the basic increase in minimum rates while confirmation of the specific rates (including new allowance rates) for each individual Award have not yet been released. These will be released before 1 July 2017.
Ed Mallett, Managing Director of Employsure, explains: “In reaching its decision to increase the National Minimum Wage by the highest percentage we’ve seen since 2011, the Commission took into consideration living standards. However, we know Australia already boasts high wages and high living standards. Our minimum wage is one of the highest in the world” says Mallett.
“We expected the increase to be no more than 2.4%, and are particularly surprised at the decision. 3.3 per cent is the highest we’ve seen in six years. Although some relief has come in the form of reducing penalty rates across some industries, the Commission announced that these reductions would be phased-in by increments over the next three years. Both decisions seem like a “double punch in two days.”
While the Commission took into consideration the strong economic environment, Mallett questions “why such a high increase, when we are doing so well?”
The weekly wage bill for Australian businesses could increase up to $51.3 million and “most SMEs won’t be charging customers 3.3 percent extra from July 1, but will need to come up with an extra $22.30 per week per employee, paid at the expense of their bottom line.”
“As I see it, SMEs will need to consider reducing costs, increasing prices, reducing staff or reducing operating hours or a mixed approach to maintain current profitability.”
Each National Minimum Wage order made in an annual wage review comes into operation on 1 July in the next financial year, and continues in operation until the next National Minimum Wage order comes into operation. Publication of determinations changing the Minimum Wage rates in Modern Awards, and a National Minimum Wage order for employees who are not covered by an agreement or Award will be released over the coming weeks.
It usually takes the Commission two to three weeks to update the pay rates for each Award. Employers need to listen out for announcements and visit the Fair Work Commission and Fair Work Ombudsman websites for updates: “We are immediately updating over 21,000 small business clients with the new rates relevant for their employees from today.”
If you pay your staff at Award level, the increase to minimum rates take effect from the first full pay period commencing after 1 July 2017.
If you already pay above Award rates, you may not be required to increase your employees’ wages, provided the rates you pay are above the increased minimum Award rates (and you are not required to increase employees’ wages under their contracts of employment or applicable enterprise agreement).
Employsure will update over 21,000 small businesses with more specific information and wages schedules for each industry in the coming weeks as final determinations are released by the FWC. For more information visit www.employsure.com.au
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