Minimum Wage Decision - July 2016

Author: Harrison HR | Blog

Fair Work Minimum Wage Decision

The Fair Work Commission has finalised its annual wage review for 2016 and handed down a decision to increase minimum wages.

The panel decided to award what it called a “moderate” increase from the first full pay period on or after 1 July 2016.

The Fair Work Commission has awarded a minimum wage increase of 2.4%. The national minimum wage will be $672.70 per week or $17.70 per hour.

The hourly rate has been calculated by dividing the weekly rate by 38, on the basis of the 38-hour week for a full-time employee. This constitutes an increase of $15.80 per week to the weekly rate or 41 cents per hour to the hourly rate.

Who does the increase apply to?

The 2.4% increase only applies to employees that get their pay rates from the national minimum wage, a modern award, or a registered agreement (in some cases).

Most employees are covered by an award. Award rates will also increase by 2.4%.

The new national minimum wage of $672.70 per week or $17.70 per hour applies to employees who aren’t covered by an award or agreement.

The increase won’t affect employees who are already getting paid more than the new minimum wage.

Are you ready for 1 July?

The decision means that employers who pay their employees at minimum wage rates pursuant to a modern award, the National Minimum Wage or other industrial instrument, will be required to increase their employees’ pay in the first pay period on or after 1 July 2016.

Harsh penalties of up to $51,000 per contravention apply to employers who fail to meet their minimum wage obligations so we encourage employers to use the next few weeks to conduct an audit of their employees’ pay to make sure they are ready to comply on 1 July.

For employees paid in accordance with minimum wages in modern awards (or the national minimum wage), this means ensuring that payroll systems are ready to pass on the increased wages from the first full pay period on or after 1 July 2016.

Employers with enterprise agreements will need to ensure that the base rate of pay payable to employees under the agreement does not fall below the applicable base rate of pay under the relevant modern award (or the national minimum wage, if applicable).

For employees on annualised salaries, employers will need to consider whether that salary is still sufficient to cover the employees’ minimum entitlements taking into account the increased national minimum wage (or their respective modern award wage).

You also need to review any individual flexibility agreements to ensure they still meet the better off overall test (BOOT).

What happens next?

The Fair Work Commission will issue draft determinations and orders about how this decision affects each modern award.

It usually takes the Commission 2-3 weeks to update the pay rates in each award. Once they make these changes, Fair Work (Ombudsman) update their pay tools with the new rates.

For help with auditing your pay rates and award coverage please contact Harrison Human Resources.

Harrison Human Resources is a Brisbane based HR consulting and outsourcing company helping business leaders to manage and motivate their employees.

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