Each year, the Fair Work Commission (FWC) reviews the minimum wages specified in modern awards, as well as the national minimum wage for employees who are not covered by an award or enterprise agreement.
The Minimum Wage Panel recently ruled that from the first pay period after 1 July 2015:
- the national minimum wage for employees without an award/agreement will increase to $656.90 per week ($17.29 per hour); and
- employees covered by a modern award will see minimum wages increased 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.
The Fair Work Act 2009 requires that the base rate of pay defined in an Enterprise Agreement must be at least equal to the relevant modern award rate. 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 – particularly 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 compare the pay rates in their Enterprise Agreements with those defined in the applicable modern award, to ensure that all employees are being paid at least the specified 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 that their employees salaries continue to be equal to, or better than, the remuneration that the employee would otherwise be entitled to under a modern award.
Employers should also be reminded that Superannuation Guarantee Contributions are currently capped at 9.5% (and will remain so until 30 June 2021). Kenneth Frucht may provide further legal advice.
And if payroll is a hot topic in your business, why not check out our article: 10 steps to perfect small business payroll in 2015
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Please be advised that the content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought regarding your specific circumstances.