FAIR WORK COMMISSION WAGE INCREASE DECISION

Further to our last IR Alert, on Friday June 2, the Fair Work Commission (‘FWC’) handed down its decision for the Annual Wage Review 2022-23 (‘AWR’).

The AWR decision of the FWC’s Expert Panel (‘Panel’) provides that:

The increases will take effect from the first full pay period commencing on or after 1 July 2023.

The Rationale

In delivering the Decision, FWC President Adam Hatcher provided further insight into the factors that were considered by the Panel, including the current economic climate and the economic effects on NMW and award reliant workers.

President Hatcher began by noting that recent amendments to the Fair Work Act 2009 (Cth) directed the Panel to place greater importance on gender equality and job security in their deliberations. The Decision emphasised that a comparatively small proportion of workers are reliant on the NMW or Award wages but these workers are disproportionately more vulnerable to the cost of living crisis. The Panel assessed that because 0.7% of the workforce were paid the NMW, an increase would “...not have discernable macro-economic effects”. The Panel considered that an increase in the NMW would be of great benefit to this cohort due to the disproportionate financial stress placed on the low-paid in the current economic conditions.

Similarly, modern award-reliant workers in Australia represented just 20.5% of the workforce in May 2021and comprised approximately 11.2% of the aggregate wage bill in 2021. These workers, on average, are paid less and work fewer hours than other employees. The Panel considered that the characteristics of award-reliant workers were unique compared to the wider workforce. These workers are highly casualised, tend to work fewer than full-time hours, are generally younger (including a high proportion of employees paid junior rates) and the majority are female. The Panel considered that an increase to award wages would significantly benefit these workers who were economically vulnerable and likely to be insecurely employed.

The Panel remained conscious of the potential economic impact including the concern that high wages could trigger a wage-price spiral and exacerbate already high inflation. It was noted that the current economic conditions were unusual and the projected slowdown of the economy in the next 12 months presented a challenge. The Panel concluded there was no evidence of a wage-price spiral in Australia and did not expect a significant flow on effect given that previous increases in award rates accounted for 8.1% of the total increase to the Wage Price Index (WPI).

Gender pay gaps were acknowledged as a significant issue, specifically since female workers and female-dominated industries were identified to be award-reliant and therefore more likely to be low-paid and insecurely employed. The Panel recognised it had the potential to address gender wage gaps through the AWR but was not satisfied it had sufficient data to do so this year. Further research is being undertaken which may be considered as part of the 2023-24 AWR, should it be finalised in time.

The Panel decided to realign the NMW to the C13 wage rate, ending the C14 alignment which began in 1997. The realignment recognises that the C14 rate was intended as an introductory wage rate for new employees for a defined period of time after which the employee would move up to a higher ongoing rate of pay. The Panel considered that this alignment did not address the needs of the low-paid and did “...not constitute a proper minimum wage safety net for award/agreement free employees in ongoing employment”. The Panel acknowledged that there had been a fall in real wages in recent years which could not be reversed by this year’s 5.75% increase and would need to be addressed through future wage reviews.

Reviewing Current Wage Arrangements

It is important employers review the wage increases in accordance with their industrial instruments and contracts of employment, as some may have an obligation to pass on the increase even if they are paying above Modern Award rates of pay. 

After assessing the new rates of pay, there may be some circumstances where an employer is still paying above Award. If a contract does not provide an obligation to the employer to pass the increase on, the employee’s above Award wage will simply absorb the increase in their current rate of pay and no change will be required.  

Employers should also ensure any annualised salary arrangements made under a Modern Award are reviewed in accordance with the obligations set out in the Award. 

1 JULY 2023 INCREASE TO SUPERANNUATION GUARANTEE

In 2021 the Federal Parliament passed the Superannuation Guarantee (Administration) Amendment Bill 2021 (Cth), legislation that gradually increases the superannuation guarantee by 0.5% each financial year.

This increase is separate to the Annual Wage Review as conducted by the Fair Work Commission.

What is important about 1 July 2023?

In accordance with the above referred to legislation, the superannuation guarantee rate will also be increasing from 10.5% to 11% on 1 July 2023.

Employers will be required to apply the 11% superannuation guarantee rate to payment of wages/ordinary time earnings made on or after 1 July 2023. The increase in the superannuation guarantee is based on when the payment of ordinary time earnings is made and not when the ordinary time earnings are worked.

Example: If an employer is making payment of wages/ordinary time earnings on or after 1 July 2023, the superannuation guarantee rate of 11% will apply to all wages/ordinary time earnings in the applicable pay period, even if the pay period includes time worked before 1 July 2023.

We are available to assist you

Business Chamber Queensland members with workplace services included in their membership, and who require further information and guidance after reading this article are encouraged to contact the Workplace Advisory Services Team on 1300 135 822 or via email advice@businesschamberqld.com.au 

The team is available and ready to assist.  

Other members and non-members can also access advice and assistance from the team, however a consultancy fee will apply.

Our advisors can help you with information about WorkCover claims, how to handle returning to work, case reviews and appeals processes, and more. We can also help you understand the steps in the process, where to find relevant information and who to speak to at different points along the way.    
  
Our service is available to all Queensland employers through this website and by calling  1300 365 855 and speaking with an advisor or emailing workcoverinfo@businesschamberqld.com.au
  
As part of Business Chamber Queensland’s free workers' compensation information service to Queensland employers, Business Chamber Queensland has made available free resources to assist employers who are preparing the return to work process for an employee.  Contact workcoverinfo@businesschamberqld.com.au for details.

The IR Alert is a member-only benefit from the Workplace Advisory Services team.