FY 2021 Fair Work Annual Minimum Wage Increase
By Paolo Coniglio, 25.06.2020
On Friday, 19 June 2020, the Fair Work Commission announced a 1.75 % increase to the National Minimum Wage and Awards’ Pay Conditions, following its Annual Wage Review. The increase will apply for both the National Minimum Wage and eventually to all Awards’ Pay Conditions. The increase will be effective on the first full pay period on/after the pay increase date.
Minimum Wage Increase
This year the Fair Work Commission took a very careful approach in reviewing and increasing minimum wages and even considered a wage freeze for the 2020-21 Financial Year. As the COVID-19 pandemic had a sizeable effect on the National Economy, the Commissions quickly reconsidered increasing the minimum wages by a high percentage and settled on a conservative 1.75%, avoiding further risks of unemployment. From 1st July 2020 the minimum wage rates will be:
An updated Fair Work Information Statement has been made available for Employers to download.
Modern Awards’ Increase
The Commission highlighted that the Fair Work Act allows a delay of pay condition increase in exceptional circumstances.
Usually, all awards’ rates increase from 1 July at the same time as the National Minimum Wage. However, this year the Commission took into consideration the impact of the COVID-19 Pandemic across the various industry sectors and decided to stagger the pay increase over the first 9 months of the Financial Year.
Using the data provided by the Australian Bureau of Statistics, the Fair Work Commission divided the 122 Awards into three groups.
Group 1 – July 2020
The annual pay increase applicable to this group will be effective from the first full pay period commencing on or after 1 July 2020. Group 1 includes Awards from the following Industry Sectors: frontline health workers, social assistance workers, teachers and childcare workers and other essential services such as funeral, cleaning and banking workers.
Group 2 – November 2020
The annual pay increase applicable to this group will be effective from the first full pay period commencing on or after 1 November 2020. Group 2 includes Awards from the following Industry Sectors: construction, manufacturing and similar industries.
Group 3 – February 2021
The annual pay increase applicable to this group will be effective from the first full pay period commencing on or after 1 February 2021. Group 3 includes Awards from the following Industry Sectors: accommodation and food services, aviation, retail and tourism industries.
Traineeship Wage Rates
Trainees pay conditions are included on Schedule E of the Miscellaneous Award (MA00104). The 1.75% increase in their pay condition will apply on the same date of the trainee’s industry or occupation award that covers them.
A trainee working in Childcare will receive an increase of 1.75% on their pay rate as of 1 July 2020, as the Children Services Award is part of Group 1.
A trainee working in a restaurant instead, won’t receive the increase until 1 February 2021, as the Restaurant Award is part of Group 3.
Tips for Employers
Employers should review and update both Payroll processes and documentation to reflect the above changes. In detail:
- Communicate with your employees
Email employees to let them know about the pay increase, and how they will positively affect their pays.
- Update your Employees’ Pay Rates in your Accounting Software
Ensure the employee pay rates are updated by no later than the applicable effective date of the pay increase. This is also an ideal time to review their employment duties and re-assess their classified levels.
- Re-test your employees’ Annual Salary or rates above their classified Award
Ensure that any employees paid an Annual Salary or on pay rates above the Award are still meeting the BOOT Test Criteria (Better Off On All Terms)
- Update recurring wages bank transfers
Any regular wages bank transfers should be stopped and update them with the new amounts once the new Tax Tables (and Fair Work pay increases) are applied to Payroll. Also, consider speaking to your Bank about starting to pay employees using Batch Payments (aba files)
- Update your Payroll Documentation
Ensure your Payroll Documentation is updated. This includes: update the Fair Work Information Statement in your onboarding documents and download the new Pay Rates.
As always we are at your disposal if you require assistance with meeting your Payroll compliance obligations.
This blog and attached resources are of general nature designed for informational and educational purposes only. They should not be construed as professional financial advice for your individual business. Should you need such advice, consult a licensed financial or tax advisor.