On Friday 2 June, 2023, the Fair Work Commission (FWC) delivered a substantial increase to the national minimum wage and award rates in its annual wage review.
Workers employed under an award are set to receive a 5.75% increase.
The national minimum wage is also set to increase by a record 8.6%. This increase is a result of ending an alignment between the national minimum wage and the C14 award.
“The C14 rate is the lowest modern award minimum wage rate but was only ever intended to constitute a transitional entry rate for new employees. As such, it does not constitute a proper minimum wage safety net for award/agreement-free employees in ongoing employment.”
Taking a look at the national minimum wage, full-time workers will receive an increase of $812.60 to $882.90 per week, with the minimum wage hourly rate increasing from $21.38 to $23.23. Casual workers will be entitled to a 25% loading on these amounts.
Coming into effect on the first full pay period on, or after, July 1, 2023, it’s expected approximately 184,000 people will receive minimum wage increases, and a further 2.4 million+ will receive a pay boost as a result of the award rate changes.
What does this mean for Australian employers?
Professional advice should be sought on exactly how this will operate in your business.
Generally speaking, where employers are already paying rates that are higher than the relevant minimum wage, they will not need to increase their rates of pay, unless the new minimum wages overtake the rates that are currently being paid.
It’s time to get prepared and ensure you’ve got the right systems and tools in place to handle potential changes and mitigate risk for your business. Get in touch if you’re interested in learning how our software can help you stay compliant. You can start a chat with our friendly bot below or head to this page to find out more.
Employment Hero is currently updating our pre-built Modern Awards to reflect the new minimum wage increases and plans to release these updates on 1 July 2023, in time for the first pay cycle of the new financial year.
Reflections on the decision from our Founder and CEO, Ben Thompson
Employment Hero is supportive of wage rises and the prosperity of both employees and employers. We know that thriving, robust economies create great opportunities for businesses and employees alike.
With this in mind, we feel obliged to comment on the FWC wage rise decision as it seems at odds with the data in our Employment Hero SME Employment Index, which indicates private sector wages have outpaced inflation.
April’s Index found that median hourly wages increased by 8.1 per cent in the last year. With the Index’s new analysis of hours worked, we know this is in part because people are working more and partly because wages have increased due to the talent shortages affecting many industries. The latest annual inflation data is 6.8 per cent.
The FWC has now approved a 5.75 per cent increase in all award rates creating an effective 8.6 per cent rise in the national minimum wage. This 8.6 increase is a result of ending an alignment between the national minimum wage and the C14 manufacturing award. Although an estimated 184,000 Australian workers will see an 8.6 per cent boost to their pay, more than 2.6 million workers will experience an increase of 5.75 percent or more.
We are fully supportive of better outcomes for employees and employers. Employees earning more is a great thing and we know the positive impact this has on society. We’ve committed to this by developing a product that improves the quality of life for people by helping them save thousands annually; employees using our Swag app get significantly more value from their salary with access to benefits and cashback resulting from our $75B of purchasing power. We use technology and our purchasing power to provide much better financial outcomes for employees, without any increased cost to employers.
With all this in mind, there is risk in this FWC decision for employees and employers alike; firstly that such a large increase could fuel a wage-price spiral and secondly that it could increase unemployment.
We are conscious of short-term gains that may ultimately produce long-term pain for employees; Employment Hero’s Index shows wages are already outpacing inflation and we are concerned this decision will exacerbate the decline in employment growth reported in our data. Some employers will have no choice but to reduce their employee numbers.
It is also important to consider the consequences of the FWC decision beyond the financial hit to SMEs. Employers already struggle with the Australian employment law minefield. How many small business owners are going to get caught out with the admin burden required for this change? Thankfully, our platform will be updated to assist our customers and help them remain compliant.
This is little comfort however to employers who will face even more pressure now with the FWC decision. Businesses are facing economic headwinds and the pressures of inflation; further wage rises that ultimately cause a wage-price spiral or unemployment benefit no one, especially not employees.
View the full Annual Wage Review 2022/23 decision.
Want to learn more about changes to employment law?
Download our 2023 Employment Law Updates factsheet.
Disclaimer: The information in this article is relevant as at 2 June 2023, and has been prepared by Employment Hero Pty Ltd ABN (11 160 047 709) (Employment Hero). The views expressed herein are general information only and are provided in good faith to assist employers and their employees. The Information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising either directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article.
