Fair Work Commission increases minimum wage by 3.3 per cent: Employment Law Update

Last week, the Fair Work Commission (FWC) announced a 3.3 per cent increase to minimum wages. This amounts to a raise from $17.70 to $18.29 an hour, or $694.90 per week, for employees covered by the national minimum wage or a modern award. The changes will be effective on 1 July 2017, so employers should ensure that they are ready to implement these increases. This decision is to affect more than 2.3 million employees that are reliant on minimum rates of pay.

Impact on Small Businesses

Australian Retailers Association Chief Executive Russell Zimmerman said that the pay increase will be “devastating” for small businesses. The Australian Chamber of Commerce and Industry agreed, stating that the decision will be unfair for small businesses with a limited capacity to pass on the increase to consumers.

The Australian Council of Trade Unions took the opposite approach, recommending that an increase of $45 per week, or 6.7 per cent, for all adult minimum award wages would be reasonable. This is despite an increase of only 2.4 per cent being granted by the FWC last year.

In response to criticism, experts at the FWC said that the 3.3 per cent increase “will not lead to inflationary pressure and is highly unlikely to have any measurable negative impact on employment”.

What does this mean for employers?

Employers covered by modern awards or with employees receiving payments based on the national minimum wage will need to review their arrangements to ensure that employees are being paid correctly. Employers covered by an enterprise agreement will need to make sure that the base rate of pay under their enterprise agreement is not less than the base rate of pay that would be payable under the relevant modern award.

The pay increase will also impact applications for approval of an enterprise agreement currently before the FWC. For an enterprise agreement to be accepted by the FWC, it must pass under the better off overall test (BOOT). The BOOT test is based on the relevant modern award that covers any employees covered by the proposed enterprise agreement. It requires that each award-covered employee and each prospective award-covered employee must be better off under the agreement than they would be if the relevant modern award applied to them. This test is applied as at the test time, or the date that the application was lodged with the FWC.

Checklist for employers:

  • Employers should review their arrangements before 1 July 2017 to ensure that employees are being paid correctly;
  • Employers with enterprise agreements currently being considered by the FWC must ensure that their agreement passes the BOOT test;
  • If you’re unsure about what this means for your business, contact a solicitor.

Are you looking for a solicitor in Newcastle to assist you in your legal matter? Please don’t hesitate to contact Butlers Business and Law on (02) 4929 7002 or fill out an enquiry form on our website. We have experience in advising businesses in Newcastle, the Hunter and Sydney.