Each month, David Bates (aka DB) from Workforce Guardian will answer one of our Members’ HR questions. This month, DB responds to a question from Kaylene in Sydney about the National Minimum Wage:
“Hi DB. My business has a warehouse and I pay employees above the current minimum Award rates. Last week I heard there was an increase coming to the minimum wage – does that apply to me? And do I need to pass it on? Thanks for your help!”
Firstly, it’s important to note that employees must always be paid at least the legal minimum rate of pay. This rate depends on whether the employee is covered by a Modern Award or an Enterprise Agreement, or is instead Award/Agreement-free.
Modern Award-covered employees: Classification levels and their corresponding pay rates are found in the Award itself. Each year, these minimum rates are adjusted in line with any increase to the National Minimum Wage.
Enterprise Agreement-covered employees: Classification levels and their corresponding pay rates are found in the Agreement. Any applicable annual increases to the Agreement rates of pay will also be set out in the Agreement.
Award/Agreement-free employees: Employees who are not covered by a Modern Award or Enterprise Agreement must be paid no less than the National Minimum Wage.
The National Minimum Wage is adjusted each year by the Fair Work Commission (FWC), with any increase taking effect in the first full pay period on or after 1 July. This year, the FWC has announced the National Minimum Wage will rise by 2.4% to $672.70 per week (or $17.70 per hour) for permanent adult employees.
Importantly, this increase of 2.4% will flow through to the minimum rates imposed by each Modern Award, and updated copies of the Awards will be published by the FWC between now and 1 July.
Turning now to Kaylene’s specific questions, this means:
- The increase to the National Minimum Wage is relevant because the minimum rates in the applicable Modern Award will be adjusted by 2.4%.
- No, there is no need to pass on the 2.4% increase if employees are already receiving a rate which is higher than the newly-adjusted rates. This is because an above-Award wage will generally ‘absorb’ any increases to the underlying minimum rate of pay.