1.75% Wage Increase for Modern Awards

1.75% Wage Increase for Modern Awards

On Friday 19 June 2020, the Fair Work Commission announced its decision in the 2019-2020 Annual Wage Review.

That decision was to increase the National Minimum Wage and modern award minimum rates of pay by 1.75% but, unusually this year, with three different operative dates for different industries based on their view on the impact of COVID-19 on different industry sectors.

The National Minimum Wage increases from

The effective dates are:

  • 1 July 2020: National Minimum Wage & Award Group 1 (mainly health and community services, children’s services and aged care, emergency services, cleaning services, non-tertiary education and public service sectors)
  • 1 November 2020: Award Group 2 (most awards including common ones like clerical, building and trades, manufacturing, graphic arts, gardening, farming, transport and distribution, professional services, mining and quarrying, tertiary education)
  • 1 February 2021: Award Group 3: (mainly retail, hospitality, food services, events, recreation and entertainment, personal services such as fitness, hair dressing and dry cleaning)

Here is a detailed listing of each Award group: Modern Award Groups

The new rates are payable from the commencement of the first full pay period occurring on or after the relevant operative date.

For employers, the different scenarios that can apply are:

  1. If you have employees who are covered by a modern award and you otherwise apply all of the terms and conditions of the award, you must ensure that employees are paid at least the award rate for their classification as adjusted for this decision.
  2. If you have employees who are award free and not covered by an enterprise agreement, you must ensure that they are paid at least the National Minimum Wage as adjusted for this decision.
  3. If you have employees who are covered by an award and you pay them on an annualized wage basis or on a salary or all purpose rate which sets off certain monetary employment conditions such as annual leave loading, overtime and shift loadings, penalty payments and allowances, you need to recalculate the rate of pay to ensure that the employee remains better off overall against award entitlements and comply with any award provisions that might apply to annualized wage arrangement.
  4. If you have employees who are covered by an enterprise agreement which provides for annual adjustment of wages in line with Annual wage Review decisions of the Fair Work Commission, you need to adjust wages by 1.75% from the operative date for the relevant award.
  5. If you have employees who are covered by an enterprise agreement but the agreement does not provide for annual adjustment as per 4., you need to ensure that wages paid are at least equal to those applying to the underpinning modern awards or the National Minimum Wage as applicable from the relevant operative date.
  6. You need also to have regard to any provisions in employment contracts which might provide an obligation to pass on any increases separate from or additional to any of the above scenarios.

Please also note that, the ongoing modern award review process has resulted in a number of changes to modern awards (including, in some cases, changes to the calculation of minimum wages and also changes to the calculation of annualized wages) since the last Annual Wage Review.

This likely also means that you will need to review your employment contracts, something that we recommend that you do at least once a year in any case.

The Fair Work Ombudsman has a Pay Calculator Tool on its website and also publishes Pay Guides for each award – these provide detailed advice on ordinary time and overtime and penalty rates for each classification in the relevant award. You can access these resources at https://www.fairwork.gov.au/pay/minimum-wages/pay-guides.

If you need assistance in understanding and applying the effects of this decision in your business, we are happy to assist. We offer a free initial phone consultation if this is of interest to you.