Fair Work Commission awards 3.5% wage increase

The Fair Work Commission (FWC) has handed down its decision on the 2017/18 Annual Wage Review, increasing the National Minimum Wage and award rates by 3.5% with effect from 1 July 2018.

This is about half what the ACTU claimed and twice what AiG offered so it was pretty well what we expected to be the outcome.

In last year’s decision, the FWC flagged the likelihood of a significant increase this year because of the fact that the lowest paid workers on award rates were still at risk of poverty. That is one of the reasons why the ACTU continues to press for a “living wage” which would be significantly higher than the National Minimum Wage and will remain on the ACTU agenda for some time to come.

The FWC has some empathy for the ACTU’s position in this regard but has to balance that with the ability of employers to manage a larger wage increase than that which it has awarded in each of the last two Annual Wage Reviews (3.3% and 3.5% respectively). We don’t expect that trend to change much in the foreseeable future.

The new national minimum wage for an adult employee will be $719.20 per week or $18.93 per hour from 1 July 2018.

The FWC will now embark on variations to award rates and allowances, all of which should be updated on their website (www.fwc.gov.au) over the next few weeks.

Employers need to apply this decision in one of the following ways:

  1. If the employee is covered by an award or an enterprise agreement and is being paid at award rates, increase the employee’s wage to the new award rate (ie by 3.5%);
  2. If the employee is covered by an award or an enterprise agreement and is being paid at above award rates, the employer can absorb the increase in award rates against that over award payment unless there is an enterprise agreement or contract of employment which provides for increases in wages in line with Annual Wage Reviews (in which case, wages would be increased by 3.5%);
  3. If the employee is paid on a salaried basis (whether expressed weekly, fortnightly, monthly, annually or otherwise), review the salary to ensure that it remains above award, having regard to all of the monetary benefits payable under the relevant award in respect of all hours worked under the contract of employment;
  4. If the employee is not covered by an award or enterprise agreement and is therefore subject to the national minimum wage, ensure that the employee’s remuneration provides at least that national minimum wage for all hours worked regardless of how it is structured.

Failure to provide employees with compliant levels of remuneration can result in severe penalties of up to $630,000 per offence for a corporation and $126,000 per offence for an individual. Claims for underpayment can be made retrospectively for up to 6 years.

If you need assistance with understanding what this decision means for your business, contact us using the form below for a free first consultation from us.