The Fair Work Commission’s Minimum Wage Panel increased all Modern Award minimum wage rates and the Federal Minimum Wage by 2.4% on 1 June 2016.

From the first pay period commencing on or after 1 July 2016, the national minimum wage will increase to $672.60 per week, or $17.70 per hour.

In its decision, the Commission considered the general economic climate was “robust” and remarked that the level of increase:

  • would not lead to inflationary pressure;
  • would be highly unlikely to have any negative impact on employment; and
  • means a modest improvement in wages.

Are you ready for 1 July?

There are a number of implications for businesses as a result of the decision.

For employees paid in accordance with an industrial instrument (i.e. a modern award or enterprise agreement) or the national minimum wage, employers must:

  1. ensure that payroll systems are ready to pass on the increased wages from the first full pay period on or after 1 July 2016;
  1. revise any allowances that are calculated based on the national minimum wage or base rate of pay under an award; and
  1. ensure that any base rate of pay payable to employees under an enterprise agreement does not fall below the national minimum wage or base rate of pay under the relevant modern award, as applicable.

Employers should also consider whether:

  1. annualised salaries paid to award covered employees are still sufficient to cover an employee’s minimum entitlements under any applicable award;
  1. an employee covered by any individual flexibility arrangement remains “better off overall” than if no individual flexibility arrangement had been entered into; and
  1. any guarantee of annual earnings provided to an award covered employee continues to operate to preclude the application of the award on the basis that the employee’s annual earnings still exceed the high income threshold (which is not directly related to the Commission’s minimum wage decision, but will also increase on 1 July).

Need help?

Penalties of up to $54,000 per contravention apply to employers who fail to meet their minimum wage obligations. Employers should use the next few weeks to conduct an audit of their employees’ pay to make sure they will meet their obligations from 1 July.

Norton Rose Fulbright can help you navigate the implications of the national minimum wage decision and assist you in understanding how your business is affected.

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