FWC announces 5.75% increase to National Minimum Wage and Modern Award Wages

The Fair Work Commission’s Expert Panel has awarded a 5.75% increase to the National Minimum Wage and the minimum wages in Modern Awards.

Accordingly, all Modern Award minimum weekly wages will be increased by 5.75% from the first full pay period commencing on or after 1 July 2023.

The Panel noted their decision to no longer align the National Minimum Wage with the C14 classification wage rate in Modern Awards, which has been applied since 1997 in practice, but is not a legislative requirement. This year, the rate will be aligned with the C13 classification wage rate.

The National Minimum Wage will be increased to $882.80 per week or $23.23 per hour. This change in alignment results in an actual increase of 8.6% to the National Minimum Wage.

The Panel advised that the current combination of economic circumstances presented a particular challenge to this year’s annual wage review, including low unemployment, falling real wages, high inflation and the expected sharp slowdown in economic growth next year.

In arriving at their decision, the Fair Work Commission confirmed that they considered the impact of the current high inflation rate and the subsequent declined in real wages amongst Modern Award covered employees. This is causing a decline in living standards, financial pressure on households and in some cases, an inability to meet their financial needs. This resulted in a higher increase than the 5.2% applied to the National Minimum Wage last year.

As a result of the Secure Jobs, Better Pay legislation that came into effect last year, the Panel were also required to give a greater emphasis to the impact of the wage increase on female employees and employees in less secure employment.

The Panel indicated that approximately 20.5% of employees in Australia are paid in accordance with Modern Award wages, with a further 0.7% paid the National Minimum Wage. Typically, these employees work part-time hours, are predominantly female and almost half are casuals and therefore fall within the ambit of the legislative changes.

The Panel noted their inability to satisfactorily address the lower wages paid in female dominated industries. However, noted that this was an ongoing focus of the Fair Work Commission that will form part of next year’s annual wage review.

A further factor that was considered by the Panel was the upcoming legislative increase to the superannuation employer contribution rate from 10.5% to 11% on 1 July 2023.

The Panel confirmed that consideration was given to the various submissions received from the Government and a range of various stakeholders, including peak councils, registered employer and employee organisations. The Australian Government proposed a CPI-matching wage increase to the National Minimum Wage and the C14 Award wage rate, an equivalent flat dollar wage increase to classifications up to the C10 Award wage rate, and a 4% increase to award rates at C10 and above. Additionally, the ACTU suggested a 7.0% increase.

The increase applies to minimum wages for all employees, including junior employees, trainees and apprentices, employees with disability and to piece rates. Weekly wages will be rounded to the nearest 10 cents.

If an Enterprise Agreement applies to an employee and the employee would otherwise be covered by a Modern Award, then the employee’s base rate of pay under the Enterprise Agreement must not be less than the base rate of pay that would be payable to the employee under the Modern Award.

If an Enterprise Agreement applies to an employee and the employee is not covered by a Modern Award, then the employee’s base rate of pay under the Enterprise Agreement must not be less than the National Minimum Wage.

If no Enterprise Agreement or Modern Award applies to an employee, then the employee cannot be paid less than the National Minimum Wage.

If you would like more information on the impact that the minimum wage increase might have to your organisation, please contact us here and a Mapien Workplace Strategist will be in touch within 24 hours.