21 Jun 5.2% Wage Increase – 1 July 2022
What does the 5.2% wage increase mean for my business?
In the latest Fair Work Commission press release, two announcements in respect to the 2022 Annual Wage Review were made.
A) Increase to the National Minimum Wage
- From 1 July 2022, the National Minimum Wage will increase by 5.2%, which amounts to $40 per week.
- The new National Minimum Wage will be $812.60 per week or $21.38 per hour.
- The increase must be applied from the first full pay period on or after 1st July 2022. If for example, you have a weekly pay period that starts on Mondays, the new rates would apply from Monday 4th July 2022
B) Increase to Award Minimum Wages
- Award minimum wages will increase by 4.6%, which is subject to a minimum increase for award classifications of $40 per week and based on a 38-hour week for a full-time employee
- This means minimum award wages:
- above $869.60 per week, will get a 4.6% increase
- below $869.60 per week, will get a $40 increase.
- Most awards will increase from the first full pay period on or after 1st July 2022, however, a two staged approach was announced and some awards in the aviation, hospitality and tourism industries will receive their increases from 1st October 2022.
What do I need to do?
1. Start Preparing
- If you don’t already know the answer, go to Find my award to check which awards apply to your business. Determine whether:
*Increases for your business will commence from 1st July 2022; or
*Increases for your business will commence from 1st October 2022; or
*Multiple awards exist and increases will apply from 1st July 2022 then from 1st October 2022; or
*No awards apply
2. Get the New Pay Guide and Update your Pay Rates:
- Once the Fair Work Ombudsman has updated the Pay Guides (estimated by the FWO to be just prior to 1st July) take the following steps:
a. Review the hourly rate for each employee against the new minimum award rate to determine the difference.
*If there is a shortfall, be sure to increase the rate from the first full pay period after 1st July 2022 or 1st October 2022 as appropriate to the new minimum award pay rate
*If your employee is paid more than the minimum award rate, decide whether to pass the increase on or absorb the increase within the current rate of pay. In this case, no action will be required.
*Review the Pay Guide to ascertain whether allowances such as meal allowances, uniform allowances, travel, etc., have been increased. Where an increase has been applied, update your payroll system with the new allowance rates.
*If you pay an annualised salary to employees who are covered by an award, check to make sure the annualised rate continues to absorb the included payments such as leave loading, overtime and allowances. If not, increase the annualised rate to make sure that it covers all minimum award entitlements. Where the award specifies that an annualised salary letter is to be provided, provide your employees with a new letter that contains of all the relevant information.
b. If no award applies, check whether wage rate for each employee needs to be increased to the new National Minimum Wage of $812.60 per week or $21.38 per hour and apply the increase from the first full pay period from 1st July 2022.
Key Watch Out:
If you pay an employee less than the minimum wage, including adding entitlements due, provided for in their minimum wage instrument, there is a risk of an underpayment. Underpayment of wages can result in fines, breaches and penalties together with the costs for back-payment of wages to current employees and past employees for up to six (6) years. Additionally, underpayment of wages can lead to inspection of the organisation by the Fair Work Ombudsman and damage to your public reputation if your business is labelled a “wage thief”.
Salary watch out:
Some awards now stipulate that you must ‘call out’ any included overtime and allowances, within the agreed salary, within the employment contract.
Does Your Business Need Assistance to Interpret the Wage Increases?
If you need help to determine what award applies, when to apply the increase, how to prepare an annualised salary letter or whether you can absorb any or all of the increases, contact us at Business 360 where you can also request a copy of our “Annualised Salaries” and “Modern Awards” Fact Sheets. Call us on 1300 287 360 or email firstname.lastname@example.org or if you would prefer a confidential discussion with one of our directors, click here to book a time to discuss your needs.