National Minimum Wage increase and other important changes to be aware of from 1 July 2021

Australian Minimum wage increases to stimulate post-pandemic economy

At approximately 3:30pm on 16 June 2021, the Fair Work Commission (the Commission) handed down its heavily awaited annual minimum wage ruling, unanimously approving a 2.5% increase in all award rates. Concurrently, the Commission has put wage increases on hold for a handful of sectors most affected by the COVID-19 pandemic.

What is the New National Minimum Wage?

Up to and including 30 June 2021, the national minimum wage (NMW) will be $19.84 per hour or $753.80 per 38-hour week (before tax). The 25% casual loading is additional to these rates.

From 1 July 2021, the new NMW will be $20.33 per hour or $772.60 per 38-hour week. The substantive difference is therefore $0.49 per hour, or $18.80 per 38-hour week.

Award-specific changes

The Commission’s ruling also determined that retail award workers would wait until 1 September 2021 for rate increases, and employees covered by 20+ awards in areas such as aviation, tourism, fitness, and some areas of retail trade will need to wait until 1 November 2021. The relevant awards are listed below.

How did we get here?

In 2020, following a push from employers and unions for a 3.5% rise to the NMW to stimulate the economy, University of Melbourne economist Professor Mark Wooden dissented from the majority ruling that might have achieved that result. Professor Wooden instead promoted a 1.75% increase to the NMW in addition to a potential wage freeze. Meanwhile, the Australian Council of Trade Unions (ACTU) sought a 3.5% increase across all award rates. Employer bodies sought either a wage freeze or for rate increases corresponding with the Consumer Price Index (CPI).

Through the research of University of Melbourne labour economist Jeff Borland, we are afforded some understanding of why there has been such a divergence of views on this matter. His research indicated that:

• three (3) sectors of the economy are ‘lagging’, indicated by their employment remaining down by 5%-10% compared to pre-pandemic levels. These include:
  • accommodation and food services;
  • transport, postal and warehousing; and
  • information, media and telecommunications;
• five (5) sectors of the economy are ‘almost recovered’, indicated by their employment only being 1%-2% lower than the comparable period. These include:
  • manufacturing,
  • construction,
  • wholesale trade,
  • education and training’ and
  • arts and recreation services; and
• all other sectors are fully recovered.

In addition to these factors, the Commission also considered in its decision the 0.5% rise in the superannuation levy set to occur from 1 July 2021 (taking it from 9.5% to 10%) and the Treasury’s May 2021 ruling, which projected a 1.75% increase in the cost of living within the 2021-2022 financial year.

Needless to say the 2021 annual minimum wage ruling has required a significant balancing act by the Commission between the interests of multiple stakeholders during a period of ongoing economic turbulence. It has also required recognition that the challenges of the COVID-19 pandemic have not been uniform across all sectors of the economy, and that one size will not fit all if Australia as a whole is to properly economically recover from the last 18 months.

Unfair Dismissal High Income Threshold increase & Compensation limit

The high income threshold for unfair dismissal applications will increase from $153,600 to $158,500 from 1 July 2021.

For dismissals that occur on or after 1 July 2021, the compensation limit will be $79,250 (increase from $76,800).

Fair Work Application fee increase

For unfair dismissals, general protections and bullying at work applications, the application fee will increase from $74.50 to $74.90.

Superannuation Guarantee rate increase

From 1 July 2020, the superannuation rate will increase to 10% from the current rate of 9.5%. This means that employers need to ensure that as at 1 July 2021, they are correctly paying their employees according to the increased super rate. There will be a 0.5% increase each year until 2025 when it reaches 12%.

More information about what this increase means for employers and how it should properly be introduced to avoid liability will follow in an article on the topic to come shortly.

What does this mean for employers?

Employers will need to remain cognisant of the dates from which the changes determined by the Commission will come into effect. Accordingly, employers will need to prepare to make any adjustments to employee wages that are implicated by these changes and do so by appropriate consultation with the relevant employee/s.

The failure of an employer to satisfy the new minimum wage after 1 July 2021 and/or other adjusted award rates to follow will place that employer at risk of underpayment and liability for failure to meet its legal obligations.

Employers should also keep in mind the above additional changes in the event that they become applicable.

If you have any questions about the upcoming changes including the annual minimum wage ruling of the Commission, or wish to discuss how to implement any of its outcomes within your business, please do not hesitate to contact a member of Coleman Greig’s Employment Law Team, who would be more than happy to assist you today.