IR Update 14/12

In 1907, the famous ‘Harvester Judgement’ paved the way for the establishment of a minimum wage in Australia. In what became a benchmark case, Justice Henry Higgins (yes that’s right) deemed 2 pounds and 2 shillings per week to be ‘fair and reasonable’ pay for unskilled workers. This is a meagre $4.20 per week by today’s standards – but enough to live on and more than many workers were earning at the time.

Today, all employees are entitled to be paid fairly for their work as defined by the statutory minimum wage. If an employer is paying less than the minimum wage they can receive a penalty of up to $51,000. (Source: Workplace Bulletin – 10 June 2014)

The Fair Work Commission (FWC) recently announced an increase of 3 per cent on the national minimum wage from 1 July 2014.

What does this mean for Australian employers?

In conjunction with this increase on the national minimum wage, all modern award base rates are increased by 3 per cent. Employers who have staff under the modern award or an agreement will have to increase wages in line with these base rates.

This does not mean an employer must provide a pay increase of 3 percent on what an employee currently earns – it only means you must increase the wage rate if it now falls under the base level – some guidelines are provided below:

If… Then…
an employee’s wage rate falls below the new increased base rate their wage rate must be bought into line with the new rate
you currently pay above the base rate (excluding exemption rates) and their wage remains above the new increased base rate you do not have to pass on the increase, as they are still above the wage rate for their classification level
you have employees on exemption rates you need to ensure that with the increase they are still at or above the exemption rate for their applicable classification level
you have employees on annualised salaries You need to ensure the annualised salary is not disadvantaging them. For example, if the employee is working additional hours that would not deemed ‘reasonable’ by the National Employment Standards (NES) and they are not getting paid for these hours or receiving penalty rates, this would be considered a disadvantage.

Other changes effective 1 July 2014

High income threshold

The high income threshold for unfair dismissal eligibility will increase to $133,000 per year. Earnings that count towards the threshold include, wages and agreed monetary value of non-monetary benefits (extra superannuation, salary sacrifice amounts).

Superannuation guarantee

The superannuation contribution has increased from 9.25 per cent to 9.5 per cent for all employees aged 18 and over, including part-time and casual workers. The superannuation contribution is based on the employee’s ordinary time earnings and must be paid into a complying superannuation fund.

Transitional provisions in modern awards

The four year process of changing monetary entitlements under modern awards has now been completed. If your employees are covered by a modern award then wages, loadings and penalties must be applied in full, however if they are covered under an agreement, only the wage component must come into line with the new modern award wage rate.

Market businesses with an employee collective or enterprise agreement, will now need to ensure that the wage rates are in line with the Modern Award base rates for both the Storage Services and Wholesale Industry Award and the Clerks – Private Sector Award. All businesses within the Markets who do not have an agreement must ensure their wage rates, penalties and loadings are now in line with the aforementioned awards. Wage rates were circulated in early June 2014 to all Member businesses and secondary wholesalers – if you missed out or did not see them – please let us know.

Source: HCOnline, Janie Smith, 27 June 2014