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On 15 June 2022, the Full Bench of the Fair Work Commission handed down the Annual Wage Review 2021–22 decision awarding a 5.2% increase to the National Minimum Wage (NMW). This results in an increase of $40 per week, bringing the NMW to $812.60 per week or $21.38 per hour.
The decision also awarded an increase to minimum modern award wages of 4.6%, subject to a minimum increase of $40 per week. In effect, this results in an increase of:
- $40 per week for employees who earn less than $896.60 per week; and
- 4.6% per week for employees who earn more than $896.60 per week.
The increase will operate from the first full pay period that starts on or after 1 July 2022 for most modern awards. However, the increase has been delayed until 1 October 2022 for those in the aviation, tourism and hospitality sectors.*
While the increase awarded fell short of the ACTU’s proposed increase of 5.5%, it is significantly more than the increases of 2.5 to 3% proposed by employer bodies.
The Full Bench considered that the increases were necessary to limit the fall in the real value of the NMW given the current CPI growth rate of 5.1% and the Reserve Bank’s outlook of headline inflation peaking at around 6%. The Full Bench also accepted that given the strength of the labour market, with unemployment currently at 3.9%, the increase would not have an adverse effect of the performance of the economy.
Interestingly, the Full Bench noted that although employees who will receive the 4.6% increase to wages are still subject to a decline in real wages, this is a matter that can be addressed by the Commission in future wage case decisions.
While it was accepted that there was a need to constrain inflationary pressures resulting from significant wage growth, the focus remained on the current impact of cost of living pressures for low-paid workers and the strengthening of the labour market as justifying the increases to the NMW and minimum modern award rates.
Another point that the Full Bench was required to take into consideration when awarding the increase was the impact it would have on enterprise bargaining. While the Full Bench concluded that they could not be satisfied that the increase will encourage bargaining (their emphasis), there is a prospect that some employers may be discouraged from bargaining by simply passing on minimum wage increases.
The decision to award such a significant increase arises in the context of declining enterprise agreement coverage and where one of the key deterrents to employers bargaining is the perception that the cost of wages demands are too high – a point we highlighted in our article from April this year.[1] As s 206 of the Fair Work Act 2009 (Cth) requires that the base rate of pay under an enterprise agreement be at least equal to the relevant modern award rate or NMW, the magnitude of today’s decision will impact on the cost of having an enterprise agreement and may result in employers being more reluctant to bargain at all.
One final point to highlight: the changes to the NMW and minimum award rates are legally binding on affected employers. However, the changes to those instruments do not mean that all Australian employers must pass on wage increases to their workers. Where employees receive amounts that exceed the NMW or applicable award rate for their classification, employers are entitled to absorb the increase within any actual wages paid above the prescribed minimum rate of pay. Employers should also ensure that their actions are consistent with any individual contracts of employment.
*These awards in the aviation, tourism and hospitality sector are subject to a deferred commencement date of 1 October 2022.
- Aircraft Cabin Crew Award 2020
- Airline Operations – Ground Staff Award 2020
- Air Pilots Award 2020
- Airport Employees Award 2020
- Airservices Australia Enterprise Award 2016
- Alpine Resorts Award 2020
- Hospitality Industry (General) Award 2020
- Marine Tourism and Charter Vessels Award 2020
- Registered and Licensed Clubs Award 2020
- Restaurant Industry Award 2020.
[1] An election for the (w)ages | Herbert Smith Freehills
This article was prepared by Natalie Gaspar, Partner, Anthony Wood, Partner and Daniel Bartlett, Solicitor.
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