Here’s what HR and employers need to keep in mind regarding the new minimum wage increase.

Following the announcement that the minimum wage is set to increase from July 1, 2022, many employers Australia-wide will be wondering how this affects them, and what they need to do to comply with the changes. 

The increase means employers will  now be required to pay their employees an extra 5.2 per cent and $1.05 an hour. This includes a 4.6 per cent increase to minimum award wages with a $40 minimum increase. The Fair Work Commission said its decision would affect more than 2.7 million workers, as well as other employees on enterprise agreements and other pay settings. 

According to Catherine Stephens, Associate Director of Employment Law at professional services consultancy BlueRock, all Australian employers (or overseas companies with local employees) now need to review their employees’ wages to ensure that they meet the new minimums. 

“It is important for employers to note that the minimum rate of pay is in addition to the other award entitlements, such as loading and allowances. Significant penalties can be imposed in the event of underpayment, even if the underpayment is unintentional,” says Stephens.

“Underpayment of wages also impacts the relationship between employer and employees, as well as generating adverse publicity which can impact the employer’s brand, goodwill and place within the market.”

So how can employers ensure they are following the correct guidelines? Stephens shared advice to make sure you’re compliant with the new increased wages and not underpaying your staff.  

1. Become familiar with the NES

The national minimum wage and the National Employment Standards (NES) make up the minimum entitlements for employees in Australia. An award, employment contract, enterprise agreement or other registered agreement can’t provide for conditions that are less than the national minimum wage or the NES – they must include the NES. 

Employers should also ensure they provide every new employee with a copy of the Fair Work Information Statement when they start their new job. Alongside this, every casual employee needs to be given a copy of the Casual Employment Information Statement at the same time.

2. Refer to the Fair Work Ombudsman pay guide

To ensure employers understand how much each employee is entitled to be paid, the Fair Work Ombudsman places a significant focus on working with employers to ensure they understand their obligations. 

Employers can use Pay and Conditions Tool to  calculate their employees’ wages, penalty rates and allowances. 

3. Consider enterprise agreements and all-inclusive salaries 

When employees are covered by an enterprise agreement, ensure that the base rates of pay provided under that agreement are at least equivalent to the new minimum rates of pay under the applicable award or the minimum wage order. 

Employers who use ‘all-inclusive’ salaries (such as via set-off clauses in their employment contracts or by using annualised salary arrangements) also need to take note.

A set-off clause is an optional clause in an employment contract that allows employers to pay their employees a rate of pay that is higher than award minimum rates in order to accommodate other entitlements employees would be entitled to receive,  including penalty rates, overtime, allowance and loading rates.

Employers utilising such arrangements need to ensure that the salary ‘buffer’ is sufficient to cover off all of the employees’ minimum entitlements each pay period, taking into account the increased minimum wages.

4. Get the right advice

The legislation around employment and fair work regulations are constantly evolving and it can be challenging to stay up to date on all your obligations as an employer. 

Employment lawyers specialise in staying across all the latest changes and will give you the right advice to ensure you are being compliant. 

Keep abreast of the changing employment law landscape with this short course from AHRI: Introduction to HR Law.