MINIMUM PAY RATES TO INCREASE BY 3.3% AND OTHER CHANGES TAKING EFFECT ON 1 JULY 2017

Published 09 June 2017 by Whitehall Workplace Law

THE FAIR WORK COMMISSION (FWC) HAS HANDED DOWN ITS DECISION ON MINIMUM PAY, PROVIDING AN INCREASE OF 3.3% TO THE NATIONAL MINIMUM WAGE AND MINIMUM AWARD RATES.  THE CHANGES TAKE EFFECT ON 1 JULY 2017.

SUNDAY PENALTY RATES IN A LIMITED NUMBER OF MODERN AWARDS WILL REDUCE ON 1 JULY 2017 WITH THE COMMENCEMENT OF A TRANSITION PERIOD.

CIVIL PENALTIES FOR BREACHES OF THE FAIR WORK ACT 2009 (CTH) (FW ACT) WILL INCREASE ON 1 JULY 2017.

ISSUE

The FWC has granted a 3.3% increase to the national minimum wage and the minimum pay rates under modern awards.  From 1 July 2017, the weekly minimum wage will be $694.90 per week, or $18.29 per hour.  The national minimum wage will apply to any employee who is not covered by a modern award.

Sunday penalty rates will be reduced over a transition period in the following modern awards: Fast Food Industry Award 2010General Retail Industry Award 2010Hospitality Industry (General) Award 2010; and Pharmacy Industry Award 2010.  The transition periods commence on 1 July 2017.

Civil penalties for breaches of the FW Act will increase to $63,000 for a corporate entity and $12,600 for an individual for contraventions which occur after 1 July 2017.

OUTCOME AND IMPACT

3.3% Increase to minimum wages

The FWC’s decision to increase the national minimum wage and modern award rates by 3.3% only impacts those employees who are paid in accordance with the national minimum wage or a modern award.  The FWC states that more than 2.3 million workers in Australia are reliant on award rates of pay.

Where an employer pays its employees an annualised salary in excess of (and in satisfaction of) all award entitlements, it will not (depending on the precise terms of the relevant employment contract) be necessary to increase the employees’ salaries where the amounts paid are already above the required minimum rates.  However, even where an employer utilises annualised salary arrangements, the new financial year is a good time to check that the rates of pay are compliant with any modern award or national minimum wage requirements.

Reduction to Sunday penalty rates

Employers (who are covered by any of the following modern awards: Fast Food Industry Award 2010General Retail Industry Award 2010Hospitality Industry (General) Award 2010; or Pharmacy Industry Award 2010) will need to carefully consider the transitional arrangements relating to the reduction of Sunday penalty rates.  The transition period will commence on 1 July 2017 and run for a period of 3 or 4 years depending on the relevant modern award.  The FWC’s decision dealing with Sunday penalty rates can be found via this link:

https://www.fwc.gov.au/documents/sites/awardsmodernfouryr/2017fwcfb3001.pdf

An employer’s ability to reduce penalty rates will depend on the terms of any applicable contract of employment.  If, for example, an employment contract specifies the applicable penalty rate, rather than simply deferring to an award, this would be likely to provide the relevant employee with a contractual entitlement to that particular penalty rate.  These matters should be checked before any reductions are implemented.

The reduced penalty rates are minimum rates of pay.  An employer could, of course, choose to continue paying a higher penalty rate where the award technically allows for a reduction in accordance with the transitional arrangements.  The FWC’s decision may be challenged on appeal, but at the time of this publication it will be legally effective from 1 July 2017.

Another effect of the transitional reductions to some penalty rates, is that any enterprise agreements should be compared to the reduced transitional rates for the purposes of the “better off overall test” (BOOT).  The BOOT is used to ensure the employees are better off overall under any enterprise agreement than they would be under any applicable modern award.

Increase to civil penalties

The maximum civil penalties for breaches of the FW Act after 1 July 2017 will increase to $63,000 for a corporate entity and $12,600 for an individual.  Individuals (including directors, other officers, managers, HR managers, payroll officers and a variety of other persons) can be required to pay a civil penalty where they have been involved in a contravention of the FW Act.  This can include “wilful blindness”.

CONTACT

Please contact us if your business requires assistance with compliance advice.

Whitehall Workplace Law

Level 14, 330 Collins Street, Melbourne, VIC 3000

+61 (0)3 8605 4841

+61 (0)428 041 272