Annual Wage Review 2013 Increase

Earlier this week, the Fair Work Commission (the FWC) handed down its fourth annual wage review under the Fair Work Act 2009. As a result of the review, modern award minimum wages will increase by 2.6 percent from the first full pay period on or after 1 July 2013, with commensurate increases in hourly rates on the basis of a 38 hour week.

The increases will also apply to transitional Australian Pay and Classification Scales, State Reference Transitional Awards and Division 2B State Enterprise Awards. Wages in the National Training Wage Schedule will also be adjusted.

The national minimum wage will be increased to $622.20 or $16.37 per hour. This is an increase of $15.80 per week or 41 cents per hour. These increases also apply from the first full pay period on or after 1 July 2013.

In determining the wage increase, the FWC considered that the superannuation guarantee rate increase of .25% effective  1 July 2013 [click here to see related article] was a moderating factor of the adjustment to minimum wages and that the increase granted was lower than it would have been in the absence of the superannuation guarantee rate. Regard was also had to the effect of the carbon price on the published CPI figures and the lower than forecasted inflation outcome.

In terms of economic circumstances, the FWC observed that:

• while the economic outlook remains favourable, GDP growth is expected to ease slightly in 2013-14 and the unemployment rate is expected to increase slightly; and

• inflation is expected to remain within 2 - 3 per cent.

By way of observation, the FWC also noted that the following matters should be considered in the next national wage case review:

• that median and average earnings and modern award minimum wages have fallen over the past decade. In particular, the national minimum wage has fallen as a proportion of full time adult median earnings from 57.5 percent in 2002 to 52.7 percent in 2012. The FWC is concerned that these trends, if not addressed, may have broader implications for the economy and the maintenance of social adhesion in Australia; and

• although there has recently been an increase in labour productivity, that short term variations should be cautiously interpreted pending more sustained increases. For this reason only a small amount of weighting was given to the productivity outcomes in determining the minimum wage increase in this review.

In summary:

• the FWC will issue draft determinations and orders about how this decision will effect each modern award in the coming weeks;

• the pay increases are effective from the first full pay period on or after 1 July 2013;

• employers covered by modern awards will need to ensure that they are complying with the transitional arrangements in those awards - taking into account the wage review increases and their likely effect on the majority of allowances under modern awards which are often expressed as percentage amounts of the standard award rate;

• the decision will also affect employers with employees covered by enterprise agreements where the enterprise agreement utilises the modern award rates of pay. The rule here being that the rate of pay under an enterprise agreement can not be lower than the rate in the modern award; and

• in order for the FWC to approve an enterprise agreement, it must be satisfied that employees are better off overall under the proposed enterprise agreement when compared to the relevant modern award (including the wage review increases) - accordingly, the decision has potential to effect those employers who are currently negotiating enterprise agreements that are only on the margin of passing the better off overall test.

If you would like more information about the case, please contact National Workplace Lawyers on +61 2 9233 3989. 

National Workplace Lawyers

Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.