Annual Wage Review 2012 Increase

On 1 June 2012, Fair Work Australia (FWA) handed down its third annual wage review under the Fair Work Act 2009.  As a result of the review, modern award minimum wages will increase by 2.9 percent from the first full pay period on or after 1 July 2012, with commensurate increases in hourly rates on the basis of a 38 hour week.

The increase 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 $606.40 per week or $15.96 per hour.  This is an increase of $17.10 per week or 45 cents per hour.  The casual loading for award/agreement free employees has increased from 22 percent to 23 percent.  These increases will also apply from the first full pay period on or after 1 July 2012.

FWA described its decision as providing a moderate increase to improve the value of award wages and assist the living standards for the low paid.  FWA did not take into account proposed increases in the superannuation guarantee levy (related article on this to follow soon), as these are not proposed to take effect until 1 July 2013 and consideration could be given to this at FWA’s next review prior to 1 July 2013.

In terms of economic circumstances, FWA observed that:

• economic conditions over the past year have been reasonably strong, driven by the resources and related sectors;
• economic growth was lower than anticipated at the time of the 2010-11 annual wage review, largely as a result of weaker net exports;
• inflation has been volatile with 3.1 percent recorded in the December quarter 2011 and 1.6 percent in the March 2012 quarter;
• productivity growth has improved with gross value added per hour increasing by 2.2 percent over the 2011 December quarter and gross domestic product increasing around 1.4 percent for the same period;
• unemployment remained at historically low levels; and
• wages growth remained largely unexceptional, with average weekly ordinary time earnings rising at its average rates for the past 10 years and the wage price index and new collective agreements remaining a little below average.

In summary:

• the increases are effective from the first full pay period on or after 1 July 2012;
• employers covered by modern awards will need to ensure that they are complying with the transitional arrangements in those awards — taking into account the annual wage review increases;
• the decision is likely to affect the majority of allowances in modern awards, as those allowances are often expressed as percentage amounts of the standard award rate;
• in some circumstances, the increases may be absorbed into over award payments, however specific advice should be sought before making a decision to absorb any such increase;
• the decision will affect employers with employees covered by enterprise agreements and those currently negotiating enterprise agreements;
• employees covered by enterprise agreements must receive at least the base rate of pay in the relevant modern award; and
• in order for FWA 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 annual wage review increases.

If you have any questions or would like more information about this article, 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.