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Minimum Wage Increase – Complexity Made Easy

29 June 2021

Recently the Fair Work Commission announced its decision to increase the minimum wage by 2.5%, effective July 1, 2021.

It happens every year and those of you who know me well know that every year I get on my soap box and say “it’s not just the minimum award rate that changes”. The way it is worded makes me nervous because it paints the picture of this increase just affecting those who are paid the lowest award rate, but that is not the case. It can have an impact on how much you pay everyone in your business.

Every year we endeavour to help employers understand the complexity and make it easier for you to navigate.

Those of you who know me well know that I’m not shy about sharing my opinions, but today I am not going to talk about the right or wrong of the decision. Regardless of whether we are happy or unhappy about the decision wages are about to change. The new National Minimum Wage will be $772.60 / week or $20.33 / hour. For those of you who don’t spend your free time reading the arguments for and against the increases the ACTU had called for a higher increase but business groups lobbied for less given the challenges of 2020 and 2021 due to COVID. There are valid reasons on both sides.

The 2.5% increase applies to employees that get their pay rates from the national minimum wage or a modern award. The national minimum wage applies to employees who aren’t covered by an award or agreement. Put simply that means the vast majority of employed Australian are affected by this change.

For you as an employer it means that there are a number of steps to go through to make sure your business continues to pay people appropriately.

  1. Confirm the award and grade that your team are paid under. In some awards employees move up in grades/levels based on length of time in the role so double check before taking the next steps.
  2. Identify anyone who is paid at the award rate. Effective July 1, they will receive an increase. Even those at higher levels or grades (such as C6 or grade 2) will receive the increase because the rate of pay at each level will also increase by 2.5%. Accidently forgetting managers is one of the biggest issues we identify when we work with SMEs.
  3. Identify anyone who is paid above the award rate. If not, bring them in line with the required level as a minimum. You may choose to increase their hourly rate by the full 2.5% or less, as long as the hourly rate is at or above the award required rate.
  4. For anyone who is on a salary package, (a fixed amount per year that is designed to cover the hours worked, overtime, allowances and penalties etc) you should be checking that the salary package is at least the equivalent of the new minimum wage for their level. Once again, if this increase means your salary is not aligned, you will need to increase the package. Make sure you check what is included in the package. Have you considered leave loading? Does it adequately compensate for any overtime, early morning or late starts that they are currently expected to do?
  5. Prepare for the changes in your payroll system ready for the first payroll cycle in July. For those SMEs that have automatic bank deposits set up, remember to up-date them.
  6. Remember that superannuation calculations are increasing to 10% as well and this may need to be changed.
  7. Communicate to the employees what their new rate of pay is in a letter or email. Perhaps you can include it on their payslip?

If you need help with any or all of these steps, Impact HR is here to support you. It doesn’t need to be hard or stressful when you have us on your side. We’ll take you through the process step by step so you feel comfortable and ready for July 1. Complexity made Easy!

For more information please contact one of our friendly HR professionals today on 1300 474 672.

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