In its annual wage review, the Fair Work Commission (FWC) recently announced the minimum wage increase for the 2018/19 financial year. In this article, we:
- discuss the new minimum wage; and
- provide guidance on how employers can meet their obligations under an applicable modern award and the Fair Work Act 2009 (Cth) (the Act).
The Minimum Wage Increase
From the first full pay period commencing after 1 July 2018, the national minimum wage will be:
- $18.93 per hour; or
- $719.20 for a 38 hour working week.
This is an increase of $24.30 (pre-tax) per week from the previous financial year.
The national minimum wage applies to all employees unless they are covered by an award or enterprise agreement. If this is the case, the minimum wage as dictated by the applicable award or enterprise agreement should be paid (as long as the enterprise agreement wages are still compliant with the Act).
Incorporating the Minimum Wage Increase Into Existing Contracts
The minimum wage increase came into effect on 1 July 2018. Accordingly, you should review your rates of pay to ensure any changes take effect from that date.
It is also a good time of year to review employees’ existing contractual terms. Over time, it is natural for your business and employee roles to change. An employment relationship may look very different to what the parties agreed to in the beginning. Therefore, you should update employee contracts to minimise disputes with employees that may arise due to ambiguities in contractual terms.
Some questions to consider when reviewing contracts include:
- Do the terms in the employment agreement accurately reflect the role your employee is in?
- Do you need to update the employment agreement?
- Are your internal employee policies current?
- Are the policies setting a standard of behaviour you are expecting to see from your employees?
Tip: Keep up-to-date employee records. Try and move away from manual recording of timesheets and payslips into an automated system. This way, you can easily search your records to resolve any misunderstandings if, for example, an employee disputes their pay.
A modern award may specify a different minimum wage to the national minimum wage. The FWC has increased minimum award rates in modern awards by 3.5%.
An award will provide a brief description of the sorts of roles and classifications which it covers. It may specify that an employee with a particular level of experience should be owed a particular pay rate. This highlights the importance of understanding:
- which award applies to each of your employees; and
- what level of entitlements within that award apply to that particular employee.
This can be a confusing process, particular if you have employees in a variety of industries and classifications. It is useful to get legal advice so that you can meet your obligations and pay your employees correctly.
Note: If you have employees in diverse roles, be aware of the various awards that apply to your business. This means understanding:
- minimum wages;
- overtime rates; and
- other allowances.
An enterprise agreement (EA) is another instrument that sets out employee terms and conditions, as well as other entitlements such as wages and allowances. EAs are agreements made between a group of employees and their employer. They can prescribe terms that differ from those stated in an applicable modern award. These terms should leave the employee better off than they were under the award and should not conflict with the Act or the national employment standards.
The Risks of Paying Below Minimum Wage
The Act requires you to pay the minimum wage, otherwise employers may face fines. Penalties also apply if you have not done adequate research to know the entitlements owed to your employees under a particular award.
If you do not pay your employee adequately and they make a complaint, you will be liable to repay any amounts unpaid. You cannot avoid your responsibility to pay your employees correctly. You also cannot have contractual terms in place that conflict with your obligations under an award, EA or the Act.
The latest minimum wage increase took effect on 1 July 2018. You must ensure you meet this updated minimum payment or risk considerable financial penalties. If you want further explanation on how these changes will affect your business, get in touch with LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.
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