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Alert: Fair Work Commission announces 3.5% increase to the national minimum wage

The Full Bench of the Fair Work Commission has today determined to increase the National Minimum Wage by 3.5%, and for the same increase to be applied to the minimum rates in each Modern Award.   The Full Bench was very positive in its statement about its view on the economic outlook for Australia, stating:

“Compared to the position at the time of the 2016–17 Review, the economic indicators now point more unequivocally to a healthy national economy and labour market. The recent data has shown strong growth in full-time employment together with a high participation rate.”

Despite the very positive view on Australia’s economic outlook, the Full Bench was not prepared to consider an increase at the high levels suggested by the ACTU and ACCER, as it considered an increase at that level would run the risk of ‘adverse employment effects’.  Instead, the Full Bench commented in support of a modest and regular increase:

[37] The Panel remained of the view that modest and regular minimum wage increases do not result in disemployment effects or inhibit workforce participation. Recent Australian research published by the RBA (the Bishop paper), discussed in Chapter 2 of the Decision provides support for that view. Recent research in the UK continues to support that conclusion. The position is more contested in the US.

[38] The real value of the NMW has increased by 5.8 per cent over the last decade, and by 4.3 per cent in the past five years. However, the Panel noted that this has not resulted in improvements to the actual or relative living standards for many categories of NMW and award-reliant households, due to changes in the tax-transfer system. It has, however, provided an increase in the living standards of single adults.

The effect of the increase will mean that the National Minimum Wage will increase by $24.30 per week, from the current $694.90 per week ($18.29 per hour) to $719.20 per week ($18.93 per hour).

The 3.5% increase will take effect from 1 July 2018.

Employers should ensure that where the Modern Award rate is being paid, the increase is passed on to their Award-covered employees from 1 July 2018. It is also essential that Employers review pay rates for employees currently receiving over-Award payments, or engaged under Enterprise Agreements, to ensure that they do not underpay their employees when compared against the revised award rates, and/or continue to comply with the remuneration provisions of the Enterprise Agreement.

Aitken Legal can be contacted for any enquiry about the wage increase as it affects remuneration arrangements, including through Modern Awards and Enterprise Agreements.