The Fair Work Commission delivered its annual wage review today. This decision will have a significant impact on all businesses and industries and over 2.2 million employees who are paid at the National Minimum Wage or minimum Modern Award rates.
From the first full pay period commencing on or after 1 July 2019:
- All Modern Award rates will increase by 3 per cent (with weekly wages rounded to the nearest $0.10)
- The National Minimum Wage will increase by 3 per cent to $19.49 per hour, an increase of $0.56 for the hourly rate. In other words, a full time employee will receive a $740.80 per week, an increase of $60.
The Commission’s decision only confirms the basic increase in minimum rates while confirmation of the specific rates (including new allowance rates) for each individual Award have not yet been released. These will be released before 1 July 2019.
While there are different minimum wages for different job types and awards, each of these comes from a Government legislated Minimum Wage, which all businesses in Australia must abide by.
Are jobs at risk?
The new minimum wage announcement typically spurs a frenzy of cost-cutting advice, and many employers will be reconsidering their staffing needs. Founder and Managing Director of workplace relations firm Employsure, Ed Mallett says, “Our small business clients tell us that there’s a lot of pressure, and that is where we can help SMEs prepare and understand what they need to do, to deal with these changes.”
SMEs may initially face an overall increase in the cost of doing business due to higher wage costs and competition for manpower from the larger firms.
“Some of our small business clients are considering reducing costs, increasing prices, reducing staff or reducing operating hours…or a mixed approach to maintain current profitability,” he said, pointing out that today’s decision, “has a disproportionate impact on small business, because they have fewer variables that they can change to maintain profitability – can they really just add the extra staff cost to the price of your coffee, for example? Would customers accept that?”
The yearly wage bill for Australian businesses could increase up to $2.2 billion and, “Most SMEs won’t be charging customers 3 percent extra from 1 July, but will need to come up with an extra $21.60 per week per employee, and many simply need support.”
Did Labor’s ‘War on Wages’ campaign impact the FWC decision?
Labor’s 2019 election campaign argued the laws of supply and demand in the labour market were broken; that the economy forces were not able to deliver appropriate wage rises for workers.
In reaching their decision, the FWC said they considered economic standards, GDP growth, living standards, inflation, and the strong labour market.
While the dialogue on wages can be highly polarising, small business advocates claimed SMEs are already reducing the number of employees to keep up the rising costs of business.
“Wages have been part of the national debate for the past few months and it’s important to strike a balance between employees and employers. Wages will always change and that is the just the nature of the economy, but that doesn’t mean businesses won’t struggle.”
What happens now?
If you pay your staff at Award level, the increase to minimum rates take effect from the first full pay period commencing on or after 1 July 2019.
Mallett advises, “If you already pay above Award rates, you may not be required to increase your employees’ wages, provided the rates you pay are above the increased minimum Award rates (and you are not required to increase employees’ wages under their contracts of employment or applicable enterprise agreement),” he said.
“In just over a month, businesses will need to absorb these changes and will be expected to be compliant. To help, we are providing over 24,000 small businesses with specific information and wage schedules according to their industry, as final rates are released by the Fair Work Commission.”