Minimum wage rate increase takes effect 1 July 2023
A reminder!
From 1 July 2023, an increased National Minimum Wage (NMW) and increased award minimum wage, will take effect.
The NMW, which applies to agreement and award-free employees, will be $23.23 per hour (up $1.85 from the current $21.38 per hour), and $882.80 per week (up $70.20 from the current $812.60 per week). This represents an increase of 5.75%.*
The minimum wage in all 121 modern awards will also receive a 5.75% increase (which will affect penalty and overtime rates). You should refer to the Fair Work Ombudsman website to check any relevant workplace award changes (linked here). If you pay your award employees above the minimum wage, you should consider what adjustments are necessary to ensure you maintain a sufficient buffer above the minimum.
Employers should also keep in mind that, from 1 July 2023:
The current casual loading for agreement and award-free employees remains at 25%;
The minimum superannuation guarantee contribution will increase from 10.5% to 11%; and
The high-income threshold for unfair dismissal applications will increase from $162,000 to $167,500, while the maximum compensation payable for unfair dismissal will increase from $81,000 to $83,750.
Who asked for what?
This year, the Albanese Government had asked the Fair Work Commission's Expert Panel to ensure that the real wages of low-paid workers did not "go backwards", while the Australian Council Of Trade Unions sought a 7% rise across all award rates. Conversely, the Council of Small Business Organisations Australia sought a lesser increase of 4% to the NMW, citing concern for SMEs and businesses with limited resources, in light of the increasing superannuation contributions. In making its decision, the Expert Panel stated that the “current combination of economic circumstances, namely low unemployment, falling real wages and high inflation”, and the "sharp slowdown" in economic growth that is expected over the next year, presented a challenging set of circumstances but ultimately weighed in favour of a decision to increase wages. The current rate of inflation was afforded significant weight, given its impact on low-paid workers and their ability to afford basic needs. The issues of gender equality and job security were also taken into account following recent amendments to the Fair Work Act 2009 (Cth), noting that of the workers receiving the NMW or award minimum wages, most work part-time hours, most are female, and almost half are casual employees.
The Expert Panel said it did not consider that these increases will have discernible macro-economic effects because only a "negligible proportion" of the employee workforce (0.7%) receives the NMW, while only 20.5% of the employee workforce are paid at the minimum wage rates in modern awards.
What did the RBA say about the increase?
In the minutes of the RBA’s board meeting on 6 June 2023 (linked here), the Reserve Bank Board observed that wage growth had been in the 3½ to 4 per cent range while the Wage Price Index had risen to 3.7%. The Board said:
The recent Annual Wage Review decision of the Fair Work Commission (FWC) had increased award wages by 5.75 per cent. This was higher than the expectation embedded in staff forecasts and would add directly to WPI growth in the September quarter, relative to the prior forecasts. In addition to this, a range of public sector enterprise agreements were being negotiated and it appeared likely that some of these would contain wage rises of at least 4 per cent for the first year, followed by smaller increases in subsequent years. Members observed that the FWC decision would support wages growth for around 30 per cent of workers (but a significantly smaller share of the total wage bill) whose wages are either directly or indirectly affected by award rates. Recently struck enterprise bargaining agreements would similarly see wages growth for those on enterprise bargaining agreements rise from current levels. Members observed that it was understandable that the lowest paid workers would be compensated for high inflation, but that it would be concerning if wages across a broad range of jobs were to become implicitly indexed to high inflation.
Fair Work Commission’s decision and summary
A copy of the Fair Work Commission's summary of the Expert Panel's decision is available here, and the full text of the decision is available here.
*For those who saw headlines that the NMW is going up by 8.65%, this is because the alignment between the NMW and the 'C14' classification rate in modern awards has also now ceased, and the NMW is instead aligned with the higher 'C13' classification rate. This, in combination with the 5.75% increase, in effect increases the NMW by more than 5.75%.