Increase of 3% for the National Minimum Wage

June 9, 2019

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The Fair Work Act 2009 (Cth) (FW Act) requires that the Fair Work Commission (FWC) Expert Panel for annual wage reviews (Panel) conducts and completes a review of the national minimum wage (NMW) and minimum wages in modern awards in each financial year.

This year, the Panel has increased the national minimum wage by 3%, resulting in the minimum weekly wage now being $740.80 per week for a full-time employee and $19.40 per hour. The hourly rate is calculated by dividing the weekly rate by 38, based on the 38-hour work week for a full-time employee.
The Panel must make a NMW order pursuant to s 285(2) of the FW Act, which states that:
 ‘In an annual wage review, the FWC: 
(a)    must review:
i.    modern award minimum wages; and
ii.    the national minimum wage order; and
(b)    may make one or more determinations varying modern awards to set, vary or revoke modern award minimum wages; and
(c)    must make a national minimum wage order.’

In doing so, the Panel is required to consider a number of objectives for national minimum wages and modern awards respectively. The objectives are set out in the FW Act:

284    The minimum wages objective
What is the minimum wages objective? 

(1)    The FWC must establish and maintain a safety net of fair minimum wages, taking into account:

(a)    the performance and competitiveness of the national economy, including productivity, business competitiveness and viability, inflation and employment growth; and
(b)    promoting social inclusion through increased workforce participation; and
(c)    relative living standards and the needs of the low paid; and
(d)    the principle of equal remuneration for work of equal or comparable value; and
(e)    providing a comprehensive range of fair minimum wages to junior employees, employees to  whom training arrangements apply and employees with a disability.

134    The modern awards objective
What is the modern awards objective

(1)    The FWC must ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions, taking into account:
(a)    relative living standards and the needs of the low paid; and
(b)    the need to encourage collective bargaining; and
(c)    the need to promote social inclusion through increased workforce participation; and
(d)    the need to promote flexible modern work practices and the efficient and productive                                  performance of work; and
(da)   the need to provide additional remuneration for:
(i)    employees working overtime; or
(ii)    employees working unsocial, irregular or unpredictable hours; or
(iii)    employees working on weekends or public holidays; or
(iv)    employees working shifts; and
(e)    the principle of equal remuneration for work of equal or comparable value; and
(f)    the likely impact of any exercise of modern award powers on business, including                                       productivity,  employment costs and the regulatory burden; and
(g)    the need to ensure a simple, easy to understand, stable and sustainable modern award                             system for Australia that avoids unnecessary overlap of modern awards; and
(h)    the likely impact of any exercise of modern award powers on employment growth, inflation                        and the sustainability, performance and competitiveness of the national economy.

In the 2018/2019 annual review, the above considerations were important given the timing of the review in a federal election year. While the Labor and Coalition governments have traditionally taken a neutral stance on minimum wage increases in submissions to the Panel, the two parties have taken somewhat opposing approaches to the review this year.

Labor called for a ‘substantial’ and ‘fair and economically responsible real increase’, while the Coalition submitted that a ‘fair increase’ should be applied. The Australian Council of Trade Unions called for a 6% increase in the minimum wage, while the Australian Chamber of Commerce and Industry has cautioned that the Panel should not consider increasing the NMW by more than 1.8%. In the 2017-18 and 2017-16 annual wage reviews, the Panel awarded increases of 3.5% and 3.3% respectively.

This year, the Panel acknowledged the improved business conditions in Australia as positive, but influence by the current strength of Australia’s mining sector. The Panel further recognized that the Australian labour market experienced employment growth of 2.5% over the year to April 2019, which equated to an increase of over 310,000 jobs.

Considering industry submissions, economic position (including labour market) and living standards, amongst other considerations, the Panel determined it appropriate to increase the NMW. The result was an increase of 3% to the NMW, resulting in a monetary increase of $21.60 per week. While the increase was lower than that awarded last financial year (at 3.5%), the increase is higher than the inflation rate increase, and higher than the 2.3% increase in Australian wage growth.

Additionally, the Panel felt it was appropriate to increase the modern award minimum wages by 3% (with the weekly wages being rounded to the nearest 10 cents), due to the increase to the NMW and other relevant considerations, including the circumstances of the different regions, industries and sectors.

It is important to note that while the wages come into effect from 1 July 2019, it will only apply from the first full pay period on or after 1 July 2019.

PH Solicitor can assist in conducting annual wage rate audits for businesses. For further information or enquiries, please contact Paul  on