How to Implement Fair Work Australia’s Changes in Minimum Wage for Your Business
by Meg Giles, AWX Industrial Relations Expert & Payroll Manager
Wednesday 22nd June 2011
In light of the recent minimum wage increase handed down by Fair Work Australia (FWA) on 3rd June 2011, you may be required to change how much you pay your employees.
What does the increase in minimum wage mean for your payroll?
In order to ensure that you are paying your staff correctly as of 1st July 2011, you will have to understand the modern award changes that occurred in January 2010 as well as the transitional periods that have been allowed by FWA.
Calculations
You will also have to do some calculations. Don’t panic there are examples below. And you can always contact the Fair Work Infoline Adviser on 13 13 94 or the Fair Work Australia Help Line on 1300 799 675.
Let us start by defining what we mean by the Modern Award:
Modern awards are industry or occupation-based minimum employment standards which apply in addition to the National Employment Standards. They were created to establish one set of minimum conditions for employers and employees across Australia who work in the same industries and occupations. [Source: Fair Work Ombudsman ]
Don’t panic! You don’t have to pay the full increase straight away. Let’s discuss the transitional period.
Since the award modernisation came into effect on 1st January 2010, some awards have transitioning periods which give employers and employees time to adjust to the changes in pay rates (including loadings and penalties).
The transitioning period allows new pay rates to be phased in over a period of four years until the full modern award rates apply from the first full pay period on or after 1st July 2014.
Modern awards may contain…
- Model transitional provisions that phase in changes to pay rates from 1st July 2010 across a four year period
- Specific transitional provisions unique to the modern award dealing with and/ or other conditions (you will need to refer to your relevant award for details)
- No transitional arrangements (the full terms of the modern award applied from 1st January 2010)
So, how do you calculate what’s the right pay rate for your staff? Here is an example on how to work out pay rates during the Transitional Provisions period (“phasing in period”):
Greg’s modern award minimum wage on 1st January 2010 was $17.00 per hour.
His minimum wage under his pre-modern wage instrument was $15.00 per hour.
The July 2010 annual wage review increased Greg’s modern award rate by $0.50 per hour.
To find Greg’s transitional minimum wage at 1st July 2010:
1. Find the modern award rate of pay at 1st January 2010
i.e. $17.00 per hour
2. Find the pre-modern award rate of pay at 31st December 2009
i.e. $15.00 per hour
3. Calculate difference between modern award and pre-modern award rates to find the “transitional amount”,
i.e. $17.00 - $15.00 = $2.00 per hour (this amount is the preserved transitional amount)
4. Find the 1st July 2010 modern award rate of pay, including any annual wage increases, i.e. $17.00 + $0.50 = $17.50
5. To identify the transitional amount for 2010, subtract 80% of the transitional amount from the 1st July modern award rate,
i.e. $17.50 – (80% x $2.00) = $1.60 = $15.90 per hour as at 1st July 2010
The July 2011 annual wage review increased Greg’s modern award rate again by $0.70 per hour.
6. To identify the rate applicable from 1st July 2011
i.e. $17.50 + $0.70 = $18.20
7. To identify the transitional amount for 2011, subtract 60% of the transitional amount from the 1st July modern award rate,
i.e. $18.20 – (60% x $2.00) = $1.20 = $17.00 per hour as at 1st July 2011
The preserved transitional amount will decrease by 20% per annum.
First full pay period on or after
1st July 2010 80%
1st July 2011 60%
1st July 2012 40%
1ST July 2013 20%
Please note that while all care has been taken in the preparation of this information, AWX cannot accept liability for errors or omissions, or for your use of it. For in-depth information, please refer to www.fairwork.gov.au or call the Fair Work Ombudsman on 13 13 94 or the Fair Work Australia Help Line on 1300 799 675.