Australia’s national minimum wage and modern award pay rates are set to increase by 2.5% starting July 1, 2015.  On June 2, 2015, the Minimum Wage Panel (the Panel) of the Fair Work Commission announced an increase to the minimum rates.  The increase will affect over 1.86 million employees in Australia whose salary is at the minimum rate.

Each financial year, the Panel reviews the national minimum wage and the minimum wages set out in modern awards.  The modern awards vary depending on the industry or the type of job, and cover employee entitlements not only to minimum pay rates, but also to allowances, loadings and other conditions of employment.  Most employees in Australia are covered by one of the 123 modern awards. 

To be covered by a modern award, an employee must work in an industry covered by the award and/or work in a job classification that is covered by the award.  Often, more than one modern award will apply to a single workplace depending upon the jobs its employees perform.  

Employers should note that an employee who holds a “professional” or “managerial” position within an organization should not automatically be deemed award-free.  High income employees, however, are excluded from modern awards.  A high income employee is an employee who has entered into a contract setting forth a guarantee of annual earnings and the guaranteed annual salary is no less than $133,000 as of July 1, 2014.  This threshold is expected to increase to between $135,000 and $137,000 as of July 1, 2015, but is yet to be determined.

If employees are not covered by a modern award (or a registered workplace agreement) they are considered to be award- (and agreement-) free and are thereby entitled to at least the national minimum wage.  Also as of July 1, 2015, the new national minimum wage will be $656.60 per week or $17.29 per hour for a full-time employee working 38 hours per week, which represents an increase of $16.00 per week or 42 cents per hour. 

It is advisable for companies with operations in Australia to review their employee pay rates, in particular the pay rates of any lower-level employees, to ensure that they will be compliant with the new rates effective July 1, 2015. Employers that fail to comply with legally mandated minimum employee benefits, such as these pay rate increases, can be subject to penalties of up to $10,200 AUD (currently $7,857.77 USD) per offense for individuals and up to $50,100 AUD (currently, $38,595.54 USD) per offense for corporations.