Australians being paid the National Minimum Wage (NMW) will see an increase of $15.80 per week or 2.4% in wages as a result of the Fair Work Commission (FWC) releasing their annual wage review decision on 31 May 2016. The Minimum Wage Panel (the Panel) of the FWC determine any variations to the NMW or modern awards before 1 July each year.

The NMW will increase from $656.90 to $672.70 per week or $17.29 to $17.70 per hour. This is an increase of 41 cents per hour or 2.4%. This is slightly less than the 2.5% increase made last year (see article on the 2015 NMW Increase here).

This differed to the amounts requested by Unions and employer groups. Employer groups, such as the Australian Industry Group, requested an increase of 1.6% while the Australian Council of Trade Unions sought an increase of $30 per week.

The Panel determined that “The general economic climate is robust, with some continued improvement in productivity and historically low levels of inflation and wages growth. The Panel found that, in such circumstances, there is an opportunity to “improve the relative living standards of the low paid”. Other factors taken into account by the Panel in determining the amount of the increase included:

  • stronger labour market conditions with the unemployment rate falling;
  • inflation and wage growth at historically low levels;
  • labour productivity growth in the market sector was higher than in the previous five year period;
  • company gross operating profits grew by 2.8% in non-mining industries, which is above average for the past five years;
  • wage growth does not impact inflation or the ability for Australian firms to compete with the international market. Further, inflation and wages growth is expected to continue to be below average for the next year or so;
  • the relative position of low-paid workers has deteriorated over the past decade;
  • an increase in minimum wage would provide assistance addressing the gender pay gap; and
  • an increase will impact the incentives to bargain but will not discourage collective bargaining.

The minimum wage rates contained in modern awards have also been increased by 2.4%, with weekly wages being rounded to the nearest 10 cents.

These changes will come into effect on 1 July 2016.

What does this mean for employers?

If you pay employees the national minimum wage or in accordance with a modern award, those rates will increase from 1 July 2016.

It also means that for employees entitled to Government-funded paid parental leave, the entitlement will also increase from 1 July 2016 to $672.70 per week, less tax.

See link to the Statement from the FWC here. See link to the full decision here.