On 30 May 2019, the Fair Work Commission (FWC) handed down its decision in the Annual Wage Review for 2018-19. The decision will increase the national minimum wage and the modern award minimum wages by 3 per cent from the first full pay period on or after 1 July 2019. The decision affects close to 2.2 million or 21 per cent of Australian employees who have their pay set by a modern award and 180,220 or 1.7 per cent of employees who are paid at the adult minimum wage rate.

The key changes from the Annual Wage Review are as follows:

  • 3 per cent increase in the national minimum wage for award/agreement free employees, which will see:
    • the current weekly minimum wage increase from $719.20 to $740.78 (an increase of $21.60 per week); and
    • the current hourly minimum wage increase from $18.93 to $19.49 (an increase of 56 cents per hour).
  • 3 per cent increase to the modern award minimum wages
  • the current casual loadings in the modern awards and for award/agreement free employees will remain at 25 per cent.

The minimum wage percentage increase falls short of last year’s increase of 3.5 per cent. The FWC stated their decision to present a lower wage rate increase than last year was due to the current economic environment, especially the recent fall in GDP growth, the drop in inflation and the tax-transfer changes which took effect in the review period which have provided a benefit to low-paid households.

The increased modern award minimum wage will have a flow on effect to loadings, penalties, allowances and overtime payments under the modern awards that are calculated with reference to the modern award minimum wages.

In the coming weeks, the FWC will hand down further determinations setting out the new modern award minimum rates of pay (based on the 3 per cent increase) for each of the modern awards.

Employers should review their current pay arrangements to ensure that:

  • any employee not covered by a modern award or enterprise agreement (award/agreement free employees) will from the first full pay period on or after 1 July 2019 be paid in accordance with the new minimum wage rates (including the casual loadings in respect of casual employees)
  • any employees covered by a modern award are paid in accordance with the new modern award minimum rates of pay in respect of the employee’s classification under the modern award. This also includes casual loading and other loadings, penalties, allowances or overtime which are calculated by reference to the modern award minimum rates of pay. If an employee receives an all-inclusive salary, the increase to the minimum rate may affect the lawfulness of that all-inclusive salary if it is no longer adequate to compensate them for their award entitlements.

The FWC’s full decision is accessible here.