On Friday, 2 June 2023, the Fair Work Commission (FWC) announced the outcome of the 2022-23 Annual Wage Review. Overall, the FWC increased modern award wages by 5.75% effective from the first full pay period commencing on or after 1 July 2023. This comes in addition to recent increases to award minimum wages for direct care classifications in the Aged Care sector. In deciding to increase modern award wages, the FWC noted that the current economic climate created unique challenges for the review, with the increase taking into consideration ”low unemployment, falling real wages and high inflation” combined with a predicted steep decline in economic growth over the next financial year.
A two-pronged approach
The Annual Wage Review has two stages, with the first being the making of the National Minimum Wage Order. This sets the minimum wage for employees not covered by an award or enterprise agreement. The FWC has decided to align the National Minimum Wage with the C13 award classification rate. This effectively raises the base rate which is used to set each year’s minimum wage. Minimum wages will increase to $882.80 per week or $23.23 per hour. The second stage is to review modern minimum award wages. Modern awards set minimum wages for employees working in a given industry or occupation. The FWC has increased modern award wages by 5.75% effective from the first full pay period commencing on or after 1 July 2023.
Aged Care Sector
In February, the FWC also announced a 15% increase to the modern award minimum wages for direct care employees covered by the Aged Care Award 2010 (Aged Care Award), the Nurses Award 2020 (Nurses Award) and the Social, Community, Home Care and Disability Services Industry Award 2010 (SCHADS Award) as part of the Aged Care Work Value Case. The 5.75% increase in modern award wages will apply in addition to the 15% increase from February, meaning direct care employees covered by these awards will effectively receive a 21.61% increase in modern award wages.
Superannuation
Separate to the Annual Wage Review but also taking effect from 1 July 2023, is an increase to the superannuation guarantee contribution rate from 10.5% to 11% of ordinary time earnings.
How does this affect employers?
In summary, from the first full pay period commencing on or after 1 July 2023, employers need to ensure that employee salary and wages have taken into account:
- the 5.75% increase to modern awards for employees employed subject to an award;
- the 0.5% increase to the Super Guarantee; and
- the 15% increase for direct care employees covered by the Aged Care Award, Nurses Award or SCHADS Award.
Employers covered by an enterprise agreement will also need to review their enterprise agreement rates to ensure these rates are equal to or more than the new minimum award rates. For advice on implementing these changes and meeting minimum pay obligations, please contact us by telephone or email.
Written by Alisar Tawil and Nicole Dunn