In a move some say was overdue, the federal government is poised to raise the minimum national wage by 2.5% following a review by the Fair Work Commission.
What does this mean for your small business and when does this increase kick-in?
The Fair Work Ombudsman, the independent statutory agency of the federal government for workplace rights, has said about the impending increase to the minimum wage:
“Following the Annual Wage Review 2021, the Fair Work Commission has announced a 2.5% increase to minimum wages. This will also apply to all award wages, with the award increase happening in three different stages.”
In real terms, what are the changes to minimum wage?
- The current national minimum wage sits at $19.84 per hour or $753.80 per 38-hour week (before tax). Casual employees covered by the national minimum wage also receive at least a 25% casual loading.
- This 2.5% increase means that the new minimum wage will be pushed to $20.33 per hour or $772.60 per 38-hour week.
When does it kick in?
The first increase (according to awards) will start from 1 July 2021.
This means that if your business does weekly pay runs, the new wage will be enacted in the first full pay period week on or after July 1.
So, for example, if you normally run your weekly pay on a Tuesday, the new rates will apply from Tuesday 6 July 2021. In this example, the previous pay week prior to the 6 July would be paid at the previous minimum wage rate. This avoids employers having two pay scales for one pay run during the crossover period.
What are the three stages?
The rollout of the increase will be staggered according to industry awards, with some industries receiving a short reprieve before the increase cements itself.
- Most businesses will begin paying the new minimum wage from 1 July 2021.
- Those under General Retail Industry Awards will commence the new minimum wage from 1 September 2021.
- Those under the following awards will commence on 1 November 2021:
- Air Pilots Award 2020
- Aircraft Cabin Crew Award 2020
- Airline Operations – Ground Staff Award 2020
- Airport Employees Award 2020
- Airservices Australia Enterprise Award 2016
- Alpine Resorts Award 2020
- Amusement, Events and Recreation Award 2020
- Dry Cleaning and Laundry Industry Award 2020
- Fitness Industry Award 2020
- Hair and Beauty Industry Award 2010
- Hospitality Industry (General) Award 2020
- Live Performance Award 2020
- Mannequins and Models Award 2020
- Marine Tourism and Charter Vessels Award 2020
- Nursery Award 2020
- Racing Clubs Events Award 2020
- Racing Industry Ground Maintenance Award 2020
- Registered and Licensed Clubs Award 2020
- Restaurant Industry Award 2020
- Sporting Organisations Award 2020
- Travelling Shows Award 2020
- Wine Industry Award 2020.
Does it affect all my employees?
This boost to the national minimum wage will affect certain businesses and employees differently.
- Those not covered by an award or those currently being paid minimum wage will be afforded the full wage increase.
- Junior rates will be different, as per the relevant award.
- Those employees operating under registered agreements will need to check these agreements carefully and consult the Fair Work Ombudsman if unsure.
- This does not affect employees already being paid above the minimum wage.
What does this mean for your small business?
Firstly, as an award, the wage rise is of course a compulsory and non-negotiable increase to your employee’s minimum required pay.
This also means that employee entitlements like annual leave and other allowances will all be altered due to this minimum wage increase.
You’ll not only need to pay employees the full minimum wage, but you also need to reflect this in your payroll software or accounting app when you complete a pay run.
Small businesses are certainly under unique pressures at the moment. However, the minimum wage increase is aimed at addressing liveability and the ability for employees to cope with inflation.
As a reasonably modest increase, this may certainly put a slight amount of pressure on the small business community, yet across the board this should not amount to an undue financial burden on your business.
How does this affect Single Touch Payroll?
As we move into Phase 2 of Single Touch Payroll (STP), with a starting date of January 2022, you need to be particularly careful you’re paying your employees correctly.
Through the expanded STP scheme, the ATO will be gleaning even more data directly from your payroll or accounting software. As such, employee payments as per the minimum wage will be monitored alongside a host of other payee data and records.
It’s never been more important to pay your employees correctly, on time, and at or above the minimum wage.
To keep yourself abreast of all changes to the minimum national wage, it’s a wise idea to subscribe to the Fair Work Ombudsman’s email alerts, which will inform you of all the changes as they occur and alert you when updated award calculators and other tools become available.