2020 ANNUAL WAGE REVIEW DECISION
Whilst we always follow the National Minimum Wage (NMW) and minimum Award rate decisions very closely, we have watched with bated breath the proceedings at the Fair Work Commission, the submissions and the data analysis to see what will be the outcome for businesses in this “not normal” year.
The Annual Wage Review directly impacts 21% of Australian employees as it dictates the National Minimum Wage and minimum Award base rates of pay. The Panel considers a whole raft of data in making their decision each year. This year, this included drought, bushfires, COVID-19, a likely recession, a decrease in GDP, a decrease in consumer spending, a decrease in the Wage Price Index, 7.1% unemployment and over 20% underemployment, amongst many other factors.
A large number of stakeholders, like previous years, made submissions and then follow up submissions. The Federal Government put forth a carefully worded document for consideration, which was the subject of a previous News article, which you can read here. The outcome is summarised below:
For more info on what Group each Award falls into, read on.
Last year there was a 3% Annual Wage increase, effective the standard 1st full pay period in July.
The Panel has been very clear in the published decision that timing the increase across all industries (normally the first full pay period after 1 July), would be a severe disservice to a struggling economy; while some sectors have done well out of the pandemic, many more have not.
Therefore, taking into account submissions and data by sector, the Expert Panel has determined that the minimum 1.75% Award increase will take effect at three (3) specific dates in the next seven (7) months:
Group 1: the sectors that have, generally speaking, been travelling OK such as electricity/gas/essential services/banking. Increases for these Awards are effective the first full pay period after 1st July 2020.
Group 2: sectors that have been somewhat affected by the global pandemic, equating in rough terms to about 40% of employees, such as manufacturing/construction/call centres/mining/vehicle transportation. Increases for these Awards are effective the first full pay period after 1st November 2020.
Group 3: the sectors that have been the hardest hit will have a delayed wage increase in Award rates the first full pay period after 1st February 2021. These sectors include airlines/retail/food/accommodation services / the Arts.
A full list of each Group, with the associated Award, has been released by the Fair Work Commission. HR Unplugged can assist you in this matter.
Please note: The Expert Panel has acknowledged that whilst no data is perfect and it will not suit all businesses within all sectors, they have made the best decision with the data available to them, in an imperfect world.
Does this mean I need to increase employee wages?
Not necessarily. If you already pay above the Award rate, then you just need to ensure you remain at or above it across all base rates, penalty rates and allowances. You cannot be below it. If you pay an “all-up” hourly rate or an annualised salary, the calculations still need to be done to ensure your organisation is compliant across all roles.
On the other hand, you should consider your Remuneration Strategy in light of the wage review:
Do you wish to maintain an Award rate?
Do you wish to pay above the Award rate to attract & retain key talent, and if so, what increase should you apply?
What is the national, state and local labour market doing in your area for the roles in your organisation? This will impact how you remunerate people.
How will you reward key staff, and when?
What bonuses/incentives/commissions can you consider to reward the right outcomes for your business – remember these don’t look the same across all levels of the business?
Consider gender pay equality – check you are remunerating employees the same for the same skill-set and expertise. It doesn’t mean you need to pay the same if you can justify a pay difference (i.e., Bob has 7 years more experience than Allison so attracts a more senior rate of pay), but it does mean that you should not pay differently due to gender
Which Group of Awards do the roles within your business fall into?
Remember, each role may align to a different Award, so therefore the dates of wage increases may be different for employees within your organisation.
Did the Fair Work Commission get it right?
In my opinion, pretty much. With the enormous amount of data available to the Expert Panel, and the largely disparate opinions between business interests and union interests (i.e., from no increase to 4% increase), a 1.75% increase is a measured approach and the staggered effective dates by industry is certainly welcomed.
The Commission has balanced the need to ensure those who are on low wages in a time when the things are difficult, will receive a little to protect standards of living; whilst those businesses most desperately impacted by the global pandemic have a seven (7) month “hiatus” in rate increases.
Where to now?
Please reach out to our friendly HR Unplugged team to discuss your situation, and the different scenarios you may be facing. Some sound, practical advice from us, can save you a lot of heartache in the future.
The staggered start to the wage increases also means more complexity, however ignorance is not an excuse for failing to adhere to legislation!
Visit our website to learn more, or contact us on Facebook / Instagram or contact Mel at mel@hrunplugged.com.au 0424 995 502.