Changes to minimum wages and superannuation in Australia from 1 July 2022

From 1 July 2022, both the ‘wage floor’ and compulsory superannuation contributions have increased. This article summarises the key changes.

Increase to minimum wages

The Fair Work Commission issued its Annual Wage Review Decision for 2021-2022[1] on 15 June 2022 (Decision), with the National Minimum Wage Order 2022 published shortly after on 28 June 2022 (Order).

The key take-aways from both the Decision and the Order are below.

  • The National Minimum Wage (NMW), the absolute base minimum wage payable to an adult employee (irrespective of award or agreement coverage) has increased by $40 per week, representing a 5.2% increase on the existing minimum.
  • The NMW is now $812.60 per week for 38 ordinary hours of work which equates to an hourly minimum wage of $21.38. We  note all minimum rates are exclusive of compulsory superannuation contributions.
  • The casual loading for award/agreement free employees remains 25% on the NMW.
  • Adult award minimum wages will be increased by a minimum of 4.6%, subject to a minimum increase of $40 per week. This means modern award minimum wage rates above $869.60 per week will increase by 4.6% and below $869.60 will increase by $40 per week.
  • The award minimum wage increases will be effective as follows:
    • for most awards, the minimum wage increase is operative from the first full pay period on or after 1 July 2022; and
    • for some awards, such as those in the aviation, tourism and hospitality sectors,[2] the adult minimum wage increase are deferred until the first full pay period on or after 1 October 2022 to account for the disproportionate impact of the Covid-19 pandemic on those industries.

Changes to Superannuation

From 1 July 2022:

  1. the superannuation guarantee percentage has increased from 10% to 10.5%, as it travels towards 12% effective from 1 July 2027; and
  2. employers are now required to make compulsory superannuation contributions on behalf of workers (being both employees and eligible contractors) who earn less than $450 per month. Previously, a $450 per month threshold existed such that employers were not obliged to remit superannuation payments for persons earning less than that amount.

Recommendations for Employers

In order to avoid underpayments, employers should review their current pay arrangements (including automatic payroll processing rules) to ensure:

  • payments are increased where necessary, including for casual employees (where appliable);
  • employees covered by an enterprise agreement are not paid less than the increased award minimum wage. Should this occur, the agreement rates are not effective and are replaced by the applicable award rates;[3] and
  • award covered employees are paid the minimum rate of pay applicable to their award classification. In this regard, many employees may also qualify for reclassification under an award. This can occur due to the passage of time, acquisition and use of new skills or, automatic progression mandated by the award.

As many award-based allowances are derived from award minimum rates of pay, many allowances will have also increased. It is important that employers are familiar with their modern awards and these adjustments.

Read other items in the Australian employment brief - July 2022

 

Footnotes

[1] [2022] FWCFB 3500.

[2] These include: Aircraft Cabin Crew Award 2020, Airline Operations – Ground Staff Award 2020, Air Pilots Award 2020, Airport Employees Award 2020, Airservices Australia Enterprise Award 2016, Alpine Resorts Award 2020, Hospitality Industry (General) Award 2020, Marine Tourism and Charter Vessels Award 2020, Registered and Licensed Clubs Award 2020 and Restaurant Industry Award 2020.

[3] Section 206 of the Fair Work Act 2009 (Cth) provides that base rates under an EA must not be less than the NMW order rate or modern award rate.