On Monday, June 3rd, the Fair Work Commission (FWC) announced a minimum wage increase for Australian workers. From 1 July 2024, the National Minimum Wage and minimum award wages will increase by 3.75%. The superannuation guarantee rate will increase from 11% to 11.5%.
While the minimum wage review is an annual occurrence, the announcement often flies under the radar. With this in mind, we sat down with Elsa Bland, Senior IR Technology Consultant at Tanda, one of Australia’s leading payroll platforms, to break down everything you need to know about the upcoming increases and how best to prepare.
Let’s dive in.
- Increases to the National Minimum Wage and minimum award wages
- Changes to superannuation
- What does this mean for your business?
- How can your business prepare?
Increases to the National Minimum Wage and minimum award wages
The Fair Work Commission recently announced that both the National Minimum Wage and minimum award wages will increase by 3.75% at the start of the new tax year.
In 2023, minimum wage workers received a higher increase than award workers (8.65% increase vs 5.75% increase, respectively), whereas this year, both minimum wage categories will receive the same increase.
Let’s take a look at each one in more detail.
Minimum award wages
In Australia, many employees are covered by an award which dictates the minimum pay rates and conditions of employment for specific job roles based on industry or occupation.
For example, hospitality industry employees are covered by either the Hospitality Industry (General) Award, Registered and Licensed Clubs Award, or Restaurant Industry Award.
As a business owner, it is important to understand which award(s) apply to your employees so you can offer the correct compensation to your staff. To learn more about industry awards, visit the Fair Work Ombudsman website.
Minimum award wages will increase by 3.75% for all award-covered employees.
National Minimum Wage
The National Minimum Wage applies to Australian workers who aren’t covered by an award wage. For these workers, the National Minimum Wage will increase from $23.23 to $24.10 per hour or $915.91 per week, based on a full-time, 38-hour working week.
This amounts to an additional $33 a week for minimum-wage workers and will impact around 2.6 million employees—equivalent to 20.7% of the national workforce.
The National Minimum Wage will increase by 3.75% for full-time employees.
When do the changes come into effect?
The new National Minimum Wage and minimum award wages will come into effect from the first full pay period commencing on or after 1 July 2024. This means if your weekly pay period starts on Monday, the new rates will apply from Monday, 1 July 2024.
Changes to superannuation
Alongside changes to the National Minimum Wage and minimum award wages, hospitality venues also need to prepare for the upcoming changes to superannuation payments.
From 1 July 2024, the super guarantee rate will increase from 11% to 11.5%. Businesses will need to use the new rate to calculate super on payments made to employees on or after 1 July, even if some or all of the pay period is for work done before 1 July.
It’s also important to note that the super guarantee will continue to increase each year until 1 July 2028.
What does this mean for your business?
The annual minimum wage increase often ignites a fierce debate between business owners, unions and employees—and this year is no different.
For the FWC, it’s a delicate balance between offering a fair increase for workers who are battling a cost-of-living crisis and appeasing business owners, many of whom are struggling with rising operating costs.
“In determining this level of increase, a primary consideration has been the cost-of-living pressures that modern-award-reliant employees, particularly those who are low-paid and live in low-income households, continue to experience notwithstanding that inflation is considerably lower than it was at the time of last year’s review,” the commission said.
A win for workers
In a joint statement, Treasurer Jim Chalmers and Employment Minister Tony Burke said the FWC’s ruling was “a win for workers” and would contribute to cost-of-living relief.
While the Australian Council of Trade Unions (ACTU) had pushed for a 5% increase in the minimum wage, they acknowledged that the increase would help 2.6 million workers with a small wage that was above the annual rate of inflation.
“Any day working people get a pay rise is a good day. This decision allows people to keep up with inflation and have a small real wage increase,” commented Sally McManus, ACTU Secretary.
Additional costs for businesses
On the other hand, business groups had called for a modest increase. The Australian Chamber of Commerce and Industry (ACCI) wanted an increase of no more than 2%, while the Australian Industry Group (Ai Group) proposed a 2.8% cent increase.
Luke Achterstraat, chief executive of the Council of Small Business Organisations Australia (COSBOA), acknowledged the tough operating conditions facing businesses today and the toll increased wages may take on businesses.
“It’s an extremely tough operating environment; the levy is really breaking for small business, energy, rent, insurance, [and] borrowing costs, and as the [Fair Work] commission said, productivity has been flatlining for a number of years now,” he told ABC News.
“Unfortunately, the decision today will mean higher costs and more cost pressure for small businesses who are really struggling to churn out a profit and to remain in business at the moment. Small businesses will need to find a way to pass these costs on, that’s the reality.”
How can your business prepare?
The national and award minimum wage increases are imminent, so it’s important to get ahead of the game to ensure you remain compliant and don’t underpay your employees.
Ensure the new rates are set up in your payroll system
As we mentioned earlier, the minimum wage increase will take effect on 1 July 2024 for the first full pay period commencing on or after this date.
“This means if you have a weekly pay period that commences on a Tuesday, the wage increase will be effective for you on Tuesday, 2 July 2024, as this is the beginning of your next full pay period after the increase,” explains Elsa from Tanda.
With this in mind, it is important to have a process in place to ensure the required rates are updated for your first pay period after the increases take effect.
However, if you use another payroll platform, you should contact your provider to confirm how the rate increases will be managed and if there’s anything you’ll need to action to remain compliant.
“We would also recommend subscribing to updates from the Fair Work Commission on the modern award/s that are applicable to your business.”
Stay on top of your super payments
“Employers must pay eligible employees their super guarantee a minimum of four times a year,” explains Elsa.
“When calculating super payments it is important to ensure that you can identify ordinary hours of work from overtime payments.”
This is because superannuation payments are only calculated on an employee’s ordinary time earnings (OTE). Therefore, it’s crucial to track their contracted work hours vs. overtime to ensure you’re always paying the correct amount of super.
“It’s also important to ensure that you set reminders for when the quarterly super payments are due,” comments Elsa. “This information can be found on the ATO website and ensures you never miss a payment and remain compliant.”
What about employees who earn more than minimum wage?
After a minimum wage increase, a common query amongst hospitality operators concerns the need to increase the pay of more experienced staff to maintain a fair wage structure.
While every business is different, and there’s no legal requirement to do so, it’s broadly accepted that senior staff on rates above minimum award rates or annual salaries should have their remuneration assessed to see if it should also increase.
“As 1 July 2024 approaches, it’s important to review your employees’ salaries and confirm that salaried employees have received the same (or more) as they would have received as an hourly employee,” explains Elsa.
Some employee management platforms, like Tanda, have reporting tools that compare salaried employees against what they would have otherwise been paid as hourly workers under a modern award.
“Businesses use this tool to ensure that their salaried employees’ wages cover any penalties, overtime, and allowances they would have otherwise been entitled to,” comments Elsa.
Employ workforce management software
Navigating wage laws, such as calculating overtime, penalty rates, and different wages across awards, can be complex and challenging.
“My best recommendation is to engage workforce management software to assist in navigating the complexity of the modern award system,” says Elsa.
“Having a system that can help you establish strong rostering practices, automatically apply penalties and that will help you identify potential overtime prior to the roster being published is one of the best ways to manage compliance requirements.”
Editor’s note: The content in this post is intended for informational purposes only and should not be considered legal, financial, or tax advice. We recommend consulting with a qualified legal or accounting professional for personalised guidance. Where available, we have included primary sources to support our information. We strive to ensure accuracy; however, we cannot be held liable for any actions taken based on this content. Please note that Lightspeed does not commit to updating or verifying any new changes to the information in this blog post after its publication.
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