On Friday, 2 June 2023, the Fair Work Commission announced a minimum wage increase for Australian workers.
From 1 July 2023, Australian minimum wage workers will be entitled to an 8.65% wage increase, and award workers’ wages will increase by 5.75%.
But what does this mean for your business?
Let’s dive in.
- Increases to the national and award minimum wage
- When do the changes come into effect?
- Changes to superannuation
- What does this mean for your business?
- How can your business prepare?
Increases to the national and award minimum wage
The Fair Work Commission recently announced that both the national minimum wage and award minimum wage will increase at the start of the new tax year. The decision comes amid a year of surging inflation and repeated interest rate rises, both of which have added a considerable financial burden to many working Australians and small businesses.
National minimum wage increase
The national minimum wage applies to Australian workers who aren’t covered by an award wage. For these workers, the national minimum wage will rise from $21.38 to $23.23 – an increase of just over $70 per week, based on a 38-hour work week, which equates to an 8.65% pay rise.
Award minimum wage increase
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.
Employees in the retail industry, for example, will be covered by the General Retail Industry Award. Whereas hospitality workers will be 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.
Award minimum wages will increase by 5.75% for full-time employees.
“The 5.75 per cent increase to awards is the biggest in history and will help 2.7 million workers,” commented Treasurer Jim Chalmers in the wake of the announcement.
When do the changes come into effect?
The new national minimum wage and award minimum wage will come into effect from the first full pay period on or after 1 July 2023. This means if your weekly pay period starts on Monday, the new rates will apply from Monday, 3 July 2023.
Changes to superannuation
Alongside changes to the national minimum wage and award wages, businesses also need to prepare for the upcoming changes to superannuation payments.
From 1 July 2023, the super guarantee rate will increase from 10.5% to 11%. 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.
What does this mean for your business?
The increase in national and award minimum wages will see nearly one-quarter of Australian employees receive a pay rise. While the increases are a positive move for workers, the decision will have a detrimental effect on business owners, particularly those in the retail and hospitality industries, who are already struggling due to rising inflation and the cost of living crisis.
Business owners are worried that the wage increase will add further financial strain for struggling vendors. Many industry groups had called for a 3.5% – 4% increase, as they feared anything higher would impact the bottom line of small businesses that were already feeling the pinch.
Luke Achterstraat, Council of Small Business Organisations Australia CEO, said he was “deeply concerned” by the new wage increases and the impact they could have on businesses across Australia.
“The minimum wage increases do not easily translate to higher earnings for these business owners,” he commented. “Small business owners are currently working for a low return.”
Andrew McKellar, the chief executive of the Australian Chamber of Commerce and Industry, also pointed towards financial pain the increases will cause for small businesses.
“Taking account of the 0.5% increase in the superannuation guarantee from July 1, this represents a significant burden for small business and risks unlocking the floodgates for deep and prolonged economic pain,” McKellar said.
“[The] decision will come as a hammer blow for the 260,000 small and family-owned businesses who pay minimum and award wages,” he said.
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.
To help your business prepare:
- Update your payroll and accounting systems before 1 July to reflect the minimum wage and award wage increases.
- Update your payroll and accounting systems before 1 July so that you continue to pay the right amount of super for your employees.
- Subscribe to email updates from the Fair Work Ombudsman to be notified when the new rates are available in their pay tools.
- Use the find my award tool to keep up to date with relevant changes.
The information contained in this article was correct at the time of writing, June 2023. Please visit the Fair Work Ombudsman website to stay up to date with the latest minimum wage information.
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