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In recent years, there’s been an increased focus on the underpayment of wages in Australia. A series of high profile cases, like those involving a number of high profile chefs and 7-Eleven franchises, have angered the public and seen Fair Work Australia commit to furthering their efforts to stamp out such practices.
It’s vital that small business owners are aware of and compliant with all their statutory obligations with regard to the payment of wages. Penalties are severe and ignorance is not a defence. In a recent 7-Eleven controversy, court-imposed penalties have now exceeded $1 million. In other words, the fines and requirement to back pay unpaid wages could easily bankrupt many small businesses.
Currently, the Fair Work Commission, an independent body, sets the minimum wage. It operates under the Fair Work Act 2009. While there’s no indication that this arrangement is likely to change in the short or medium-term, it’s worth noting, though, that if the federal legislation is altered or replaced, the manner in which the minimum wage is set and enforced could also change.
It’s worth noting, though, that if the federal legislation is altered or replaced, the manner in which the minimum wage is set and enforced could also change.
What is the minimum wage in Australia?
Modern awards outline the minimum entitlements for wages and conditions of employment. They usually relate to a specific industry or occupation.
In some instances, employees aren’t covered by an award or enterprise agreement, in which case a national minimum wage order safeguards against exploitative arrangements.
Modern awards cover things such as minimum wage rates, annual leave, hours or work, penalty rates, allowances and other minimum conditions.
For example, as of 1st February, 2021, full-time adult retail workers covered by the General Retail Industry Award 2010 are entitled to a minimum wage of $827.80 per week (Retail Employee Level 1). The award is an extensive contract that outlines all other foreseeable employer obligations, many of which are industry-specific, like meal and uniform allowances. Any failure to abide by it could leave employers open to legal action.
A full list of awards can be found here.
Penalty rates explained
Penalty rates are the legal requirement for employers to pay their employees a higher pay rate when working weekends, public holidays, overtime, late night or early morning shifts.
Penalty rates vary across different awards, but as a case in point, full and part time workers covered by the General Retail Industry Award 2010 are entitled to an additional 25 per cent loading on a Saturday and 50 per cent loading on a Sunday (as of 1st February 2021).
The Fair Work Pay Calculator
The Fair Work Pay Calculator is an online tool that allows employers and employees to work out base pay rates, allowances and penalty rates.
The step-by-step questionnaire helps employers and employees establish which award is relevant to their circumstances.
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Who sets the minimum wage in Australia?
Since 2010, the minimum wage has been set by the Fair Work Commission’s Expert Panel. Each year it reviews the current minimum wage and issues a decision, which comes into effect on 1st July of the following financial year.
Seven people sit on the Expert Panel: a President, three other full-time members and three part-time members. They’re experts in workplace relations, economics, social policy and commerce.
Under the Fair Work Act (2009), the Expert Panel is required to publish all written submissions from interested individuals or organisations. The Expert Panel then makes comments on these submissions. The Act also demands that the research conducted by the Expert Panel be published, which ensures transparency and allows for submissions to be made based on the research.
Minimum wage change in 2021-22
From 1st July, 2021, the Fair Work Commission announced that it would increase new minimum wages in the retail, accommodation, food services and a other industries by 2.5 per cent. This follows an announcement last year that miminum wages would increase by 1.75% to $19.84 per hour as of 1st July, 2020. This was lower than the previous year’s 3 per cent increase, but above the 1.43 per cent rate of inflation, meaning real wage growth was 0.32 per cent for Australia’s minimum wage earners.
The Fair Work Commission’s decision is in line with historical trends. With one exception, it has always ruled that the minimum wage should be raised slightly each year. This takes things like the national economic performance, cost-of-living and inflation into account.
Australian minimum wage rates since 2007
|Commencement Date||Per hour||Per 38 hour week|
|1 October 2007||$13.74||$522.12|
|1 October 2008||$14.31||$543.78|
|1 July 2009||Unchanged||Unchanged|
|1 July 2010||$15.00||$569.90|
|1 July 2011||$15.51||$589.30|
|1 July 2012||$15.96||$606.40|
|1 July 2013||$16.37||$622.20|
|1 July 2014||$16.87||$640.90|
|1 July 2015||$17.29||$656.90|
|1 July 2016||$17.70||$672.70|
|1 July 2017||$18.29||$694.90|
|1 July 2018||$18.93||$719.20|
|1 July 2019||$19.49||$740.80|
|1 July 2020||$19.84||$753.80|
|1 July 2021.||$20.33||$772.60|
Minimum wage for juniors
In Australia, a junior employee is any employee under the age of 21. The minimum wage for junior employees is different depending on their age and is determined as a percentage of the national minimum wage, depending on the industry they’re working in.
The idea is that junior employees have the opportunity to enter the job market with a competitive advantage over adults who have to be paid a higher wage. It also allows employers to reduce their staffing costs.
For instance, under the General Retail Industry Award, from the first pay period commencing on or after 1 July 2015, junior employees are paid at the following percentage of the appropriate wage rate:
|20, employed by the employer for 6 months or less||90%|
|20, employed by the employer for more than 6 months||100%|
You can calculate junior employee pay rates for specific industries using the Fair Work Ombudsman Pay Calculator.
Minimum wage for apprentices
The pay rate for apprentices, as well as their entitlements, such as sick leave, annual leave and allocated breaks, are outlined in the relevant award and registered agreement.
The rate of pay varies slightly across industries, depending on the nature of the work and risk involved and the age of the apprentice.
Apprenticeships are tiered and apprentices move up the next level by either working for a certain amount of time or demonstrating their competency. As they move up, their rate of pay increases.
In terms of apprentice wages, the most important thing is that employers ensure they are operating in accordance with the conditions stipulated in the relevant award. But, as a fairly typical example, a full-time first year bricklayer building apprentice under 21 years old who hasn’t completed high school is entitled to $14.17 per hour or $538.57 per week. (These figures may be different in Queensland, where building apprentices are covered by a different award.)
Use the Fair Work Ombudsman Pay Calculator to determine the exact rate for a specific apprenticeship.
Employers are obliged to pay a minimum 10 per cent superannuation contribution to their employees based on their ordinary time earnings when an employee earns $450 or more pre-tax in a month and is over 18 years old or is under 18 and works more than 30 hours a week - but this is scheduled to increase progressively to 12% by 2025.
This is applicable to full and part-time employees and, depending on the agreement, some casual employees.
If employers are unsure about their superannuation obligations they should contact the Australian Taxation Office (ATO) on 13 28 61 or visit their website.
Nothing in this article constitutes legal advice. If you have questions about minimum wage compliance, please consult a legal advisor or qualified professional.