Annual Wage Review Decision 2023

The Fair Work Commission has today handed down its annual wage review decision.

The Commission has decided to increase the minimum wages in all modern awards by 5.75%. These increases will take effect from the first full pay period commencing on or after 1 July 2023.

The National Minimum Wage has also been increased from $21.38 per hour to $23.23, producing an effective increase of 8.65% (explained in more detail below).

The Commission also indicated that it will soon commence work to address what it identified as significant issues concerning the potential gender undervaluation of work in modern award minimum wage rates applying to female-dominated industries and occupations.

Size of the Increase

The decision gives workers the highest increase in decades and is naturally influenced by the unique inflationary environment currently facing Australia.

Most employer organisations appearing in the proceedings who ABLA work with urged the Commission to implement a more moderate increase of 3.5% for the 2023 year as this figure was justified on the basis of “productivity”.

The Commission acknowledged that the Superannuation Guarantee contributions rate is also set to rise to 11% from 1 July 2023 and indicated that this had a moderating impact on their decision.

Changes to Modern Awards

The minimum wages in all modern awards will be increased by 5.75%. These increases will take effect from the first full pay period commencing on or after 1 July 2023 for all modern awards.

Changes to the National Minimum Wage

The Commission took a two-step approach to the National Minimum Wage.

The National Minimum Wage has traditionally been linked to what is known as the C14 wage level - an introductory/training wage contained in certain modern awards. The Commission determined that this was no longer appropriate and indicated that the minimum wage should instead be linked to the C13 wage level, which is the lowest classification rate applicable to ongoing employment in most modern awards.

The Commission decided that, in addition to the change in alignment, the National Minimum Wage should also be increased by 5.75%.

The changes in moving the National Minimum Wage reference point from C14 to C13 and the 5.57% increase results in the National Minimum Wage increasing from $812.60 per week or $21.38 per hour to $882.80 per week or $23.23 per hour, an increase of 8.65%.

Gender Equality Issues

The Commission also stated that the scope and timing of the present review had prevented it from addressing what it considered to be significant issues concerning the potential gender undervaluation of work in modern award minimum wage rates applying to female-dominated industries and occupations.

It announced that it will soon commence a research project to identify occupations and industries that may be subject to such undervaluation, and that this project will be used to underpin future proceedings.

While no further specific details were announced, the Commission put all parties on notice that “the timely resolution of these gender equality issues is firmly on the Commission’s agenda”.

These industries include child care, aged care (where a work value case is ongoing) and potentially, retail which is more problematic given that this industry is split 48%/52%, male/female where others involve more than 80% female participation.

It is likely that the Commission may move of its own motion to consider awards in these sectors in due course.

This may mean that the historical stability of modern award minimum rates across the modern award system may be changed. For the last 25 years this stability was based on what is called the C10 framework (hence the reference to C14 and C13 for the National Minimum Wage) which was introduced in the 1990’s to create stability and stop decades long instability (leap-frogging) brought about by ad-hoc work value cases.

As the C10 framework largely considered awards in male dominated sectors, the Commission will likely work to recalibrate this having considered its new obligation to remove gender undervaluation from  modern awards.

The implications for this could be profound and lead to a further raising of many modern award minimum rates of pay.

What do employers need to do?

Employers should ensure that employees who are paid strictly in accordance with a modern award or the National Minimum Wage receive the appropriate pay increase by the relevant, effective date.

Employers who pay over minimum modern award rates can continue to absorb increases into over award payments (subject to how their employment contracts are worded).

If you pay above minimum award rates, pay annualised salaries or ‘flat rates’ of pay you should still ensure that these payments will satisfy your obligations under the relevant modern award once the increases apply.

Employers who pay in accordance with an enterprise agreement must ensure that the base rates of pay under their agreement are no lower than the increased relevant modern award rates of pay, particularly if the agreement was made several years ago.

When will the changes come into effect?

The changes come into operation from the first full pay period on or after 1 July 2023.,

To view the Commission’s decision click here. A summary of the decision is also available here.

Further information

If you would like to discuss the changes and their impact on you please contact one of the workplace and employment law team or call 1300 565 846.