Preparing for 1 July 2018 – increases to wages and remuneration

21 June 2018

Annual Wage Review Decision

On 1 June 2018, the Fair Work Commission handed down its 2018 Annual Wage Review Decision. The key elements of the decision are:

  • the national minimum wage will increase by 3.5% to $18.93 per hour; and
  • a 3.5% increase to full-time minimum wage rates in all modern awards, including:
    • Road Transport and Distribution Award 2010
    • Road Transport (Long Distance Operations) Award 2010
    • Transport (Cash in Transit) Award 2010
    • Clerks-Private Sector Award 2010

The new minimum weekly and hourly rates of pay permanent employees are entitled to under each of these modern awards from 1 July 2018 as a result of the Annual Wage Review Decision are set out in the Schedule to this article.1

Allowances contained in these award will be increased in line with the formulas in awards.

These increases are operative from the first full pay period starting on or after 1 July 20182. If you are already paying an employee above the new minimum rate for their classification in the applicable award, you are not required to adjust those rates unless you have agreed otherwise.

1 Note: Casual employees are generally entitled to a casual loading of 25% but the relevant clauses of each modern award in relation to casual employees should be checked.

2 The new rates and allowances payable under each award are expected to be published on the Fair Work Commission website shortly.

Wage outcomes and trends

The national wage price index (WPI) shows that rates of pay (excluding bonuses) for all wage and salary workers across all industries in the private sector increased by 0.5% in the March 2018 quarter and 1.9% in the year to March in trend terms.3

Data on enterprise agreement wage outcomes for the December 2017 quarter4, shows an average annual wage increase of 2.6% for private sector agreements and 2.4% for transport, postal, warehousing sector agreements.

3 Source: ABS, Wage Price Index, Australia, Cat no 6345.0, Mar 2018. More information is available at www.abs.gov.au

4 The full report can be accessed at www.employment.gov.au/trends-federal-enterprise-bargaining

High income threshold

The high income threshold, which limits an employee’s eligibility to pursue an unfair dismissal claim (unless they are award or agreement covered), will also increase from $142,000 to $145,400 for dismissals that take effect from 1 July 2018.

The same figure is used for guarantees of annual earnings. An employer may provide such a guarantee to an employee whose earnings exceed this amount and the effect is that an award which would otherwise apply to that employee does not apply. However, that employee remains covered by the award for the purposes of the unfair dismissal provisions.

The maximum compensation which can be awarded for unfair dismissal, which the Fair Work Act 2009 (Cth) (FW Act) stipulates is 6 months’ pay (capped at half the high income threshold) will also rise from 1 July 2018 from $71,000 to $72,700.

It is important to remember that high income earners still have access to other avenues to challenge a dismissal including the general protections provisions in the FW Act, anti-discrimination legislation and the common law (eg breach of contract claims).

Other threshold changes

Tax free threshold for genuine redundancy – base amount and service amount

There are automatic tax free amounts calculated according to a formula which specifies:

  • a base amount, to which is added
  • an additional amount multiplied by years of completed service
Income year Base amount Service amount
2018-19 $10,399 $5,200
2017–18 $10,155 $5,078

ETP cap

ETP cap threshold will increase to $205,000 from 1 July 2018. The whole of income cap also remains at $180,000 as this is a non-indexed figure.

Maximum superannuation contribution base

In accordance with section 9 of the Superannuation Guarantee (Administration) Act 1992, the maximum superannuation contribution base is indexed in line with AWOTE each income year. The new indexed amount is generally available each February.

Income year Per quarter
2018-19 $54,030
2017-18 $52,760

If you have any questions about how any of the above impacts your business or you would like assistance with your remuneration and/or enterprise bargaining strategy, please contact our Workplace Relations team.