Annual Wage Review Decision
On 19 June 2020, the Fair Work Commission handed down its 2020 Annual Wage Review Decision. The key elements of the decision are:
- the national minimum wage will increase by 1.75% from $19.49 to $19.84 per hour from 1 July 20201 ; and
- a 1.75% increase to full-time minimum wage rates in modern awards.
Allowances will be increased in line with the formulas in awards.
The increases in modern awards commence from different dates for different industries:
- from the first full pay period starting on or after 1 July 2020 – Category 1 – health care and social assistance workers, teachers and childcare workers and employees engaged in other essential services.
- from the first full pay period starting after 1 November 2020 – Category 2 – industries not in Categories 1 or 3 such as cinemas, clerical, manufacturing, storage and transport.
- from the first full pay period starting on or after 1 February 2021 – Category 3 – accommodation and food services, arts and recreation services, aviation, retail trade and tourism.2
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.
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 2020 quarter and 2.1% in the year to March in trend terms.3
Data on enterprise agreement wage outcomes for the December 2019 quarter4, shows an average annual wage increase of 2.7% for private sector agreements and 2.5% for public sector agreements.
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 $148,700 to $153,600 for dismissals that take effect from 1 July 2020.
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 2020 from $74,350 to $76,800.
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 (e.g. breach of contract claims).
Other threshold changes
Tax Free Threshold for Genuine Redundancy7 – base amount and service amount.
There are automatic tax free amounts calculated according to a formula which specifies:
- a base amount; and
- an additional amount multiplied by years of completed service.
|Income Year||Base Amount||Service Amount|
Employment Termination Payment (ETP) cap
The ETP cap threshold will increase to $215,000 from 1 July 2020. The whole of income cap remains at $180,000 as this is a non-indexed figure.
Maximum quarterly superannuation contribution base.
In accordance with section 9 of the Superannuation Guarantee (Administration) Act 1992, the maximum quarterly superannuation contribution base is indexed in line with Average Weekly Ordinary Time Earnings (AWOTE) each income year. The new indexed amount is generally available each February.
|Income Year||Per Quarter|
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 a member of our Workplace Relations team.
1. $753.80 per week for a full-time employee working 38 hours per week.
2. The new rates and allowances payable under each award are expected to be published on the Fair Work Commission website shortly.
3. Source: ABS, Wage Price Index, Australia, Cat no 6345.0, Mar 2020. 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
5. Only applicable if employee is under age of 65.
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