Annual Wage Review Decision
On 16 June 2021, the Fair Work Commission handed down its 2021 Annual Wage Review Decision.
The key elements of the decision are:
- the national minimum wage will increase by 2.5% from $19.84 to $20.33 per hour from 1 July 20211; and
- a 2.5% 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 2021 – Category 1 – industries not in Categories 2 or 3 such as manufacturing, health care and social assistance workers, teachers and childcare workers
- from the first full pay period starting after 1 September 2021 – Category 2 – some retail trade (to which the General Retail Industry Award applies)
- from the first full pay period starting on or after 1 November 2021 – Category 3 – accommodation and food services (with the exception of the Fast Food Industry Award), fitness, arts and recreation services, aviation, retail trade (with the exception of the General Retail Industry Award) and tourism2.
If you are 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 (e.g. in an enterprise agreement).
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 0.6% in the March 2021 quarter and 1.4% in the year to March in trend terms3.
Data on enterprise agreement wage outcomes for the December 2020 quarter4, shows an average annual wage increase of 2.6% for private sector agreements and 2.4% 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 $153,600 to $158,500 for dismissals that take effect from 1 July 20215.
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 2021 from $76,800 to $79,2506.
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).
Superannuation Guarantee Contributions
The Superannuation Guarantee (SG) rate will increase from 1 July 2021 from 9.5% to 10% and continue to increase annually until it reaches 12% on 1 July 2025.
|Income Year||SG Rate|
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 cap
The employment termination payment cap threshold will increase to $225,000 from 1 July 2021. The whole 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 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. The Fair Work Commission’s draft determination for the Annual Wage Review 2020-21 can be accessed at https://www.fwc.gov.au/awards-agreements/minimum-wages-conditions/annual-wage-reviews/annual-wage-review-2020-21/draft
2. The Fair Work Commission’s draft determination for the Annual Wage Review 2020-21 can be accessed at https://www.fwc.gov.au/awards-agreements/minimum-wages-conditions/annual-wage-reviews/annual-wage-review-2020-21/draft
3. Source: ABS, Wage Price Index, Australia, Cat no 6345.0, Mar 2021. 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. The Fair Work Commission’s announcement regarding the increase in the high income threshold can be assessed at https://www.fwc.gov.au/about-us/news-and-events/filing-fee-increase-dismissals-general-protections-anti-bullying-1
6. See note at footnote 5.
7. Only applicable if employee is under age of 65.
|Disclaimer: This publication contains comments of a general nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional advice. No responsibility can be accepted by Rigby Cooke Lawyers or the authors for loss occasioned to any person doing anything as a result of any material in this publication.
Liability limited by a scheme approved under Professional Standards Legislation.
©2021 Rigby Cooke Lawyers