On 31 May 2016, the Fair Work Commission handed down its 2016 Annual Wage Review Decision.
Annual Wage Review Decision
The key elements of the decision are:
- The national minimum wage will increase by 2.4% to $17.70 per hour
- A 2.4% increase to full-time minimum adult wage rates in modern awards
- A 2.4% increase to junior, apprentice, trainee and supported wage and piece work rates.
Allowances 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 20161. 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 0.4% in the March 2016 quarter and 1.9% in the year to March in trend terms – a new record low2.
Data on enterprise agreement wage outcomes for the March 2016 quarter3, shows an average annual wage increase of 2.9% for private sector agreements and 2.6% 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 covered), will also increase from $136,700 to $138,900 for dismissals that take effect from 1 July.
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 ordered for unfair dismissal, which the FW Act stipulates is 6 months’ pay (capped at half the high income threshold) will also rise from 1 July to $69,450.
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 (ie 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|
ETP cap threshold will remain at $195,000 from 1 July 2016. The whole of income cap also remains at $180,000 as this is a non-indexed figure.
Maximum Super Contribution base
In accordance with s 9 of the Superannuation Guarantee (Administration) Act 1992, the maximum super contribution base is indexed in line with AWOTE each income year. The new indexed amount is generally available each February.
|Income year||Per quarter|
1 The new rates and allowances payable under each award are available at https://www.fwc.gov.au/awards-andagreements/minimum-wages-conditions/annual-wage-reviews/annual-wage-review-2015-16
2 Source: ABS, Wage Price Index, Australia, Cat no 6345.0, Mar 2016. More information is available at www.abs.gov.au
3 The full report can be accessed at www.employment.gov.au/trends-federal-enterprise-bargaining
If you have any questions about how any of the matters mentioned 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.
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