Everything You Need to Know About the 2020-21 Minimum Wage Increase

On 1 July 2020 the Australian minimum wage for 2020 to 2021 increased by 1.75% per cent to $19.84 per hour. This means a full-time employee will earn a minimum of $753.80 per week, an increase of $13 per week.

However, unlike previous years, where the national minimum wage increase would take effect for every award at once, this time, the increase will gradually be phased in over 3 stages.

Depending on the industry you are in, the time in which you receive the minimum wage increase will differ. Below is a quick breakdown of when each award will receive the increase https://www.fairwork.gov.au/about-us/news-and-media-releases/website-news/the-commission-has-announced-a-1-75-increase-to-minimum-wages#when-will-my-award-increase:

1st stage (Group 1 Awards): 1 July 2020

  • Frontline healthcare and social assistance workers
  • Teachers and childcare workers
  • Other essential services

2nd stage (Group 2 Awards): 1 November 2020

  • Construction
  • Manufacturing
  • A range of other industries

3rd stage (Group 3 Awards): 1 February 2021

  • Accommodation and food services
  • Arts and recreation services
  • Aviation Retail Trade
  • Tourism

Maintaining stability during COVID-19

The decision to stagger the minimum wage increase is largely due to the COVID-19 pandemic, where industries hit the least-hardest by COVID-19 will benefit first, followed by the remaining sectors such as essential workers later on in the year and early 2021.

Staggering the pay rises will also assist sectors which have suffered the biggest job losses and pay declines during COVID-19.

The Fair Work Commission (FWC) also admitted that the minimum wage increase of 1.75% is considerably lower than the 3% increase of 2019, yet it still falls mostly in line with the current inflation rate, which was 1.90% in March.

As a result, the increase will help balance the need for lower-income earners to support themselves financially, while also making it easier for employers to attract and retain employees, while managing their daily business operations – thus, being able to keep their doors open.

In addition to this, the wage increase is high enough so that the rate of ‘real wages’ won’t go backwards. What this means is, since the increase is mostly line with the rate of inflation, workers can still afford roughly the same amount of goods and services that they previously could. In a sense, the amount of ‘buying power’ they have will remain the same.

What employers need to know

Employers who pay any of their employees the minimum wage rate must increase their employee’s pay in the first full pay period on or after 1 July 2020, 1 November 2020 or 1 February 2021 – depending on which modern award applies.

For employees covered by a collective bargaining agreement, employers should review these agreements and make any necessary changes, so that each employee’s rate of pay is compliant with the national wage increase.

The minimum wage increase will also apply to any work an employee performs while they’re in the JobKeeper scheme, if they get their pay rate from an award or the National Minimum Wage.

To find out if the minimum wage increase will affect your employee’s usual pay for work performed in a fortnight, refer to the FWC Pay and Conditions Tool. Choose your relevant Group (1, 2 or 3), followed by the set date in which the wage increase will take place for you.

Employers should also take the time to review any other changes that could made to their relevant award outside of just the wage increase.

Updating your payroll procedures

Keeping your payroll procedure up-to-date with the latest minimum wage increase is important.

It ensures that your employees are being paid the correct wage, while protecting your business from costly pay disputes and the risk of serious penalties imposed by the Fair Work Ombudsman (FWO).

Depending on your existing payroll procedure, you may have to manually update the rate of pay for each employee.

Also, when calculating the new minimum pay rate, you may need to consider how the rate increase applies to junior employees and apprentices. Other factors like penalty rates, leave entitlements, flexible working arrangements, public holidays and redundancy pay must also be taken into account.

Extra due-diligence must be made to reduce the risk of critical payroll errors. For this reason, consider enlisting the help of an outsourced payroll service provider, so they can help take the stress and complexity out of your payroll.Request a FREE demo of E-Payoffice. See how our online payroll software and outsourced payroll services will ensure that your payroll is right the first time, every time.

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