Modern Award rates have increased, so should all my employees get pay rises?

Written by: The Institute of Certified Bookkeepers

On 30 May 2019 the Fair Work Commission announced that as of the first full pay period in July, the minimum wages in modern awards would increase by 3% (and so would the Federal minimum wage for award-free employees).

But does this mean that employers have to increase the wages of all employees by 3%? The simple answer is no. The minimum rates set out in modern awards are exactly that: minimum rates of pay. If you are already paying above the award then there is generally no obligation to increase wages just because the minimum wage has increased (unless the new minimum wage will now be greater than the rate you are paying).

Employers who pay “above the award” rates of pay in order to meet all the entitlements that arise under an award should ensure that the rate of pay is still sufficient to cover all entitlements that might arise under the award (e.g. overtime, allowances, etc.) now that the minimum rates have increased. Employers should also make sure that employment contracts clearly state that the employee’s wage or salary covers all entitlements that arise under the award – to avoid an employee being entitled to an above the award rate of pay plus payment for overtime, allowances, etc.

Employers covered by an enterprise agreement should remember that the Fair Work Act 2009 states that if the base rate of pay in an enterprise agreement is overtaken by the base rate of pay in a modern award that would otherwise apply to the employee, then the employer must pay the award base rate of pay, rather than the rate stated in the enterprise agreement. NB this obligation to match the award rate only arises in relation to base rates of pay. There is no obligation for the overtime or penalty rates in an enterprise agreement to “keep up” with the award rate of pay (unless the enterprise agreement has specifically provided for this).

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