Written by Managing Partner Clayton Glenister and Senior Associate Sewar Mitanis
Effective 1 July 2021, and the start of the 2021-2022 financial year, employers need to be aware of significant changes to employees’ entitlements which will have an immediate effect on businesses across Australia.
Increases To The Modern Award Wage Rates And The National Minimum Wage
Recently, the Fair Work commission declared a 2.5% increase to all Modern Award wages across Australia. Most award wages increased effective on 1 July 2021 with several Awards wages due to increase on 1 September 2021 and 1 November 2021. For more information in relation to those increases, please see our previous blog article on this topic.
Similarly, the Fair Work Commission also declared that effective 1 July 2021, the National Minimum Wage increased to $772.60 per week or $20.33 per hour. This is an increase of $18.80 per week.
With many employers across various industries, paying their employees the minimum Award wages, it is important to apply the increases within the next pay cycle after the applicable effective date of the increase. Employers who pay employees “above award” remuneration packages should review the salaries provided to ensure that, on balance, employees’ entitlements do not fall below the applicable award entitlements.
Increases To Superannuation Employer Contributions
Effective 1 July 2021, all employers in Australia are required to increase their minimum superannuation guarantee contribution to 10%. The employer’s minimum superannuation contributions will continue to increase gradually over the next few years until they reach 12% in 2025.
The increase in superannuation contributions may have an immediate effect on employees’ remuneration packages which employers may not have budgeted for. It is important that employers assess arrangements with their employees and whether there may be ways to mitigate the financial burden of such increases.
Employers are encouraged to consider the impact of the increase in the superannuation contributions on the following categories of employees:
- Award based employees – employees who are covered by modern awards and receive all applicable entitlements under the awards. The increase in superannuation contribution would be compulsory.
- Employees on “Over Award” contracts – employees are covered by modern awards, however, they are paid what is known as “over-award” remuneration packages and their contracts of employment contain “offset” provisions. In some cases, employers may be able to “absorb” the increases in the superannuation contributions, however, tailored advice from an Employment Lawyer is highly recommended to ensure that contracts allow for such a mechanism.
- Employees who are not covered by an industrial instrument – whilst the majority of employees are covered by modern awards, some are not. Such employees are still entitled to receive the increased superannuation contribution rate. It is highly recommended that specific advice from an Employment Lawyer is obtained in order to ensure that employees’ contracts of employment sufficiently deal with this issue.
- Employees who receive remuneration packages that are “exclusive” of superannuation – generally, such employees would be entitled to receive the increased superannuation contribution. However, it is highly recommended that specific advice from an Employment Lawyer is obtained in order to ascertain whether the contracts of employment may include any provision that would allow for the “absorption” of the increase.
- Employees who receive remuneration packages that are “inclusive” of superannuation – generally, such remuneration packages would not stipulate the exact percentages that the employers should contribute to employees’ superannuation funds. It is likely that for such employees, employers may be able to “absorb” the increases. However, absorbing the increases may result in employees’ “take-home pay” being less than what employees received prior to the increase. It is highly recommended that specific advice from an Employment Lawyer be obtained to ensure compliance with legislation and other industrial instruments.
Increases To The “High Income Threshold”
Effective 1 July 2021, the “high-income threshold” for high-income earners (as defined in the Fair Work Act 2009) increased from $153,600 to $158,500. This threshold is used to determine the eligibility of employees to access the unfair dismissal jurisdiction and eligibility for guarantees of annual earnings.
This change will have an impact on whether high income earning employees may now be able to lodge unfair dismissal claims in the Fair Work Commission or the Queensland Industrial Relations Commission. It is imperative that employers conduct a review of contracts for such employees to ensure that their salary does not fall below the new high-income threshold.
Increases To The Unfair Dismissal Cap
Similar to the increases to the high-income threshold, effective 1 July 2021, the maximum amount recoverable in an unfair dismissal claim also increased to six (6) months’ pay capped at $79,250.
Don’t get caught out missing any of these important changes while navigating these updates all at once in your business. Contact our expert Employment and Workplace Relations team for assistance with all your employment and policy review needs.