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Wages went up on 1 July… do we have to pay the increase now?

Release Date

23 July 2012

Minimum award wages rates have just been increased from 1 July 2012 as a result of the National Minimum Wage Order. You might be wondering how this impacts your company if you adjust your wages at a different time of the year?

For example, it may be your company’s policy that wages are reviewed annually at the end of each calendar year. Does the increase to award rates of pay from 1 July mean that you have to pass on the increase immediately, instead of at the end of the year?

2.9% increase

The National Minimum Wage Order 2012 was handed down by Minimum Wage Panel which increased, among other amounts, the minimum wage rates in the modern award by 2.9%, operative from the first pay period commencing on or after 1 July 2012. Allowances were also increased, using the formula in the relevant modern award.

The Order has an immediate effect on each employee’s wage where the current wage rate is less than 2.9% above the previous award wage.

Where an employee is receiving an over-award payment that is at least equal to, or greater than, the Minimum Wage Order increase, the employer can absorb the increase without breaching the minimum wage provisions of the applicable modern award.

Over award payments

Most modern awards contain an ‘absorption clause’ that allows an employer to absorb new monetary obligations — occurring in a modern award or arising from an annual wage review — into over award payments.

The clause usually provides that ‘nothing in this award requires an employer to maintain or increase an over award payment’.

Provided that each employee’s wage equals or is greater than the relevant minimum award wage rate at any point in time, you will not be in breach of the applicable modern award and if you do not review your employee’s wages until the end of the year.

Source: Paul Munro, IR Consultant, writes regularly for the HR/IR news and information website WorkplaceInfo www.workplaceinfo.com.au

For further information, please contact Australian Business Consulting & Solutions on 1800 505 529 or via email.


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