2011 Annual Wage Increase and ongoing transitional provisions in Modern Awards

Minimum Wage Panel Decision

On 3 June 2011, the Minimum Wage Panel of Fair Work Australia (FWA) handed down the Annual Wage Review 2010-2011 decision.

The Minimum Wage Panel considered that a uniform percentage increase, rather than a flat dollar increase, should be made to the national minimum wage and modern award rates, as this would best ensure that the relativities between different award levels would not be 'compressed', and the real value of minimum award wages would be maintained.

The Minimum Wage Panel determined that a percentage increase of 3.4% should be made to the national minimum wage and modern award rates, with weekly wages rounded up to the nearest ten cents. Fair Work Australia has published draft determinations varying the modern awards and the increases are scheduled to take effect from the first pay period on or after 1 July 2011. There will also be increases in award allowances and an increase in the minimum rates for junior employees, apprentices and trainees.

Ongoing Transitional Provisions

It is important for employers to be aware that, for award covered employees, the transitional provisions set out in modern awards (introduced to adjust for changes arising from the creation of modern awards) still apply from 1 July 2011.

For the year 2011-12, in addition to the annual wage increase, most modern award wage rates will be adjusted (either up or down) by 60% of the relevant transitional amounts, rather than 80%, as was the case for year 2010-11.

In addition, award loadings and penalty rates will be adjusted to reflect the new transitional amounts. Making this task more complex is the fact that the Fair Work Ombudsman have determined different methods of calculating transitional loadings, depending on whether they consider that the old award entitlement is 'equivalent' to the new award entitlement.

Implications for Employers

The annual wage increase and transitional provisions are relevant for general award compliance, as well as for the purposes of meeting the BOOT for enterprise agreements under the Fair Work Act 2009. In a recent FWA decision, approval of an enterprise agreement was refused in part due to the employer's failure to explain to employees that the rates and penalties underpinning modern awards would increase under the transitional provisions.

It is crucial that employers who rely on modern award conditions are aware of the 2011 changes and calculate up-to-date wage rates and loadings accordingly.

We have developed detailed calculation tools to assist clients to identify award wage rates in light of the annual wage increase and new transitional provisions.

Employer Paid Parental Leave Payroll Obligations

From 1 July 2011, employers must administer government funded Parental Leave Pay (PLP) to eligible employees. PLP is to be paid in accordance with the employee's normal pay cycle, with the usual PAYG withholding arrangements applied.

Our Enterprise article summarises the PLP scheme.

Employers will have to provide their bank account details, the employee's pay cycle and pay cut-off details to Centrelink in order to receive PLP funds; these will be transferred to the nominated bank account either fortnightly or in three six-weekly instalments. Employers will have the additional administrative obligations of providing employees with a pay slip recording PLP, including PLP in the employee's periodic payment summary and keeping financial records of funds received and administered.

In preparation for the changes being operative from 1 July 2011, employers should:

  1. register for Centrelink Business Online Services to enable them to receive online Centrelink support;
  2. register for an AUSkey which provides an online management facility for employers to add or update bank details and new users online;
  3. ensure payment records and processes are updated to provide for recording obligations; and
  4. update PAYG arrangements to include PLP.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.