Australia: Australian Fair Pay Commission Determination

Yesterday the Australian Fair Pay Commission (AFPC) released its first minimum wage determination. From 1 December the Federal Minimum Wage (FMW) will rise by $27.36 per week, an increase from $12.75 to $13.47 per hour. Employees covered by the Australian Pay and Classification Scales (APCS) who earn up to $700 per week will also receive the same $27.36 per week increase and those who earn above $700 will receive a $22.04 per week rise. For employees outside the Federal system, the minimum wage is set by State legislation. Apart from the general FMW, the AFPC also sets a minimum rate for juniors, trainees and workers with a disability.

The AFPC was established under the Work Choices legislation. Its primary role is to develop and adjust the FMW and other pay rates relating to different classifications, and casual loadings. Work Choices implemented key minimum employment conditions, such as annual leave, hours of work and personal leave. Leaving aside the operation of the complex transitional provisions, an employment arrangement for a constitutional corporation cannot contain conditions below these minima. The function of the AFPC is therefore to determine the wage component of these minimum conditions. As well as the basic FMW, the AFPC also determines the APCS. This represents minimum pay rates for employees within various award classifications. The pay rate for those in an APCS will be increased as outlined above, however the AFPC has stated that it will seek to streamline the current classification system at some point in the future.

In making its determination the AFPC considers:

• The capacity of the unemployed to obtain and remain in employment.
• Employment and competitiveness across the economy.
• Providing a safety net for the low paid.
• Providing a minimum wage for junior employees, and employees to whom training arrangements apply and employees with a disability to ensure those employees are competitive in the labour market.

It is therefore likely that commentary on this determination will centre on two competing interests; providing a proper safety net for the low paid and ensuring that the minimum wage is not set too high that it prices people out of the labour market.

The AFPC’s determination can only apply to Work Choices employees and those entities covered by a Work Choices transitional arrangement. These changes will apply under Work Choices unless wage rates are located in some form of workplace or transitional agreement.

The increases discussed will flow through to juniors, trainees and employees with a disability. The AFPC also announced that it will conduct a review of junior and trainee wages in early 2007 with a view to future changes, including the potential establishment of new Classification Scales. From 1 December a new FMW will be established, equal to the standard FMW for employees with a disability that does not impair their productive capacity. The supported wage minimum weekly payment will also rise to $64.00.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.