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The Fair Work Commission’s Expert Panel (Panel) has announced significant increases to minimum wages following the Annual Wage Review 2021-22.

From 1 July 2022, the National Minimum Wage (NMW) will increase by 5.2% to $21.38 per hour or $812.60 per week (up from $20.33 and $772.60 respectively). Last year, the Panel increased the NMW by only 2.5 percent following an increase of 1.75% in 2020.

The minimum weekly rates prescribed by modern awards will also be increased by:

  • 4.6% for award wage rates above $869.60; and
  • $40 for award wage rates below $869.60.

These changes come into effect from 1 July 2022 for most awards. However, the Panel determined that the wage increase will operate from 1 October 2022 for the following awards in the aviation, tourism and hospitality:

  • Aircraft Cabin Crew Award 2020
  • Airline Operations – Ground Staff Award 2020
  • Air Pilots Award 2020
  • Airport Employees Award 2020
  • Airservices Australia Enterprise Award 2016
  • Alpine Resorts Award 2020
  • Hospitality Industry (General) Award 2020
  • Marine Tourism and Charter Vessels Award 2020
  • Restaurant Industry Award 2020

The Panel cited the sharp increase in the cost of living as well as a strengthened labour market for their decision. Measures of unemployment have fallen to 3.9 per cent with the improvement in labour market expected to continue.

The Panel received submissions from Unions, employer groups, the Federal Government and State Governments. Union groups proposed increases of between 5.5 per cent and 6.5 per cent while AI Group and the Australian Chamber of Commerce and Industry proposed increases of between 2.5 per cent and 3 per cent. The Panel noted that an increase of between 6.5 and 5.5 per cent would pose a significant risk to the economy, while minimum increases of between 2.5 and 3 per cent would result in a reduction in real wages.

In May, the Reserve Bank of Australia (RBA) in its Statement on Monetary Policy predicted that the Wage Price Index would only surpass the CPI by mid-2024. The RBA noted while unemployment rates have been low, ‘real wages’ have declined as wage growth has not kept up with the rate of inflation. The RBA has noted that inflation is set to peak at 6% by the end of the year.

What does this mean for employers?

The Panel’s decision will affect millions of workers including those who have their rate of pay set under the National Minimum Wage, a modern award or in some instances an enterprise agreement.

Employers must reflect these increases from the first full pay period on or after 1 July 2022. Failure to implement these increases will result in underpayments which could lead to legal action including the imposition of financial penalties for breaches of the Fair Work Act 2009.

The superannuation guarantee will increase from 10 per cent to 10.5 per cent from 1 July 2022. This will ultimately increase to 12% by 2025 rising in 0.5 percentage point increments each year. The Albanese Labor Government has recently indicated its intention to investigate increasing superannuation to 15% by the end of their first term in Government.

If you would like more information about the legal implications of these increases and how they may affect your business, please contact our experienced Employment and Workplace Relations team for assistance.

This article was contributed to by Law Clerk, Maida Mujkic and Senior Associate, Ben Smith.