Changes to Awards and minimum rates – Is it time to review your contracts?

Recently the Fair Work Commission has made decisions relating to the minimum standards and rates of pay applicable under a range of Awards.  Awards form the minimum standards for industries and automatically form part of a relevant employee’s employment agreement.  Awards are not the only documents that form part of an employment agreement or “governing instrument”.  Governing instruments can also include:

• An employment contract/letter of offer
• An enterprise agreement
• A piece of legislation or legislative instrument
• Any other document that could reasonable be conceived as to form part of an agreement between an employer and employee

Where a governing instrument is more favorable than an agreement between an employee and the employer, the governing instrument will prevail.

The unfortunate part about updates in minimum standards or rates of pay is that they do not always translate into the agreements between employee’s and employers, particularly when those agreements are reflective of now outdated minimum standards. Its is important to be aware of these updates and how they affect businesses and employment agreements moving forward.

The Fair Work Commission’s Decision

On 15 June 2022, the Fair Work Commission announced a 5.2% increase to the national minimum wage. This means that casual employees who are entitled to the national minimum wage must receive a minimum $26.73 per hour, which is inclusive of their 25% casual loading.

Employees covered by awards will have their minimum wage rates increase 4.6%, which is subject to a minimum increase for adult award classifications of $40 per week based on a 38-hour week for full-time employees. This means minimum award rates above $869.60 per week will receive a 4.6% increase, and wage rates below $869.60 per week increase $40 per week. Other award wages, including junior and apprentice awards will receive a proportionate increase. This is based on an ordinary work week as defined in the relevant award, meaning exclusive of all additional hours, over-time etc.

The increase to award wages will happen in two stages. The first increase, affecting most awards, occurred from 1 July 2022, and the second, affecting 10 awards in the aviation hospitality and tourism industries, are set to increase from 1 October 2022.

What does this mean for employers and businesses?

Recently, we have seen the underpayment of employees to be one of the leading factors in insolvencies, particularly in the building and construction, and mining industries. If underpaid wages are left unchecked, and employment agreements are not reviewed prudently, these underpayments can build-up to the point where employees may begin to petition as creditors for the company to be wound-up.

Now is a good time to review employment agreements and enterprise agreements to ensure they are up to the minimum standards. Doing so is a simple way to safeguard a business from an unexpected insolvency and to ensure minimum government standards are being met.

What does this mean for employees?

It is important for employees to be checking their employment agreements or enterprise agreements against minimum standards, and seeking advice where necessary, to make sure that they are receiving the minimum rates that they are entitled to. Some key things to check when reviewing entitlements are:

• Rates of pay
• Annual leave accrual
• Personal leave accrual
• Long service leave accrual
• Payment in lieu of notice entitlements
• Redundancy entitlements; and,
• Superannuation

And if you are in a relevant industry, it is important to make sure your employer is making the necessary contributions to your nominated, or agreed, portable redundancy and long service leave funds.

If an employee finds themselves in a situation where their employer has gone insolvent, they can make a claim for their unpaid entitlements through the government’s Fair Entitlements Guarantee Scheme. Please note that personal leave and superannuation are not covered by the Scheme. Superannuation can be recovered through the Australian Taxation Office.

What does this mean for insolvency practitioners?

As agents of the court, insolvency practitioners have a duty to comply with the law when conducting work post-appointment. As such, it is imperative when books and records are reviewed that underpayments are identified and adjusted accordingly so the minimum entitlements can begin to be paid post-appointment.

The positive

The introduction of the new rates offers a chance for businesses and employees to review their agreements to ensure the minimum standards are being met. Early intervention in these circumstances is imperative in preventing insolvencies and maintaining good relationships between employers and employees.