What employers need to know about the new wage increase

Amid an ongoing pandemic, the Fair Work Commission has announced an increase to the minimum wage – but what does it mean for your business?

On 19 June, The Fair Work Commission announced that Australia would see a 1.75 percent rise to the minimum wage.

The increase is in effect as of 1 July 2020, making the new national minimum wage $753.80 per week, or $19.84 per hour.

Although on the surface it may seem like a blanket wage uptick, it’s actually a bit more complicated than that – depending on the industry your business lies in, the increase might not actually affect you until next year.

Getting to grips with the finer details

For business owners worried about budgeting for staff wages in a mere week, it’s important to note that award increases are set to occur in three stages.

The award groups initially affected by the new minimum wage from 1 July include frontline healthcare, social assistance workers, teachers and child care and other essential services.

There are two Awards Groups to follow:

• Group 2 consists of construction, manufacturing and other industries and is set to be introduced from 1 November 2020
• Group 3 consists of retail, hospitality, aviation and arts and recreation and will be introduced from 1 February 2021

If you’re unsure when your industry qualifies for the rise in minimum wage, the full list of award groupings can be found in the Fair Work Commission’s media release.

And as for the reliably confusing JobKeeper payments?

In these instances, the new minimum wage applies to work an employee performs under the JobKeeper scheme, but only if their pay rate is related to an award or the national minimum wage.

Reasons for the Fair Work Commission’s decision

The Fair Work Commission’s verdict was designed primarily to “establish and maintain a safety net of fair minimum wages” to support lower income earners during these extraordinarily difficult times.

Statistics commissioned by the Fair Work Commission in its wage review report found that a much higher proportion of low-paid households experienced stress related to the following:

• Paying electricity, gas or telephone bills on time
• Needing to obtain financial help from friends or family
• An inability to raise $3000 in a week for something important

Research also supported an increase to the minimum wage to alleviate stress associated with other vulnerable demographics. These include:

• Equal remuneration for women: Research found that women were more likely to be award reliant, low paid, and both low paid and award reliant.
• Young people: social, economic and health outcomes of young people were found to be much poorer with lower wage and employment levels
• Apprentices and Trainees: higher minimum wage contributed to improved economic wellbeing of apprentices
• People with a disability: people with disability were not only more likely to be on the minimum wage than people without disability, they also often incurred higher living expenses.

Conflicting viewpoints raised before the announcement

Although the modest increase to the minimum wage will be received warmly by some, not all found the decision agreeable.

Before the Fair Work Commission’s announcement, Sally McManus, Secretary of the Australian Council of Trade Unions, pushed for a four percent increase to the minimum wage, while labour economics expert Professor Mark Wooden instead advised for the panel to “prioritise growth in jobs and hours over a wage increase”.

“Just about every cent a worker on minimum wages receives, they spend,” McManus said. “This is money circulating to local businesses.

“It is the fastest and most effective form of stimulus we can have,” she said, expressing disappointment after the announcement of the decision,

“Wage cuts are confidence killers which hurts business and job creation.”

Wooden took issue with the decision for very different reasons, believing a higher wage will decrease the potential for jobs.

“Given a downward sloping demand curve for labour, increases in wages will (all other things held constant) result in a reduction in the demand for labour, and hence either a reduction in employment or in the number of paid hours worked (or both),” he stated in the Fair Work Commission’s wage report.

How can businesses keep up?

Trying to stay on top of wage changes and keeping payroll up-to-date is challenging and can land employers in hot water when things go wrong.

According to Rod Schneider, Head of Strategic Partners for leading time and attendance software Tanda, it is possible to incorporate modern solutions to take care of this for you.

“Whether you’re an accountant handling several clients or if you’re just one person handling this process in an organisation, you need to find solutions that save time and ensure accuracy,” said Schneider.

Using Tanda in combination with your online accounting software, you can achieve exactly that.

“Tanda has a team of compliance professionals that tracks award changes and makes updates when necessary,” said Schneider.

“This team’s responsibility is ensuring compliance, and using the managed award templates will update pay items in MYOB according to the latest changes. In addition, they provide guidance on managing new challenges that arise, as can be seen in the recent example of JobKeeper.”

READ: Simplifying the JobKeeper payroll process with Tanda and MYOB

In this situation, timesheet data collected in Tanda is computed based on the correct awards, and this information goes straight into your accounting system for the employer or payroll officer to verify.

“Tanda and MYOB covers all areas of staff management — from rostering, automatic computation of staff costs based on hours and industry awards, and processing of costed timesheets — all done in minutes.”

READ: How to streamline payroll processing

With Tanda and MYOB, payroll can be processed quickly. Tanda’s Managed Award Templates enhance payroll accuracy at every stage — from scheduling, hours worked and application of awards for each employee.

Want to learn more about how Tanda and MYOB can help simplify your business and save you a lot of hassle? Check Tanda out in our App Marketplace directory today.