|Yesterday (3 June) Fair Work Australia handed down its 2010 annual wage review, increasing adult award rates by $26.00 and the adult minimum wage by $26.12 to $569.90 (or $15.00 per hour).
The increases apply from the first pay period starting on or after 1 July 2010. Junior rates, training rates, including training wage rates, and piece rates vary according to the formula in the relevant award.
For many, the increases coincide with the first phasing step into their modern award rates, which also applies from the first pay period starting on or after 1 July 2010.
This circular deals with who is affected by the decision and its effect on classification rates, allowances, casual loadings and modern award phasing.
Except for some employers in Western Australia, private sector employers are in the national system. State system employers are not affected by this decision.
Most national system employers are covered by one or more modern awards that cover all or most of their employees. Some employees are award-free and some employees are covered by other instruments. Award-free employees may be covered by a minimum wage order.
Classification rate increases
1. Modern awards
Modern awards cover national system employers according to their coverage clause and the classification structure. They do not cover employers covered by:
(i)enterprise awards or enterprise NAPSAs
(ii)Div 2B state awards (which cover those employers referred into the national system on 1 January 2010 who previously employed under state awards)
Where a modern award covers the employer, they do not cover its employees:
(i)excluded by the coverage provisions
(ii)who do not fall within the classification descriptions
excluded by a high income guarantee.
An employee who is excluded because he or she does not fall within the classification descriptions in the relevant modern award may be covered by:
(i)an occupational modern award
(ii)a NAPSA or federal award (transitional award) which covered the employee’s work prior to 1 January 2010
(iii)or may be award-free.
Adult employees covered by modern awards had their award rates increased by $26.00 from the first pay period starting on or after 1 July.
2. Award-free employees
Most award-free adult employees are covered by the national minimum wage. This was increased to $569.90 from the first pay period starting on or after 1 July.
The following award-free employees are not covered by the national minimum wage:
adult employees of employers referred into the national system on 1 January 2010 who were previously award-free and covered by the relevant state minimum wage continue to be covered by it:
(i)that rate was not increased
(ii)employees undertaking training
(iv)employees with a disability (most award-free employees with a disability are covered by a national minimum wage that is equal to the one above [$569.90 from the first pay period starting on or after 1 July] or equal to the discounted wage under the supported wages system — award-free employees with a disability employed by employers who were referred into the national system on 1 January 2010 are not subject to a minimum wage).
The minimum wage under the supported wages system and related discounted wages systems (currently $71.00) will be increased in the near future following the release of the revised weekly income free test threshold in the near future.
In all cases, the increases referred to above may be absorbed into over award payments.
For employees covered by an enterprise agreement or a transitional agreement (a pre-fair work agreement such as an AWA or ITEA, state enterprise agreement, preserved state agreement, collective or certified agreement) which applies to them, the modern award classification rates are the minimum classification rate they can be paid under their agreement. In some cases, this may lead to increases from the first pay period starting on or after 1 July to bring an employee’s rate up to the new modern award rate.
3. Enterprise awards and enterprise NAPSAs
The increase applies. Where employees covered by an enterprise award or NAPSA are also covered by an agreement which applies, the new rates in their enterprise award or enterprise NAPSA are their minimum rates. This may lead to increases where the agreement rates are lower.
4. Transitional awards and NAPSAs
The $26 from the first pay period starting on or after 1 July increase applies. These apply when the employer is covered by a modern award but the employee does not fall within the classification structure and the employee’s work was previously covered by a federal award or NAPSA. The new rate forms the employee’s minimum rate where he or she is covered by an agreement with lower rates which applies.
5. Division 2B state awards
Rates in most Div 2B State Awards were not increased. However, enterprise specific Div 2B state awards did receive the $26 increase. These new rates are the minimum rates for employees also covered by an agreement.
1. Modern Awards
Allowances in modern awards vary automatically when classification rates are increased. There are two types of allowances.
‘Work related’ allowances (such as leading hand, dirty work, confined spaces, etc, allowances) are expressed as a percentage of the ‘standard rate’ in the award. These will increase in line with the increase to the standard rate.
‘Expense related’ allowances vary with the movement in the relevant component of the CPI since they were last varied. In most cases, this will be from the June quarter 2008. In some cases, a particular allowance may not increase, and the size of any increase will depend on the particular component of the CPI that the allowance is linked to. (See Further information below.)
2. Award-free employees covered by a minimum wage
These employees are not covered by any instrument that provides allowances. Subject to their contract of employment, the decision does not increase any non-wage entitlement for these employees.
3. Enterprise awards and NAPSAs, transitional awards and NAPSAs, Div 2B state awards
The annual wage review decision does not vary any allowances applying to these employees under their award or NAPSA. There may be further decisions from Fair Work Australia affecting these rates.
Award-free casuals are covered by the default casual loading, unless there is an agreement covering them. The default casual loading was increased from 20% to 21% from the first pay period starting on or after 1 July.
The wage decision and phasing
Many modern awards have provisions phasing-in the award’s classification rates and penalties or loadings. Where there was a difference between the pay rate, penalty or loading in the old pay scale, NAPSA or transitional award and the corresponding rate, penalty or loading in the modern award the old rate continued to apply after 1 January 2010.
From from the first pay period starting on or after 1 July, phasing starts. Phasing is intended to reduce the gap between the old rate and the modern award rate over five annual installments.
Where there is phasing, an employee’s new minimum rate from the first pay period starting on or after 1 July is the modern award rate (after the $26 increase) +/– 80% (four-fifths) of the ‘gap’.
The ‘gap’ is based on rates before the $26 increase. It can be determined from the rates applying immediately before the increase (ie it is the difference between the employee’s rate under the old pay scale on 30 June and the modern award rate on 30 June). This same ‘gap’ amount is used for phasing in the following three years.
If an employee’s old rate is higher and the ‘gap’ amount is $26 or less the ‘gap’ amount can be fully absorbed now. The employee’s minimum rate from the first pay period starting on or after 1 July is the modern award rate for his/her classification. That employee’s classification rate is now fully phased into the modern award.
2. Loadings and penalties
Under phasing, an employee’s new minimum penalty or loading is the modern award penalty or loading +/– 80% of the ‘gap’ between the old one and the one under the modern award. The phased penalty or loading applies as the employee’s minimum penalty or loading from the first pay period starting on or after 1 July. The same ‘gap’ is used for phasing over the next three years.
Enterprise awards and NAPSAs, transitional awards and NAPSAs, minimum wage orders and Div 2B state awards do not have phasing provisions of this kind.
As noted above, where there are increases, they take effect from from the first pay period starting on or after 1 July 2010. The first round of phasing also takes effect from the first pay period starting on or after 1 July.
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