New Wage Rates apply from 1 July 2010

Modern awards now cover most workplaces, bringing about a change to minimum terms and conditions of employment. Many of these changes result in an increase in wage rates, penalty rates and allowances from what employers have historically paid employees. Whilst the modern awards commenced on 1 January 2010, the wage rates, penalty rates and allowances did not start until 1 July 2010.

In order to allow employers time to adjust to these changes, most modern awards contain transitional arrangements, allowing for the ‘phasing-in’ of the new wage rates (including the Federal Minimum Wage increase of $26 per week), penalty rates and allowances over a five year period, starting from the first full pay period on or after 1 July 2010.

From 1 July 2010, employers have the choice to either pay the full amount of any increase in wage rates or to phase the increase in at 20% increments over 5 years.

Employers also have the ability to phase in any increases in casual loadings, weekend penalty rates, public holiday rates, shift allowances and other allowances, but changes to overtime rates cannot be phased in and applied from 1 January 2010.

The good news is that the increases in award entitlements under the modern award can be absorbed into any over-award component of an employee’s salary where the salary is sufficiently over the award minimum wage to do so.

Key Point: Employers need to determine any increase in wage rates, penalty rates and allowances applying from 1 July 2010. They then have the choice of either:

  • paying the increases in full from 1 July 2010;
  • phasing the increases in at 20% increments over 5 years; or
  • absorbing them into any over-award component where an employee’s salary is sufficiently above the award wage to do so – this should be recorded in a contract.

Employers that are unsure about whether they’re applying the correct award; paying the correct wage rates or how to phase in the increases should seek legal advice without delay to avoid non-compliance and the risk of hefty penalties.