On 1 July 2023, the national minimum wage (NMW) and modern award minimum wages will increase by 5.75% following the Fair Work Commission (FWC) Expert Panel decision handed down earlier this month.

The NMW – which applies to Australian employees that are not covered by awards or enterprise agreements – will actually increase by 8.65% because the FWC ended the alignment between the NMW and the C14 classification wage rate in modern awards. Instead, the FWC aligned the NMW with the higher C13 classification wage rate, which in nearly all relevant awards is the lowest modern award classification rate applicable to ongoing employment.

The FWC justified this on the basis that the proportion of the Australian employee workforce who only received the NMW is 0.7%.

The key outcomes for the 2023 Annual Wage Review are as follows:

• the NMW rate will be aligned with the C13 modern award classification (currently $834.80 per week or $21.97 per hour) and a 5.75% increase will apply to those rates, which will see:
  • the current weekly minimum wage increase from $812.60 to $882.80 (an increase of $70.20 per week); and
  • the current hourly minimum wage increase from $21.38 to $23.23 (an increase of $1.85 per hour);
• a 5.75% increase will apply to modern award minimum wages across the board.

Any employee not covered by a modern award or enterprise agreement will, from the first full pay period on or after 1 July 2023, be entitled to a minimum weekly wage for 38 hours of work equal to $882.80, or $23.23 an hour (plus the 25 per cent casual loading in respect of casual employees)

From the first full pay period on or after 1 July 2023, any employees covered by a modern award are to be paid no less than the new modern award wage in respect of the employee’s classification under the modern award. This change also includes casual loading and other loadings, penalties, allowances or overtime, which are calculated by reference to the modern award minimum pay rates.

Employers should review annual salary packages for award-covered employees to ensure they are adequate to compensate them for their award entitlements (and the increase in the Superannuation Guarantee rate to 11% on and from 1 July 2023).

Remember that if base rates of pay under an enterprise agreement covering an employee are less than the base rates provided in an award covering the same employee (or the NMW if award-free), the latter rates prevail.

Employers that intend to guarantee pay above the high-income threshold to preclude the application of a modern award for certain employees should review whether the annual rate of earnings paid to the relevant employees exceeds the high-income threshold. The high-income threshold will increase on 1 July 2023.