MINIMUM PAY RATES TO INCREASE BY 3.5% AND HIGH INCOME THRESHOLD TO INCREASE FROM 1 JULY 2018

Date: June 25, 2018

The Fair Work Commission (FWC) has handed down its decision on minimum pay, providing an increase of 3.5% to the national minimum wage and minimum award rates.  The changes take effect from the first full pay period after 1 July 2018.

The high income threshold will increase to $145,400 with effect from 1 July 2018.  Most relevantly, employees earning above the high income threshold (and who are not covered by a modern award or enterprise agreement) are not able to pursue a claim for unfair dismissal under the Fair Work Act 2009 (Cth) (FW Act).

ISSUE

The FWC has granted a 3.5% increase to the national minimum wage and the minimum pay rates under modern awards.  From 1 July 2018, the weekly minimum wage will be $719.20 per week, or $18.93 per hour.  The national minimum wage will apply to any employee who is not covered by a modern award.

The high income threshold will increase to $145,400 with effect from 1 July 2018.   This is principally relevant to the issue of whether an employee is able to make an unfair dismissal claim and when they can, it imposes a cap on potential compensation.  Where an employee earns above the high income threshold (and they are not covered by an award or enterprise agreement) the employee may not pursue an unfair dismissal claim against their (previous) employer.  Where an employee is able to pursue an unfair dismissal claim, the maximum compensation will be six months’ pay, capped at $72,700 (being half the high income threshold).

OUTCOME AND IMPACT

3.5% Increase to minimum wages

The FWC’s decision to increase the national minimum wage and modern award rates by 3.5% only impacts those employees who are paid in accordance with the national minimum wage or a modern award.

Where an employer pays its employees an annualised salary in excess of (and in satisfaction of) all award entitlements, it will not (depending on the precise terms of the relevant employment contract) be necessary to increase the employees’ salaries where the amounts paid are already above the required minimum rates.  However, even where an employer utilises annualised salary arrangements, the new financial year is a good time to check that the rates of pay are compliant with any modern award or national minimum wage requirements.

High income threshold to increase to $145,400

Whilst the terms of the employee’s contract of employment and any binding policies (if relevant) will require immediate consideration where employers are considering the termination of employment of employees earning in excess of the high income threshold, it will also be prudent to properly assess whether an award or enterprise agreement applies before any steps are taken in relation to termination of employment.

Examples of some recent cases where employees earning above the high income threshold claimed they were covered by an award or enterprise agreement for the purpose of accessing the unfair dismissal jurisdiction are below:

In McCullagh v Acciona Infrastructure Australia Pty Ltd [2018] FWC 2997, the FWC found that a person employed as “general foreperson” and receiving a total salary package of $202,575 plus a fully maintained motor vehicle was not covered by the Building and Construction General On-Site Award 2010.  The employee could therefore not proceed with their unfair dismissal claim.

In Collins v Bendigo Health Care Group [2018] FWC 2027, the FWC found that a Chief Financial Officer receiving a total remuneration package of $269,194 was not covered by an enterprise agreement and therefore was not able to proceed with their unfair dismissal claim.

In Muscat v Chase Commercial Pty Limited T/A Chase Commercial [2018] FWC 1398, the FWC found that an employee employed by a commercial real estate agency earning around $180,000 with the title “Director of Asset Management” was covered by the Real Estate Industry Award 2010 and therefore, despite their salary, could proceed with their unfair dismissal claim.

In Linfox Australia Pty Ltd v Howell [2018] FWCFB 464, a Full Bench of the FWC found that the employee was covered by an enterprise agreement and was therefore able to proceed with their unfair dismissal claim despite receiving an annual remuneration package of $150,778.36.

These recent cases show that the issue of whether or not a high income employee is covered by an award or enterprise agreement can often be a vexed issue.

CONTACT

Please contact us if your business requires assistance with compliance advice.

Whitehall Workplace Law

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