Annual Wage Review Announced – preparing for the 22/23 financial year
The new financial year always brings a rush of activity to finalise financial transactions for businesses but at the same time there are other financial considerations, regarding employees and contractors, which should be considered as 1 July approaches.
Annual wage review
Each year the Fair Work Commission (FWC) decides if the national minimum wage (NMW) will be increased and if so, by how much. The percentage increase is also ordinarily unilaterally applied to the minimum wages documented in the modern awards managed by the FWC.
The decision for the 2022-23 financial year was released on 15 June, to be implemented for the NMW and identified award wage recipients in the first pay period after the start of the new financial year. The FWC decided to increase the NMW by $40 per week to account for the significant increases in living costs that resulted in last year’s wage review delivering an effective decrease in earnings for low paid workers. The FWC also determined to increase modern award minimum wages by 4.6 per cent, subject to a minimum increase for adult award classifications of $40 per week for low-income adult full-time rates. The decision means that current modern award minimum wage rates above $869.60 per week will receive a 4.6 per cent increase and wage rates currently below $869.60 per week will be increased by $40 per week.
Because of the impacts of Covid-19 over the last couple of years, some award increases have been scheduled to start at a time other that 1 July, and this year the FWC decided to exercise their discretion to delay award wage increases to operate from 1 October 2022 for:
- Aircraft Cabin Crew Award 2020
- Airline Operations – Ground Staff Award 2020
- Air Pilots Award 2020
- Airport Employees Award 2020
- Airservices Australia Enterprise Award 2016
- Alpine Resorts Award 2020
- Hospitality Industry (General) Award 2020
- Marine Tourism and Charter Vessels Award 2020
- Registered and Licensed Clubs Award 2020
- Restaurant Industry Award 2020.
All other modern awards will increase on 1 July 2022.
The minimum wage increases do not necessarily translate into equivalent increases for workers who are not paid in accordance with the NMW or under a modern award. It remains open for employers to deal with proposed increases for non-award employees at another time, as long as all employees are not paid less than the relevant modern award classification that would otherwise apply to their employment, considering increases to penalties and allowances that may be incorporated into an above award payment.
If your business does pay employees under a modern award, you need to turn your thoughts to the increases, so you can ensure your payroll is ready for the first full pay period after the start of the financial year. Rates can be estimated by applying the increases outlined above. The confirmed rates will be released by the FWC closer to 1 July 2022.
The Superannuation Guarantee (Administration) Act 1992 provides for a scheduled increase to the employer contribution percentage over a twelve-year period. On 1 July 2022, the compulsory employer superannuation contribution rate will increase to 10.50%. Consequently, employers are required to contribute additional money into their employees’ superannuation accounts in line with the increased contribution percentage rate.
The Superannuation Guarantee last increased to 10% on 1 July 2021 and the percentage rate will rise again to 11% on 1 July 2023. The employer contribution rate will continue rising 0.5% each year until it reaches its final rate of 12% on 1 July 2025.
Removal of the $450 monthly SG threshold
As of 1 July 2022, the $450 minimum monthly income threshold will be removed for employees over 18 or for under 18-year-olds working more than 30 hours per week, unless they are covered by a workplace agreement that states otherwise.
With the government cancelling the monthly threshold amount, employers are now required to make superannuation contributions for all their employees, including casual and part-time employees, regardless of how much they earn, apart for the exclusions mentioned above.
Increase in age limit for salary-sacrifice contributions
If you have employees making salary-sacrifice superannuation contributions, the age limit for making those contributions, without needing to meet the work test, has been increased from age 68 to 74. That means, from 1 July 2022 eligible salary-sacrifice arrangements paying into superannuation are available to anyone aged under age 75, without the need to meet a work test. The other normal eligibility criteria such as a total superannuation balance (including compulsory and voluntary deposits) of less than $1.7 million and sufficient unused annual non-concessional contributions cap still apply.
Active Law can assist your business to prepare for the impending changes with audits and advice. You can reach us at email@example.com or on 07 3160 0000.
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The material distributed is general information only. The information supplied is not and is not intended to be, legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.