Increase to the National Minimum Wage

Workplace Directions

The Fair Work Commission (FWC) has handed down the 2020 Annual Wage Review decision, granting a 1.75% increase to the national minimum wage and modern award minimum wages.

The weekly national minimum wage will increase by $13.00 to $753.80 and the hourly minimum wage will increase by $0.35 to $19.84.

The decision followed submissions from the Australian Council of Trade Unions (ACTU) for a 4% increase, which was opposed by employer groups proposing no increase. The Australian Government urged that caution be taken in light of the continuously emerging and wide-ranging potential impacts of the COVID-19 pandemic and to prioritise keeping Australians in jobs and maintaining the viability of businesses.

In making the decision, the FWC recognised that the government imposed restrictions to contain the spread of COVID-19 had unprecedented social and economic consequences and has led to business closures and job losses. It was noted that the Australian economy is going through a significant downturn and is almost certain to enter a technical recession, upon the release of the June quarter ABS National Accounts, the first in almost 30 years.

The FWC found that to award an increase in the magnitude sought by the ACTU in the present economic circumstances, would pose a real risk of disemployment and of adversely affecting the employment opportunities of low-skilled and young workers. Balancing that consideration however was that any increase less than increases in prices and living costs would amount to a real wage cut meaning that many award-reliant employees, would be less able to meet their needs.

Weighing up these competing factors, the FWC adopted a ‘cautious’ approach to both the quantum and the timing of an adjustment to the national minimum wage and modern award minimum wages.

Effective date of increase

The increase to the national minimum wage will apply from 1 July 2020.

However, there will be staggered operative dates for different groups of modern awards based on the impacts of COVID-19 on each sector. The operative dates for the increase in modern award groups are:

  • Group 1 Awards – 1 July 2020
  • Group 2 Awards – 1 November 2020
  • Group 3 Awards – 1 February 2021

Group 1 Awards cover industries which were less affected by COVID-19 and were required to continue operating such as health care and social workers, teachers, childcare workers and other essential services. It is estimated that about 25% of non-managerial award reliant employees are covered by the modern awards in Group 1. The FWC noted that some of the modern awards in Group 1 cover significant numbers of low-paid female employees.

Group 2 Awards cover industries which were adversely affected by COVID-19, but not to the same extent as sectors covered by Group 3 Award. Group 2 Awards include real estate, pharmaceutical and, food, beverage and tobacco manufacturing. It is estimated that about 40% of non-managerial award reliant employees are covered by the modern awards in Group 2.

Group 3 Awards cover industries which have been highly affected by COVID-19 such as accommodation and food services, arts and recreation services, aviation, retail and tourism. It is estimated that just over one third of non-managerial award reliant employees are covered by the modern awards in Group 3.

The FWC’s Summary of Decision can be read here, while the Full Decision is available here.

Further information / assistance regarding the issues raised in this article is available from the author, Alison Freeman – Associate, or your usual contact at Moray & Agnew.


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