The time-employed workers love and employers dread.
It’s when the Fair Work Commission’s Minimum Wage Panel (FWC) get its big boys together over a coffee (or maybe even a fine meal and some good whisky) and decides what the increase in the minimum wage will be.
They will tell you they have listened to workers and listened to employers, but in the 16 years I have been in this country, I have never met anyone or any group that has been spoken to by the FWC. Maybe they do it by stealth. Or maybe they have telepathic powers. Maybe they use the Force. Or maybe they had so much whiskey they forgot they had to speak to some people.
Anyway, there is a problem.
That’s because we have a cost-of-living issue. This means workers want big pay rises, so lifestyle will be the same as last year. Businesses, on the other hand, will tell you their costs have skyrocketed, too. And I can firmly say that for most of my clients, that is true.
Our own costs are up 7%, but for some sectors, the rises are even more. Many businesses find it hard to maintain their costs and keep customer prices low.
The FWC also said they considered
- cost of living (obviously);
- the strong labour market;
- inflation and real wage growth;
- changes to Superannuation;
- upcoming Stage 3 tax cuts; and
- the economic conditions, both currently and those projected for the 2024/25 financial year.
In other words, they are telling us they have been very busy. So busy that maybe they did not have time for the fine meal and whisky.
And so, the FWC has tried to keep both sides happy but in doing so made both sides angry.
Workers will complain it is not enough. Struggling businesses will say it is too much.
But no matter how little or how much whiskey was drunk, the FWC was never going to get it right this year.
It has handed down its decision on the annual wage review and decided that an increase of 3.75 per cent to the National Minimum Wage would be good enough. This takes it to $24.10 per hour, effective from the first full pay period commencing on or after 1 July 2024.
This increase will also flow onto Modern Award minimum wages for all classification levels, with those increases also from the first full pay period commencing on or after 1 July 2024.
I hate the awards system, but I like the minimum wage system. The minimum wage is there to ensure that those on low earnings can live a lifestyle. I am not sure what the awards system is about apart from keeping unions happy (and in a job) and employers in check by allowing regulation to control wages. This all goes back to the days when bosses took advantage of workers and sent children up chimneys. This was a time when employers would during negotiations distribute some sandwiches with a vague promise of some jam tomorrow. But ask any Australian businessperson today, and they will tell you the worker has all the power – and wages are still regulated. And in return, there are no sandwiches, and you can forget the promise of any jam either.
Also, remember that effective 1 July 2024, the rate of Superannuation goes up by 0.5% percent, too.
This means the real wage increase will be a minimum of 4.25%. Wage costs are becoming a serious problem in Australia.
And this, in many ways, has led to an outflow of work overseas.
But dig deeper, and the problems will get bigger.
By GPD, Australia is the 12th largest country in the world. But we have the highest minimum wage in the world at approximately US$18. In the USA, it is approximately US$8, UK approximately US$14 and Germany approximately US$15.
But remember in Australia we have award rates, and most of our 100 awards are above the minimum wage of US$18. And that means our minimum wage is well above the world average. And this in the long term cannot make sense because that means on the world stage we cannot compete.
It is also the reason why jobs will continue to be moved offshore, and more and more businesses will be looking to AI and automation in an effort to reduce labour costs. And that is not good for workers.
What are the next steps for you as a business?
To help you prepare for the wage increase, we suggest undertaking the following steps:
- review minimum rates of pay, terms and conditions for award-covered employees, and process increases from the first full pay period in July;
- review the salary of award-covered employees to ensure that the salary continues to result in the employee being better off as compared to what the employee would have received under the award;
- review the base rates of pay provided under any enterprise agreement to ensure that the base rate of pay is at least equivalent to the updated base rate of pay under the award; and
- engage and inform team members who will undoubtedly receive information from the media.
- And do not forget the 0.5% increase in Superannuation!
In the event your employees are covered by an enterprise agreement, it’s important to ensure that the base rates in those agreements remain at least equal to the new minimum modern award rates.
And because we have weak leaders at the state and federal level, they will not have the guts to move the country to where it needs to go. And that means the pay award system is here to stay. And that means you and your employees are not in control of pay, nor can you openly negotiate pay rates. And wages and salaries are one of a business’s largest costs. And this is why I would urge many of you to look into automation and offshoring. I don’t like to suggest schemes that can limit or reduce the workforce, but over time, this will happen anyway. You can either be at the forefront or just wait until it is forced upon you.
You may not believe me. But in the next week or so I will be writing to you about a report which may just change your mind.
If you would like more information on this email Hitesh at hitesh@wowadvisors.com.au or Ros at ros@wowadvisor.com.au. Or call us on 07 3161 9548.
