Changes to Remuneration from 1 July 2022

There are changes to employee remuneration that are scheduled to take place on 1 July 2022.

We have set them out for you below.

Minimum wage increases

On 15 June 2022, the Fair Work Commission announced the results of its annual wage review for the national minimum wage and modern award minimum wages.

The national minimum wage will increase from $20.33 to $21.38 per hour or from $772.60 to $812.60 per week, an increase of 5.2%.

Minimum wage rates under modern awards will increase by 4.6%.

The increase to minimum rates will be delayed for employees covered by the following modern awards:

There will also be a minimum increase for adult award classifications of $40 per week. The minimum $40 per week increase is based on a 38 hour week for a full-time employee. Therefore, individuals who earn above $869.60 per week will receive an increase of 4.6%. Those who earn below $869.60 per week will receive an increase of $40 per week.

The increase for these awards will be effective from 1 October 2022.

Employers who pay their employees minimum award rates, or up to 4.6% higher than minimum award rates, need to adjust their pay rates effective from the first full pay period on or after 1 July (or 1 October 2022 for any of the above awards).

Employers who pay annualised salaries to award covered employees should review them to ensure that the total of each employee’s salary in each pay period is greater than their award entitlements in each pay period, with the rate increase taken into account.

Superannuation changes

The other changes effective from 1 July relate to the superannuation guarantee. These changes are as follows:

    the superannuation guarantee rate will increase from 10% to 10.5%;

    the maximum super contribution base will increase from $235,680 to $240,880; and

    employees will no longer need to earn at least $450 per month before becoming entitled to superannuation. All employees, regardless of how much they earn will be entitled to compulsory superannuation guarantee contributions.

Employers who pay their employees a base salary plus compulsory superannuation will need to make superannuation contributions at the rate of 10.5% from 1 July 2022.

Employers who take a total package approach, meaning that employees are paid a total package that includes both base salary and superannuation, can either:

    reduce their employees’ base salary in proportion to the superannuation increase so their total remuneration package (base salary plus super) remains the same; or

    pass on the increased superannuation rate to the employee.

In order to reduce an employee’s base salary in proportion to the superannuation rate increase, the employee’s employment contract would need to have provisions that allow an employer to do this.

Of course, employers can also take the increase in the superannuation rate into account when determining salary increases, which is often the best approach.

Questions?

If you have any questions about the upcoming changes, please don’t hesitate to get in contact with Sean Melbourne, Carolyn Moffat or your usual member of the Source employment team.

For more information, please contact Sean Melbourne and Carolyn Moffat.