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 NFPs and charities 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 normally unilaterally applied to the minimum wages documented in the modern awards.

‍

The decision 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.

‍

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 10 tourism and hospitality awards. All other modern awards will increase on 1 July 2022.

‍

The FWC decided 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.

‍

As an example of the effect of the changes, under the Social, Community, Home Care and Disability Services Industry Award 2010, a social and community services employee level 1 pay point 1 will increase from $840.10 to $880.10, but a level 2 pay point 1 social and community services employee’s rate will increase from $ 899.50 to $940.88. Below is a table of some estimated increases for social and community services employees and crisis accommodation employees:

‍

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 paid more than the relevant modern award classification that would otherwise apply to their employment. When assessing whether an increase must be applied, you will need to take into account increases to penalties and allowances that may be incorporated into an above award payment.

If you do pay your 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 announced by the FWC. The confirmed rates will be released by the FWC closer to 1 July 2022.

‍

Superannuation

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 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 removing 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 from 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 into super, 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 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.

‍

NFP Lawyers can assist your NFP or charity to prepare for the impending changes with audits and advice. You can reach us at reception@nfplawyers.com.au or on 07 3160 0010.

‍