Last week, the Fair Work Commission published its decision for this year’s Annual Wage Review (Review) and the predictions across Kingston Reid were certainly varied, with many focussed on how the Commission might grapple with inflation and cost of living pressures, as well as the findings of its gender pay equity research project.
In conducting the Review, the Commission is required to undertake two specific tasks, as prescribed by the Fair Work Act 2009 (Cth).
One, it must review and make the National Minimum Wage Order each year, setting a minimum rate for national system employees who are award or agreement free. Two, the Commission must also review modern award minimum wages, (the more impactful component of the Review), noting the Commission’s own assessment that approximately 20.7% (or about 2.6 million employees) of the Australian workforce are paid in accordance with the minimum rates set by modern awards, and are therefore directly impacted by this decision each year.
The Annual Wage Decision 2023-2024
The Commission has decided to increase both the National Minimum Wage, as well as all modern award minimum wage rates by 3.75%, with the change to take effect in the first full pay period on or after 1 July 2024. In doing so, the Commission has noted cost of living pressures – particularly for those low paid modern award reliant workers who live in low-income households – as a ‘primary consideration’, given modern award minimum rates remain, in real terms accounting for inflation, lower now than they were five years ago.
Analysis of the Australian Bureau of Statistics Wage Price Index data certainly shows the impact to wages for low-paid and modern award-reliant workers of sustained higher inflation over the past few years, even despite the Commission’s decision last year to increase award minimum rates by 5.75%, the largest national wage increase for approximately 40 years.
The Review decision shows the careful balancing exercise undertaken by the Commission, which noted that for low-income households of modern award-reliant workers and workers receiving the National Minimum Wage, the increase may only be truly meaningful once the ‘stage 3’ tax cuts and other recently announced Budget measures to address ‘cost of living’ pressures come into effect too.
With inflation having eased considerably since the time of last year’s annual wage review (although there is, of course, still a way to go until the forecast return to a sub-3% inflation rate in 2025), the Commission has taken a conservative approach to move wages just a touch above the Consumer Price Index (currently 3.6% for the 12 months to March 2024 quarter). Given the complexity of the task before the Commission in 2024, it is hard to imagine that there was much room for the Commission to move otherwise, especially in the face of Australia’s uncertain productivity outlook.
Work to address historical gender undervaluation continues
The decision also contained the promise of further work to be done to address the findings outlined in its gender pay equity research program (undertaken after last year’s annual review), with its Stage 2 report just recently published in April.
The Commission has now confirmed a program of work to address gender undervaluation issues arising in respect of certain sectors which the Commission’s research has termed as ‘large, very-highly feminised occupations in feminised industry classes’ (being occupations containing more than 10 000 people, where over 80% of people working in that occupation are women and the industry in which that occupation is located is over 60% female). Considering those sectors, the modern awards identified as a priority are:
- Aboriginal and Torres Strait Islander Health Workers and Practitioners and Aboriginal Community Controlled Health Services Award 2020;
- Children’s Services Award 2010;
- Health Professionals and Support Services Award 2020;
- Pharmacy Industry Award 2020; and
- Social, Community, Home Care and Disability Services Industry Award 2010.
The Commission will now consider submissions as to whether, having regard to the findings of the Commissions’ gender pay equity research, the work (to which the classifications within these five priority awards apply) has been historically undervalued because of assumptions based on gender, amongst other key issues. The Commission has committed to completing this program of work ahead of next year’s Annual Wage Review decision.
The Commission’s new program of work to review gender undervaluation is now inviting submissions from relevant parties, including employers, and has expressed a provisional view that relevant issues will include:
- whether the work of relevant employees involves the exercise of ‘invisible’ skills or caring work;
- whether work value increases would justify higher award minimum wages; and
- the benchmarking of wage rates against particular qualifications.
Employers, particularly those in the health and social services sectors, will be keeping a keen eye on the progress of this review.
Get ready to bargain…
The Commission’s annual review has also considered the need to encourage collective bargaining (which will both enliven and test the limits of many of the extensive legislative amendments to the FW Act since Labor took power in May 2022).
Whilst there has been a reduction in enterprise bargaining over the last ten or so years, a more recent return to pre-COVID norms in the number of applications for approval of enterprise agreements seems likely to continue in the current landscape of wage and cost of living pressures, with new rights and protections for bargaining parties and workplace delegates in the mix as part of a broader (legislatively enhanced) bargaining framework.
Given the broad reporting of the Commission’s annual wage review outcome, the decision can tend to cement a floor from which Unions and employees seek to spring from in their pursuit of wage outcomes as part of enterprise agreement negotiations. Put another way, a 3.75% adjustment might be the minimum ‘cost of doing business’ in the context of prospective wage claims, and more likely an annual adjustment starting with a ‘4’. This would represent a slight up-tick in enterprise agreement outcomes (based on the most recent data from the Department of Employment and Workplace Relations) for private sector bargaining, which had average annualised wage increases at 3.8% for the December 2023 quarter.
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The views expressed in this article are general in nature only and do not constitute legal advice.
Please do not hesitate to contact us if you require specific advice tailored to the needs of your organisation in relation to the implications of these changes for your organisation.