28 Jun 1 JULY IS NEARLY HERE, ARE YOU READY?

1 July is fast approaching and as you are probably already aware, it is an important date for employers as a number of changes to employees’ pay entitlements come into effect.

As at 1 July 2019, employers need to be prepared and ensure that they are paying the correct rates of pay.

Some significant changes that employers should be prepared for on 1 July 2019 include the following:

• Increases to the national minimum wage;
• Increases to the minimum pay rates under Modern Awards; and
• Increases to the high income threshold.

MINIMUM WAGE SET TO INCREASE

The national minimum wage is increasing from $719.20 per week or $18.93 per hour to $740.80 per week or $19.49 per hour from the first full pay period on or after 1 July 2019.

Minimum rates under most Modern Awards will also increase by 3.0%, in line with the increase to the minimum wage.

What should employers be doing?  Employers should prepare by taking the time to make any necessary adjustments to the payments they make to their employees, to ensure that from 1 July 2019, they are paying award-free employees at least the national minimum wage and employees covered by a Modern Award, the minimum rates of pay set out in the applicable award.

If your employees are governed by an enterprise agreement, we also recommend that you take the time to review the agreement to ensure that the rates remain above the Modern Award rate (if a Modern Award would apply to the employee but for the agreement), or the national minimum wage if no Modern Award would apply.

ANNUALISED SALARIES TO BE REVIEWED

 Usually employers who pay a salary or above award rates do so in satisfaction of other award entitlements that may otherwise be payable, such as overtime penalty rates or annual leave loading. With the increase to minimum wage and award rates, many employers may find they are no longer paying above award, or if they still are, not by as much.  In many cases, employers will need to increase their employees’ salaries or above award rates to avoid underpayments.

If your rates are no longer going to be above award, or if they still are but not by as much, consider whether or not you still pay enough to compensate for the award entitlements you are setting off. Additionally, if you do not have a set-off clause in an employee’s contract of employment, you may be in breach of the applicable award and/or may not be able to rely on the higher rate should an employee challenge their entitlements.

HIGH INCOME THRESHOLD INCREASES

From 1 July 2019, the income cap that determines both access to the unfair dismissal jurisdiction and eligibility for guarantees of annual earnings (for the high income threshold) will increase from $145,400 to $148,700.00.

What is the high income threshold and how does it affect my company?

 Employees who earn over the high income threshold (from 1 July 2019 $148,700.00) are considered “high income employees” under the Fair Work Act 2009 and if they receive a guarantee of annual earnings by their employer (which must be very clearly and carefully drafted in an employment contract):

• no modern award will apply to that employee; and
• the employee cannot bring unfair dismissal proceedings against their employer following the termination of their employment.

Employers who have already entered into a guarantee of annual earnings with one or more of their employees should use this time before 1 July to undertake a review of their employee/s salary to ensure that their salary exceeds the new high income threshold (i.e. $148,700.00), or will be increased to be in line with, if not more than, the high income threshold.

CAP ON UNFAIR DISMISSAL

The maximum amount that an employee may recover if their unfair dismissal application is successful, will increase on 1 July 2019 to $74,350.00. This is the upper limit for compensation in this jurisdiction, meaning that an employee will only be entitled to up to six months of their pay capped at $74,350.00. For example, an employee who earns $60,000.00 per annum would only be entitled to compensation of up to $30,000.00 (i.e. six months’ pay) if their unfair dismissal application was successful.   An employee however, who earns $150,000.00 per annum (if still eligible to make an unfair dismissal claim) would only be entitled to compensation up to $74,300.00 rather than six months of their actual pay.

WHAT SHOULD YOU DO TO PREPARE FOR 1 JULY?

 To prepare for 1 July, we strongly recommend that employers:

• review and update staff contracts;
• undertake a current wage analysis and comparison for each employee in a standard pay cycle.  This involves comparing what an employee is paid compared to what they would otherwise receive under the applicable modern award; and
• increasing any rates of pay or salary that fall short of the minimum wage and award rates or high income threshold if the high income threshold guarantee of annual earnings has been provided to an employee.

SUMMARY

We have prepared a summary of the changes to help you prepare for 1 July 2019:

National Minimum Wage                                                $740.80 per week ($19.49 per hour)

National Minimum Wage – Casual                                $24.36 per hour

High Income Threshold                                                  $148,700.00 per annum

Maximum Unfair Dismissal Compensation Amount$74,350.00

If you need any assistance to determine if you are paying your employees the correct pay as at 1 July 2019, please let us know as we are more than happy to assist.