In their latest press release, the Fair Work Commission made two important announcements concerning the 2022 Annual Wage Review.
1. Increase to the National Minimum Wage
- From 1 July 2022, the National Minimum Wage will increase by 5.2%, which amounts to $40 per week.
- The new National Minimum Wage will be $812.60 per week or $21.38 per hour.
- The increase must be applied from the first full pay period on or after 1st July 2022. If for example, you have a weekly pay period that starts on Mondays, the new rates would apply from Monday 4th July 2022.
2. Increase to Award Minimum Wages
- Award minimum wages will increase by 4.6%, which is subject to a minimum increase for award classifications of $40 per week and based on a 38-hour week for a full-time employee.
- This means minimum award wages:
- above $869.60 per week, will get a 4.6% increase
- below $869.60 per week, will get a $40 increase.
- Most awards will increase from the first full pay period on or after 1st July 2022, however, a two-staged approach was announced and some awards in the aviation, hospitality and tourism industries will receive their increases from 1st October 2022.
1. Start Preparing:
If you don’t already know the answer, go to Find my award to check which awards apply to your business. Determine whether:
- Increases for your business will commence from 1st July 2022
- Increases for your business will commence from 1st October 2022
- Multiple awards exist and increases will apply from 1st July 2022 then from 1st October 2022; or
- No awards apply
2. Get the New Pay Guide and Update your Pay Rates
Once the Fair Work Ombudsman has updated the Pay Guides (estimated by the FWO to be just prior to 1st July) take the following steps:
a) Review the hourly rate for each employee against the new minimum award rate to determine the difference.
- If there is a shortfall, be sure to increase the rate from the first full pay period after 1st July 2022 or 1st October 2022 as appropriate to the new minimum award pay rate.
- If your employee is paid more than the minimum award rate, decide whether to pass the increase on or absorb the increase within the current rate of pay. In this case, no action will be required.
- Review the Pay Guide to ascertain whether allowances such as meal allowances, uniform allowances, travel, etc., have been increased. Where an increase has been applied, update your payroll system with the new allowance rates
- If you pay an annualised salary to employees who are covered by an award, check to make sure the annualised rate continues to absorb the included payments such as leave loading, overtime and allowances. If not, increase the annualised rate to make sure that it covers all minimum award entitlements. Where the award specifies that an annualised salary letter is to be provided, provide your employees with a new letter that contains of all the relevant information.
b) If no award applies, check whether the wage rate for each employee needs to be increased to the new National Minimum Wage of $812.60 per week or $21.38 per hour and apply the increase from the first full pay period from 1st July 2022.
It’s important to ensure you get your payroll right from the beginning, and this starts with getting your employee’s wages right. Retracing your steps and correcting mistakes in payroll can be time-consuming, very costly, and not good for a business’s reputation. The more employees you have, the more complex your payroll usually gets, especially if you have a mix of employees on hourly wages and salaries. Add in some contractors, staff on commission, overtime, expense claims, allowances, and leave entitlements, and your payroll can be different every time you run it.
There can be severe consequences for not following the payroll regulations. Underpaid payroll obligations can have an added interest amount. In addition to this, your business could be hit with extra penalties for non-compliance with payroll regulations, including non-deductibility of the expense.
If you want to ensure you are making the best use of your time in the most cost-effective way to not only increase your profit but give you peace of mind, then contact us today to discuss a tailored Bookkeeping and/or Payroll solution that would work for you and for your business.
Don’t forget that the Superannuation Guarantee (SG) rate is increasing from 1 July 2022. Salary and wage payments made on or after 1 July will need to incorporate the increase to the super rate of 10.5%. Find the scheduled rate increases and dates here.