Month: June 2014

Australia – Annual Wage Review & Annual Hours

Australia – Annual Wage Review & Annual Hours

The Annual Wage Review 2013 – 2014 Decision [2014] FWCFB 3500 at paragraph [622](a) provides for the … ‘national minimum wage of $640.90 per week …  ‘.

Paragraph [620] of that decision makes it clear that this for a 38 hour working week… .

Since there are not exactly 52 weeks in every year, and more working days in some years than others a multiplier/divisor is used in calculating the annual wage rate from a weekly rate (the multiplier) or for calculating the weekly rate from an annual rate (the divisor), which takes account of leap years and/or working day cycles.

Minimum Annual Wage (Australia)

If the multiplier/divisor is not expressed in a Modern Award, or specified in an industrial agreement, the Fair Work Commission advises employers to use 313/6 (52.1667 to four decimal places).

Example – Modern Award

The Banking, Finance and Insurance Award 2010 [MA000019] provides for both the annual salary and the hourly rate, based on a divisor of 52.0.

Example – Industrial Agreement

Westpac Bank in its collective agreement uses a divisor of 52.0 for one group of employees while for others it specifies 52.2.

What divisor/multiplier should an employer adopt when a modern award is silent? The Fair Work Commission currently uses 52.1667 (313/6) for its default position, based on provisions found in the former Workplace Relations Act Regulations 2006 [Regulation 2.7.5].

Internal Consistency Test

In this context internal consistency means that we can move upward from an hourly rate (five decimals) to a weekly, fortnightly, monthly or annual rate (each of which is at least four decimals) and we can follow the path back downward from an annual rate to a monthly, fortnightly, weekly and hourly rate of pay – with the corresponding answers being the same on each leg of the journey.

 In Figure 1 the horizontal numbers divide down from the annual salary and the vertical numbers multiply up from the hourly rate.  The difference (Diff) should be equal to zero to ensure internal consistency. The answers should be the same whether we start with an annual wage or a weekly rate.

[External consistency refers to a consistent application of a multiplier/divisor such that the same result is achieved between firms and between industries.  For example, this would occur where a minimum annual salary was uniform in all parts of the country].

[Figure 1]

Annual Hours

With a divisor of 52.1667 the implied annual hours are 1982.3333 per annum.

Conclusion

In the absence of specific industrial obligations the default position at the federal level is:

As at 1 July 2014 – Australia:

Minimum Annual Wage

$33,433.62 (rounded)

Minimum Weekly Wage

$ 640.90

Weekly hours

38

Divisor/multiplier (weekly/annual)

52.1667 (rounded)

Divisor/multiplier (fortnightly/annual)

26.0833 (rounded)

Annual Hours

1982 (rounded)

 

Advertisements