Annual Wage Review 2015 – Expert Panel (fail)

On 8 June 2015 the Minimum Wage Panel of the Australian Fair Work Commission ruled that from the first pay period after 1 July 2015:

–  the national minimum wage for award or agreement free employees will increase to $656.90 per week, stated as being $17.29 per hour; and

– modern award minimum wages will increase by 2.5%.

The decision is available here: https://www.fwc.gov.au/documents/decisionssigned/html/2015FWCFB3500.htm

Comment One – hourly rate fail

Again the Expert Panel has issued a decision with an incompatible hourly and weekly wage.

No payroll department can make that decision work in the way that it was announced, since an hourly wage of $17.29 does not equate to $656.90 per week for a 38 hour working week.

[It comes to $657.02, a difference of 12 cents. Even if we round it to the nearest 10 cents for the weekly rate (as the decision foreshadows) it still does not come to $656.90 per week].

A payroll system usually rounds to four (or preferably five) decimal places at the hourly rate.

In order to obtain a weekly rate of $656.90 the hourly rate would need to be $17.2868.

Comment Two – annual salary fail

Let’s assume we have a weekly rate of $656.90 per week for a 38 hour working week.

What is the equivalent annual salary?

There is no guidance provided in the decision of the Expert Panel and the question is unanswered in many industrial awards. The Fair Work Act does not provide an answer.

So, the minimum annual rate can vary by industry and potentially by employer.

It will vary depending on the multiplier/divisor used to convert a weekly rate to an annual salary.

In Australia, this generally varies between 52.0 and 52.2.   The Fair Work Ombudsmen will suggest, in the absence of an explicit obligation, 52.1667 (or 313 divided by 6).   The source of this recommendation is a clause from the previous (and now replaced) Workplace Relations Act 2006 Regulation 2.7.5.
Link: http://www.austlii.edu.au/cgi-bin/sinodisp/au/legis/cth/consol_reg/wrr2006329/s2.7.5.html?stem=0&synonyms=0&query=313&nocontext=1

Suggestions for the Expert Panel:

1. Quote the hourly rate at four or five decimal places and make sure it is compatible with the weekly rate.

2. Make sure the minimum annual salary is explicit.

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One comment

  1. The Fair Work Ombudsmen will accept the full weekly rate for full time staff of $656.90 per week which equates to $17.2868 per hour.

    However, part-time staff need to be paid the higher hourly rate ($17.29 per hour) to comply with the minimum wage decision.

    Payroll will need to be careful when configuring the pay system to ensure compliance is achieved.

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