As of the 1st July 2021 Superannuation and Wage Rates are set to increase, but not for everyone and not all at once, especially when it comes to the wage increase.
Below are a summary of changes and links in preparation for you and your business(s).
Minimum Wage Rate Increase
From the 1st July the FairWork Commission has increased the minimum wage pay rate by 2.5% or to $20.33 per hour/$772.60 per week for full time employees.
For low paid workers this is a significant and welcomed increase. But before you get too excited this is a tiered increase across sectors, due to the COVID-19 downturn.
The commission’s president, Iain Ross, said on Wednesday the panel had decided the “markedly better” economic climate this year warranted the rise. But it would be staggered for workers in industries hardest hit by the Covid-19 downturn. Ross said the decision to stagger the pay rise was an acknowledgement that there were still economic risks linked to the pandemic, including the slow pace of the vaccine rollout and more domestic outbreaks. “We are satisfied that the operative dates we have determined are justified, consistent with the statutory framework and strike an appropriate balance between the interest of employers and employees,” Ross said.
Put simply, the 2.5% increase will apply to the majority of modern awards from the 1st July 2021.
The exceptions to this are:
The General Retail Industry Award 2020, which will come into effect on the 1st September 2021.
A selection of modern awards within the tourism and aviation sectors, the Restaurant Industry Award, the Fitness Industry Award and certain retail trade sectors, for example beauty, hair and dry cleaning, their increase will come into effect from the 1st November 2021.
A Summary of the Fair Work Commission’s decision can be read here.
For more detailed information around the FairWork Commissions process and decision go to the Fair Work Commissions 2020/21 Annual Wage Review webpage here
Key tips for employers
Have a conversation with your employees and how this may impact them, taking into account the wage increase and super increase come into effect on the same day.
Ensure all accounting and payroll systems are up to date and in line with legislation changes.
Employers covered by an enterprise agreement that refers to the annual wage review, should review the remuneration paid to employees to ensure they remain compliant.
Super Guarantee Rate Increase
Some good news in regards to the super guarantee rate (the amount the employer must pay into employees super) has been announced by the government. An increase in the super guarantee rate has been in the pipeline for some time now, and although some had speculated it wouldn’t be passed, thankfully the government has stuck to their plan and confirmed the super rate increase.
From the 1st July 2021 the super guarantee rate will increase from 9.5% per annum to 10% per annum. The super guarantee rate will continue to gradually increase until it reaches 12% per annum by July 2025.
The biggest benefit to the increase would have to be the balance of retirement funds. Although it doesn’t seem like a massive increase, it certainly adds up over time, especially if your currently in your 20’s.
As an example, by using the Industry Super Australia calculator, for a 25 year old earning approximately $85k an increase in the super rate from 9.5% to 12% per annum could increase their super balance by over $163,000 at retirement!
Key tips for employees:
Speak to your employer – especially if your superannuation is part of your total salary package, as this increase could slightly reduce your take home pay amount.
Check your super is paid correctly.
Compare funds! If you are getting higher super payments anyway, now is a great time to shop around and ensure your fund is doing the best for you and your retirement plans.
A great place to start is the Canstar comparison guide.
Key tips for employers:
Ensure your payroll and accounting systems are up to date and the super rate increase has been incorporated.
Discuss the increase with your employees, especially if this change affects their take home pay.
Be informed – for further information, super contribution calculator and eligibility tools go to the ato super guarantee webpage
If you would like to know more around the Fair Work Commissions wage review or the Superannuation increase and how it impacts your business, get in touch with one of our local coaches today.