EOFY payments and penalties update - are you ready?

The end of a financial year always heralds upcoming change in the minimum wage and award wage rates, as well as prescribed monetary thresholds for the purposes of the Fair Work Act 2009 (Cth) (FW Act).  This year, there's also an increase to FW Act civil penalties for contraventions, and a change to the superannuation guarantee rate.

We've set out the key information you need below.  In short:

• modern award minimum rates will increase by 5.75%;
• the minimum wage – which applies to non-award or enterprise agreement covered employees – will increase to $882.80 per week / $23.23 per hour;
• the high income threshold will increase to $167,500;
• the unfair dismissal compensation cap will increase to $83,750;‍
• civil penalties for breaches of the FW Act will increase to a maximum of:‍

          - $93,900 for a body corporate (and $939,000 in the case of a serious contravention); and‍

          - $18,780 for an individual (and $187,800 in the case of a serious contravention);

• employees will be able to pursue under payments of wages of up to $100,000 in the FW Act 'small claims' jurisdiction in the Federal Circuit and Family Court of Australia; and
• the superannuation guarantee percentage will increase to 11%.

Increases to wage rates and the minimum wage

 From the first pay period on or after 1 July 2023:

• award rates of pay will increase by 5.75%; and
• for employees whose roles are not covered by an award or enterprise agreement, the minimum wage will increase to $882.80 per week or$23.23 per hour (before the increase, the rate is $812.60 per week or $21.38 per hour).

If your employees are paid at award rates, or on an annualised salary calculated by reference to award rates, it's important to review the amounts you are paying and update your payroll systems to ensure that you continue to meet award obligations.  

If you pay an annualised salary rather than paying strictly in accordance with the award, it's also important to be sure that you are doing so under an effective contractual set-off clause, individual flexibility agreement, or annualised salary arrangement (where the applicable award permits).

Increase to the high income threshold under the FW Act

From 1 July 2023, the high income threshold will increase from $162,000 to $167,500.

The high income threshold under the FW Act is relevant for two key purposes:

• ‍‍an award-covered employee must earn above the threshold before they can be offered a 'guarantee of annual earnings' (GAE). If an employee accepts a GAE, the GAE will displace the effect of the award for most purposes during its life. If you have employees on a GAE, you should review to ensure that the employees continue to be paid above the high income threshold amount; and
• it affects an employee's eligibility to bring an unfair dismissal claim.  If the employee's role is not covered by an award or enterprise agreement, an employee who earns the high income threshold amount or above it is ineligible to bring an unfair dismissal claim.  You should factor in the increase to the high income threshold when considering unfair dismissal claim eligibility for your employees.

Unfair dismissal compensation cap under the FW Act

From 1 July 2023, the unfair dismissal compensation cap will increase from $81,000 to $83,750.  

The unfair dismissal compensation cap is the maximum amount recoverable if an employee is successful in bringing an unfair dismissal claim.  

Increase to civil penalties under the FW Act

From 1 July 2023, the value of Commonwealth 'civil penalty units' will increase from $275 to $313.

The practical effect is that civil penalties for most contraventions of the FW Act will increase from:

• $82,500 to $93,900 for a body corporate;
• $16,500 to $18,780 for an individual; and
• in the case of a serious contravention,

        - $825,000 to $939,000 for a body corporate; and

        - $162,500 to $187,800 for an individual.

Civil penalties apply per contravention (eg per individual breach of an award).  However, this is a complex area, and in a case involving multiple contraventions, there are a number of rules that may operate to reduce total penalties in any given case.  If you have any concerns about the potential for contraventions to have occurred and the application of civil penalties, it's important to seek advice.

Increase to the maximum amount recoverable as a 'small claim'

As of 1 July 2023, employees will be able to pursue underpayments of wages of up to $100,000 in the FW Act 'small claims' jurisdiction in the Federal Circuit and Family Court of Australia.  Previously, the cap for such a claim was $20,000.  

Small claims proceedings are relatively informal, and lawyers are only permitted to appear with the permission of the Court.  This may result in some potentially large monetary claims being pursued by employees in a forum where the parties may not be able to be legally represented at the hearing (although you will of course be able to obtain advice about the claim beforehand).  It is advisable to take steps to minimise the risk of claims of this type.

Increase to the superannuation guarantee rate

As of 1 July 2023, the superannuation guarantee percentage increases from 10.5% to 11%.

The maximum superannuation contribution base (being the maximum amount in relation to which superannuation contributions must be made) for an employee is $62,270 per quarter, and the concessional superannuation cap (being the maximum amount that can be contributed to superannuation at a beneficial tax rate in any year) is $27,500.

Employers should ensure they are paying 11% superannuation for employees, but keep in mind that they're not obliged to make superannuation contributions on more than $62,270 per quarter for any one employee. In addition, employers (and employees) should remain conscious of the $27,500 limit.

If you would like further advice or assistance, please contact a member of our Employment, Workplace Relations and Safety team.