Understanding the Basics of Award Rates and Minimum Wage in Australia

October 30, 2023
6
minutes to read
by
Alice Surdy
Contents

As a small business owner in Australia, ensuring that your employees are paid the correct award rates is important to avoid penalties and legal issues. Award rates are the minimum pay rates, allowances, and conditions that apply to most employees in a particular industry or occupation. The Fair Work Commission sets these rates based on industry standards, and they are reviewed and updated regularly. In this blog, we'll provide a comprehensive guide to Australian Payroll Award Rates, covering the minimum wage, modern award rates, and how to find and apply the correct award rates. By the end of this post, you'll have a deep understanding of how to ensure your staff are paid correctly.

What is the Minimum Wage in Australia? 

The minimum wage is the lowest amount employers can legally pay their employees. It is set by the Fair Work Commission each year and applies to most employees in Australia. As of 1 July 2022, the national minimum wage is $21.38 per hour or $812.60 per week for full-time employees. This rate applies to adult employees not covered by an award or agreement.   

In addition to the national minimum wage, minimum wages apply to employees covered by modern awards or enterprise agreements. These minimum wages are higher than the national minimum wage and vary depending on the industry and occupation. Employers must pay their employees the higher of the national minimum wage, the award minimum wage, or the enterprise agreement minimum wage. 

It's important to note that the minimum wage is just that - a minimum. Employers can choose to pay their employees more than the minimum wage, and many do so to attract and retain talented employees. However, they must always pay at least the minimum wage to comply with Australian employment law.

The minimum wage was introduced to protect workers from being exploited by employers. Before its introduction, no laws were in place to guarantee a minimum pay level for workers, leaving them vulnerable to low wages and long working hours. The introduction of the minimum wage helped ensure that workers would be paid a fair and reasonable salary, regardless of occupation or skill level. Today, the minimum wage remains an integral part of Australia's labour laws and is regularly adjusted to ensure that workers continue to receive fair compensation for their efforts.


What are Award Rates? 

Award rates are minimum pay rates, allowances, and conditions that apply to most employees in a particular industry or occupation. They are set by the Fair Work Commission and are contained in modern awards. Modern awards are industry or occupation-based and provide a safety net of minimum terms and conditions of employment for employees. 

Modern awards are reviewed and updated regularly to ensure that they reflect changes in industry standards, economic conditions, and community expectations. Employers must pay their employees at least the minimum rates in the applicable modern award.   

There are over 100 modern awards covering various industries and occupations, from the Hospitality Industry (General) Award 2020 to the Nurses Award 2021. Modern awards specify the minimum pay rates, allowances, and conditions for employees covered by that award. For example, the Hospitality Industry (General) Award 2020 covers employees in the hospitality industry, including chefs, kitchen attendants, and waitstaff. It specifies the employees' minimum pay rates, allowances, and conditions. 

Employers must be clear on the modern award that covers their employees and ensure they pay at least the minimum rates set out in that award. Failing to pay award rates can result in legal action and penalties. 

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What Industries and Jobs Do Award Rates Apply To? 

Award rates apply to most employees in a particular industry or occupation. Some of the sectors covered by modern awards include: 

  • Hospitality and tourism¬†
  • Retail and wholesale¬†
  • Health care and social assistance¬†
  • Education and training¬†
  • Manufacturing¬†
  • Construction¬†
  • Transport and logistics¬†¬†

The specific jobs and occupations covered by each modern award vary. For example, the Retail Award covers employees in the retail industry, including sales assistants, cashiers, and merchandisers. The Health Professionals and Support Services Award covers employees in the healthcare industry, including nurses, paramedics, and medical receptionists. 

It's essential for employers to determine which modern award covers their employees and to ensure that they are paying at least the minimum rates set out in that award. The Fair Work Ombudsman provides a Pay and Conditions Tool to help employers determine which modern award applies to their employees. 

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How to Find and Apply the Correct Award Rates? 

Employers must pay their employees at least the minimum rates set out in the applicable modern award. To find and apply the correct award rates, employers should follow these steps: 

  1. Identify the modern award that covers their employees. Employers can use the Pay and Conditions Tool on the Fair Work Ombudsman website to identify the modern award that applies to their employees. 
  2. Determine the minimum pay rates, allowances, and conditions for their employees. Employers can find this information in the applicable modern award. 
  3. Ensure they pay their employees at least the minimum rates set out in the modern award. Employers should review their employees' pay rates and ensure they are consistent with the minimum rates set out in the modern award. 
  4. Keep accurate records of their employees' hours worked and pay rates. Employers should keep records of employees' hours worked, pay rates, and any allowances paid. These records can help to ensure compliance with the applicable modern award. 
  5. Regularly review and update their employees' pay rates. Employers should periodically review their employees' pay rates and ensure they keep up with changes to the applicable modern award. 

By following these steps, employers can ensure they pay their employees the correct award rates and avoid potential legal issues. 

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Who Regulates and Enforces Award Rates? 

The Fair Work Ombudsman ensures that employers comply with the applicable modern award rates. The Fair Work Ombudsman provides information and resources to help employers understand and comply with their obligations under the Fair Work Act 2009 and the applicable modern awards. 

Employers who fail to pay their employees at least the minimum rates in the applicable modern award can face legal action and penalties.

The Fair Work Ombudsman can investigate complaints of underpayment of wages and other employment-related issues and can take legal action against employers who are found to have breached their obligations under the Fair Work Act 2009. 

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In addition to the Fair Work Ombudsman, industry bodies such as the Hospitality Industry (General) Award 2020 (HIGA) and Social, Community, Home Care and Disability Services Industry Award 2010 (SCHADS) also regulate and enforce award rates for their respective industries. Employers should be aware of any industry-specific regulations and requirements that apply to their business.

 

What Happens If You Don't Pay Award Rates? 

Employers who fail to pay their employees at least the minimum rates set out in the applicable modern award can face legal action and penalties. The penalties for non-compliance with award rates can be severe, including fines, back pay, and legal action. 

If an employer is found to have underpaid their employees, they may be required to back pay their employees for the period of underpayment. Sometimes, employers may also be required to pay additional compensation or interest on the backpay owed. 

In addition to financial penalties, non-compliance with award rates can damage an employer's reputation and lead to a loss of trust among employees. This can make it difficult for employers to attract and retain talented employees and can harm their overall business success. 

To avoid these potential consequences, employers should pay their employees at least the minimum rates set out in the applicable modern award. Employers should also keep accurate records of their employees' hours worked and pay rates and should regularly review and update their employees' pay rates to ensure compliance with any changes to the applicable modern award. 


Case Study

In a recent example of award rate issues, George Calombaris, a celebrity chef, was involved in several controversies related to award rate issues in his restaurant empire. In 2017, it was revealed that his company had underpaid over 500 current and former employees by approximately $7.8 million in wages and entitlements. This led to a public outcry and calls for him to be held accountable for the underpayments.

As a result of the scandal, the Fair Work Ombudsman investigated Calombaris' restaurant empire and found that he had systematically underpaid his staff over a period of six years. Calombaris publicly apologised for the underpayments and promised to rectify the issue.

In 2019, after lengthy legal proceedings, Calombaris was fined $200,000 by the Fair Work Ombudsman for the underpayments, and his company was ordered to backpay the affected employees in full. Calombaris also stepped down from his role as a judge on the popular cooking show MasterChef Australia in the wake of the scandal.

The George Calombaris award rate issue serves as a reminder of the importance of ensuring that all workers are paid their entitlements in accordance with the law. It also highlights the need for greater transparency and accountability in the hospitality industry to prevent similar underpayments from occurring in the future. 

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Award Rates FAQs 

What is the difference between the minimum wage and award rates? 

The minimum wage is the lowest amount employers can legally pay their employees. At the same time, award rates are the minimum rates of pay and conditions for a particular industry or occupation. 

Do award rates apply to all employees? 

Award rates apply to employees who are covered by a particular modern award. Some employees, such as those covered by an enterprise agreement or classified as managerial or professional, may be covered by something other than a modern award.   

How do I know which modern award applies to my business? 

The Fair Work Ombudsman provides the Pay and Conditions Tool, which can help you determine which modern award applies to your business based on factors such as industry and occupation. 

How do I apply award rates to my employees? 

Employers should pay their employees at least the minimum rates set out in the applicable modern award. Employers should also keep accurate records of their employees' hours worked and pay rates and should regularly review and update their employees' pay rates to ensure compliance with any changes to the applicable modern award. 

What should I do if I am unsure about award rates or my obligations as an employer? 

Employers unsure about award rates or their obligations under the Fair Work Act 2009 should seek professional advice from a qualified accountant or employment lawyer. The Fair Work Ombudsman also provides free resources and advice to help employers understand and comply with their obligations under the Fair Work Act 2009 and the applicable modern awards. 

 

Key Takeaways 

As an employer, it's essential to understand and comply with the applicable modern award rates to ensure you're paying your employees at least the minimum rates set out in the award. This not only helps you avoid legal penalties and reputational damage, but it also helps you attract and retain talented employees who are essential for the success of your business. 

When determining the applicable modern award, consider the industry and occupation of your employees. You should also regularly review and update your employees' pay rates to ensure compliance with changes to the applicable modern award. 

Remember, seeking professional advice from a qualified accountant or employment lawyer can help you understand and comply with your obligations under the Fair Work Act 2009 and the applicable modern awards. The Fair Work Ombudsman also provides free resources and advice to help employers understand and comply with their obligations. 

By staying informed and up-to-date on award rates and other employment obligations, you can create a fair and positive workplace culture for your employees and set your business up for long-term success.

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