Will minimum wage rise affect enterprise agreements?

Q&A

Will minimum wage rise affect enterprise agreements?

Will the 3.3 per cent increase to minimum wages affect workers covered by enterprise agreements? Paul Munro explains.

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Will the 3.3 per cent increase to minimum wages affect rates in our enterprise agreement?

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Q Our company recently negotiated an enterprise agreement which started about three years ago. The schedule of wage rates prescribed by the agreement currently exceeds the minimum wage rates in the relevant modern awards which cover our employees.

However, the recent annual wage review increase of 3.3 per cent will mean the minimum award wages will be greater than those prescribed under our enterprise agreement.

Does the 3.3 per cent increase affect the wage rates for our employees employed under the enterprise agreement?

A Minimum wage rates in all types of agreements – both enterprise agreements and transitional agreements – must not be less than the relevant minimum wage rates set out in the modern award that covers the employee.

Award wage v enterprise agreement

The Fair Work Act (s206(2)) provides that if the agreement wage rate is less than the award rate, at any time, the relevant award rate applies to the agreement-covered employee. Modern award classification rates are the minimum award classification rate that can be paid under an award or an enterprise agreement.

In this case, the employer will be required to increase wage rates from the first pay period commencing on or after 1 July 2017 if the award classification wage rate becomes greater than the relevant rate of pay under the enterprise agreement.

Annual wage review decision

The annual wage review applies to all employees covered by modern awards, enterprise awards or transitional APCSs, as well as increasing the adult national minimum wage and the minimum wage relating to juniors, apprentices, trainees and workers with a disability. It does NOT increase wage rates prescribed by an enterprise agreement.

The terms of an enterprise agreement may refer to an increase consequent to the annual wage review but there is no automatic flow-on with respect to wage rates under an enterprise agreement, unless the relevant wage rate is less than the applicable award rate of pay.

National Employment Standards

The National Employment Standards apply to each employee whatever the terms of the applicable enterprise agreement may state.

This means that where an employee is covered by an enterprise agreement that provides terms that are detrimental to the employee compared to the National Employment Standards, the Standards will override the agreement.

Minimum wage rates in all types of agreements – both enterprise agreements and transitional agreements – must not be less than the relevant minimum wage rates set out in the applicable modern award. The Fair Work Act (s55) provides that an enterprise agreement must not exclude the National Employment Standards or any provision of the Standards.

The bottom line: The appropriate minimum wage rate prescribed by the modern award will override the rate prescribed by an enterprise agreement where an inconsistency occurs. Any term of an enterprise agreement which contravenes a term of the National Employment Standards is invalid.

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