Fair Work Commission increases minimum wage by $16 per week, claiming there’s “no evidence of particular corporate stress”

The Fair Work Commission has handed down a $16 per week increase to the minimum wage in its 2014-15 annual wage review despite lower growth in consumer prices and underemployment, claiming there’s “no evidence of particular corporate stress” in the economy.

The $16 per week increase comes on top of the $18.70 minimum wage increase the industrial relations umpire handed down in its review last year.

The latest decision sees the minimum wage increase by 2.5% to $656.90 per week, or $17.29 per hour.

The increase will affect small businesses whose staff are among the 1.86 million employees in Australia who are reliant on the minimum wage, with adjustments also coming for employees on modern awards.

Before the decision, the Australian Chamber of Commerce and Industry told the Fair Work Commission any increase in the minimum wage should not exceed $5.70 per week.

However, the increase is less than the unions wanted, with the Australian Council of Trade Unions calling for a $27 per week increase to the minimum wage, claiming it would have delivered a $3.1 billion per year “economic stimulus” and “contributed towards closing the wages gap”.

In its statement explaining the decision, the Fair Work Commission cited a reduction in inflation and aggregate wages growth as key factors informing the decision.

It noted the unemployment rate has grown steadily from its recent low of 4.9% in March 2011, to 6.1% in April 2015 and there are other signs of under-utilisation in the workforce.

And in an analysis sure to raise some eyebrows among small business owners, the Fair Work Commission also said there is no “particular corporate stress” in the economy and that labour costs are low.

“Balanced against these economic considerations, there is no evidence of particular corporate stress. Business bankruptcy rates fell significantly in 2013-14, to the lowest level since 2008-09. Business entry rates for all industries in 2013-14, at 13.7%, exceeded business exit rates, at 12.7%,” the Fair Work Commission statement said

“Real unit labour costs remain at historically low levels. The unit labour cost data shows, in aggregate, an absence of cost pressures from the labour market.”

In its decision, the Fair Work Commission drew attention to the fact there is no mechanism to deal with small businesses who claim they are unable to afford an increase after an annual wage review has been completed.

In response to the decision, Victorian Employers’ Chamber of Commerce and Industry chief executive Mark Stone said many small businesses are already doing it hard in the current economic environment.

“Employment on-costs, including 9.5% superannuation, workers’ compensation and payroll tax, compound the impact of this increase and will be detrimental to small business cash flow and investment,” Stone said.

“VECCI is disappointed that there was no deferral of the increase given the fragile economy and persistently high unemployment, especially among young people. The increase is to be applied to the first full pay period on or after 1 July 2015.”

But ACTU secretary Dave Oliver said in a statement the increase was not enough, claiming it will see Australia head down the path of an entrenched US-style working poor.

“It’s not good enough when profits are up, productivity is high, executive salaries are up and the Abbott government delivered a small business bonanza in the budget – but once again workers are left with the scraps,” Oliver said.

The managing director of Australian HR services company hranywhere, Martin Nally, told SmartCompany details about how the decision affects various awards will be revealed over the coming weeks, with the changes coming into force on July 1.

“My advice is to look at those modern rates, compare your rates to those new rates and make adjustments,” Nally says.

Nally says the change will not just affect the minimum rates set in awards, but also higher tiers, and especially for long-serving employees, it is important to make sure their rates are consistent with awards.