Employers rail against extra lift for low paid
SYDNEY: The workplace umpire will consider giving the lowest-paid workers an extra increase this year on top of the general minimum wage rise, which employers warned could trigger spiralling pay demands for higher-skilled jobs and make inflation worse.
The Australian Council of Trade Unions is calling for a 5 per cent rise to cope with inflation, but the Fair Work Commission’s wage panel has flagged that it also wants to consider phasing out the lowest minimum rate, which would effectively grant about 200,000 workers an additional 3.6 per cent increase.
Such an increase would be a boon for workers in horticulture, restaurants, pubs, cleaning and child services.
However, the proposal is being debated amid heightened concern that above-inflation wage increases could entrench high inflation at a time of economic uncertainty and volatile fuel prices from the war in Iran.
It also comes as the CFMEU on Friday called for the wage panel to grant “significant increases” to higher award classifications to restore the work value that has been eroded by past decisions that delivered bigger award increases to lower-paid workers.
“The commission must bite the bullet and start the process of restoring minimum award wage relativities in this annual wage review, otherwise the award classification structures will become meaningless,” the union said in its submission.
Australian Chamber of Commerce and Industry chief executive officer Andrew McKellar said an extra increase for the lowest paid would be “a double whammy” for businesses, especially those struggling to survive the rising cost of fuel and goods.
“If expanding the minimum wage base results in a 3.6 per cent increase in the wage bill and the commission rules a 3.5 per cent increase in the minimum wage, that’s a total increase of 7.1 per cent,” McKellar said. “That would be totally unsustainable in the current economic situation.”
The Australian Industry Group warned the wage panel that phasing out the lowest rate could have “a profound impact” on employers who employ a significant proportion of workers on it.
Its submission said lifting the lowest paid to the next grade “gives rise to issues as to fairness between employees and whether the variations would remove an incentive (or indeed disincentivise) employees from upskilling”.
“There is a real risk that this may in turn give rise to claims for increases to the minimum wages prescribed for higher classification levels.”
But ACTU secretary Sally McManus said “phasing out the lowest rate of pay for ongoing work in many awards will deliver an urgently needed pay boost to some of the lowest‑paid workers in the country”.
“It would make a real difference to workers struggling with price gouging, rent hikes and global conflict,” she said.
“The increase must come on top of the across-the-board 5 per cent pay rise the ACTU is calling for.”
The FWC has rarely split the minimum increase for workers as it compresses the relative value of award classifications. However, the panel has become more open to such moves in the face of recent inflation spikes.
In 2022, it awarded a flat dollar increase equivalent to increases between 4.6 and 5.2 per cent. In 2023, it granted the lowest paid an 8.6 per cent increase – compared to a general 5.75 per cent – by aligning the national minimum wage with the so-called C13 rate rather than the lower paid C14 rate.
Now, the FWC, as flagged in last year’s decision, will consider phasing out the C13 rate, currently $24.95 an hour, and make C12, currently $25.85 an hour, the new national minimum.
According to 2023 FWC research, 195,000 workers, or 1.7 per cent of adult employees, are estimated to be on the lowest rate. The ACTU claims the number is more like 1 million.
Horticulture employers are particularly concerned about the move as the last 8.7 per cent rise had “a significant impact on employment costs”, AI Group said. A higher rate would conflate classifications for different work and mean backpackers get paid the same as workers returning season to season.
United Workers Union, representing hospitality and childcare workers, argued the move was necessary as the war in Iran and oil market shock had “heightened the likelihood of further erosion in real wage growth”.
”Further, because of the immediacy of current cost-of-living pressures, UWU supports the adoption of the C12 rate as the lowest pay rate for ongoing employment as a measure that should be implemented from July 1, 2026 (rather than it being implemented gradually over a longer period),” it said.
But the wage panel may be more cautious as past decisions to split the increase have already come back to haunt it.
The CFMEU has argued the panel needs to restore the relative value of wages between construction classifications because its 2022 decision and flat dollar increases in the past four decades have eroded the gap between new entrants and skilled tradespeople by 7.6 per cent or more.
“The CFMEU accepts that restoring the minimum classification wage relativities will lead to some significant increases in the award minimum classification wage rates, but this has been a longstanding issue that requires rectification,” its submission said.
AI Group chief executive Innes Willox urged the parties to show restraint as inflation was “expected to head towards 5 per cent by mid-2026, with deleterious consequences for many industries”.
“We think there needs to be regard to the emerging nature of the global energy shocks – for which political and economic outcomes remain extremely uncertain,” he said.
The commission will hear stakeholders in a May hearing and is expected to deliver its decision by the end of that month.
