Fair Work Commission

The Fair Work Act requires the Commission to each year conduct a review to set the national minimum wage and adjust pay rates in modern awards.

The Annual Wage Review 2015–16 decision (2015–16 decision) directly affected more than 1.86 million employees in Australia who rely on minimum rates of pay (about 18.8 per cent of employees).

Annual wage reviews are conducted by a seven-member Expert Panel for annual wage reviews (the Panel) comprising of:

• the President of the Commission
• three other full-time Members of the Commission
• three part-time Expert Panel Members with knowledge or experience relevant to minimum wage setting

The Fair Work Act's minimum wages objective and modern awards objective require the Panel to take into account specific economic, social and collective bargaining considerations in setting the national minimum wage and reviewing modern award minimum wages.

Performance

The Panel issued the 2015–16 decision on 31 May 2016.

The decision:

• increased the national minimum wage by 2.4 per cent to $672.70 per week, or $17.70 per hour based on a 38-hour week
• increased all modern award minimum wages and most transitional instrument wages by 2.4 per cent
• set a number of special national minimum wages for award and agreement-free juniors, trainees and apprentices and for employees with disability and increased the casual loading in the Business Equipment Award 2010 to 21 per cent

The Panel's determinations varying modern award pay rates and its national minimum wage order came into operation on 1 July 2016 and took effect from the first full pay period on or after that date.

In its 2015–16 decision, the Panel held that:

The general economic climate is robust, with some continued improvement in productivity and historically low levels of inflation and wages growth. The prevailing economic circumstances provide an opportunity to improve the relative living standards of the low paid and to enable them to better meet their needs. The level of increase we have decided upon will not lead to inflationary pressure and is highly unlikely to have any measurable negative impact on employment. It will, however, mean a modest improvement in the real wages for those employees who are reliant on the NMW and modern award minimum wages.¹

The Panel noted that, despite some recent improvement in the relative living standards of national minimum wage and award-reliant employees, the relative position of low-paid workers had deteriorated over the past decade and many lived in households with low or very low disposable incomes.

Further, the Panel noted:

Women continue to be over-represented among the award reliant and low paid. Increases in the NMW (national minimum wage) and modern award wages can provide some assistance in addressing the gender pay gap.²

Consultation

Any organisation or person may make written submissions for the Panel to consider in the annual wage review. This year, the Panel received submissions from 28 parties, including:

• the Australian Government
• several state governments
• peak employer and employee representative bodies
• social interest and community-based organisations

As part of the consultation process, the Panel:

• held a preliminary hearing on the casual loading in the Business Equipment Award 2010 (February 2016) and received three submissions regarding this matter (February and April 2016)
• received 27 initial submissions
  (March and April 2016)
• received six submissions in reply (April 2016)
• received six post-Budget submissions (May 2016)
• published questions for consultations (April 2016)
• received a total of 13 responses to questions for consultations and regarding additional material published (May 2016)
• conducted hearings in Melbourne and Sydney (by video) on 10 May 2016 and in Sydney and Melbourne (by video) on 11 May 2016

Research reports

The Commission published a study on an international comparison of minimum wages and labour market outcomes by the National Institute of Labour Studies, Flinders University. It commissioned the comparison as part of its medium-term research program, outlined in September 2014. The Commission also published a statistical report and research reference list of data and literature relevant to the minimum wages and modern awards objectives.

Two research reports commissioned by the Commission's Pay Equity Unit also informed the 2015–16 decision. The reports examined:

• the earnings and characteristics of employees, focusing on comparisons by industrial arrangements
• the effects of low-paid women's workforce participation decision and how they differ from higher-paid women and low-paid men

The Commission has previously considered research on the employment effects of minimum wages, however this was unable to be progressed due to limitations in data and methodology.

Meeting KPIs

The Commission has consistently delivered annual wage review decisions in time to meet the 1 July operative date required by the Fair Work Act and its agency KPI. It has done this by:

• evaluating its consultation process and beginning planning for the next year's annual wage review immediately after a review is concluded
• consulting widely with stakeholders to ensure their views are taken into account by the Panel
• members and Commission staff managing workflow and resources to meet statutory timeframes

Engagement

The 2015–16 decision and consultations were live streamed on the Commission's website. This allowed a wider range of stakeholders to engage with the process, including interested people from remote regions of Australia and overseas. The website registered 615 total views of the live stream of the consultations. There were 862 total views of the live stream of the decision announcement.

The year ahead

Although noting that it will be for the Panel constituted for the 2016–17 Review to consider, the Panel in its 2015–16 decision:

• Proposed that next year's annual wage review include reviews of the transitional instruments the Commission has to deal with in annual wage reviews, including whether it had terminated them or could do so; and the existing arrangements for employees with disability
• Noted United Voice's submission that it conduct a preliminary hearing into whether it should adopt a medium-term target for the national minimum wage

With its medium-term research program nearing completion, the Panel invited interested parties to lodge future research proposals by 31 July 2016. In doing so, it noted that budgetary constraints were likely to limit its short to medium term capacity for additional commissioned or internal research. The two projects remaining from the medium research program are an analysis of the youth labour market, and the extent and characteristics of underemployment and its relationship with unemployment.