As lawyers, we can be so committed to servicing our clients’ needs that we can fail to keep up with our own legal obligations as employers, with potentially expensive results.
A basic requirement is to make sure we are paying our employees the minimum wages required by law. The Fair Work Commission sets a minimum wage for private sector employees, which is subject to any applicable industrial award. In the legal services industry, this is the Legal Services Award 2020.
The Fair Work Commission handed down its annual wage review decision on 19 June and, like many things in 2020, it was not business as usual. For the first time, the expert panel was split, with a majority decision that all modern award rates of pay increase by 1.75% in the new financial year. In awarding an increase less than the consumer price inflation figure, the majority:
- took into account the Reserve Bank’s “plausible baseline scenario” that growth will turn around in the September quarter
- accepted that economic considerations favour greater moderation
- took into account that some low-paid, award-reliant households have disposable incomes less than the 60% of median income poverty line
- said that no increase would mean a fall in the living standards of low-paid, award-reliant employees
- considered that gender pay equity favoured an increase
- took into account the various economic assistance packages that had benefited low-paid households.
This means that the federal weekly minimum full time wage has increased from 1 July 2020 by $13 a week to $753.80 ($19.84 an hour) from $740.80 ($19.49 an hour).
However, increases to the minimum rates contained in the Legal Services Award 2020 will take effect from the start of the first full pay period on or after 1 November 2020. This is because the commission panel considered that legal services was one of the industry sectors adversely impacted by the pandemic, although not the worst effected.
A summary of the commission’s decision can be found at fwc.gov.au/documents/wage-reviews/2019-20/decisions/2020fwcfb3501.pdf. Employers should check the Fair Work Commission website for pay rate revisions to the Legal Services Award 2020 atfwc.gov.au/documents/documents/modern_awards/award/ma000116/default.htm.
Employers and employees can also subscribe to electronic award updates from the commission. The Fair Work Ombudsman also has online pay checking resources (fairwork.gov.au/pay).
Care needs to be taken in relation to annualised wage arrangements, given the Fair Work Commission’s recent tightening of award requirements in this area. A failure to apply the minimum wage increase can result in a claim for back pay (covering up to the last six years) and the imposition of a penalty for breaching the industrial award (up to $12,600 for individuals and $63,000 for corporations per breach) and also has potential professional conduct implications.
The other change that occurs each year from 1 July is an adjustment in the income level for statutory unfair dismissal claims, which may be relevant when considering terminating the employment of a professional staff member.
This year, the unfair dismissal high-income threshold has increased to $153,600 (excluding superannuation and non-guaranteed amounts, such as bonuses) from 1 July, and the maximum compensation available for unfair dismissal increased to $76,800.
This reinforces the importance for employers of making a decision whether to retain an employee before the deemed statutory probation period (called the ‘minimum employment period’) ends. This period is 12 months for employers with less than 15 employees and six months for those employers with 15 or more employees. These periods cannot be extended, even by agreement.