Hiring employees and adhering to the minimum wage laws

If you’re a small business owner, you’ll be hiring employees as you grow your business. As is the case with any business decision, you should project how this choice will impact your firm financially.

When factoring how much to pay your employees, you’ll need to, at the very least, consider the minimum wage rates. Minimum wage rates are the bare minimum you must pay your employees.

Last year, there were changes to the Australian national minimum wage. If you’re not familiar with these changes, you should take the time to understand what took place.

This article should answer all of your questions. Here, we’ll cover everything you need to know about the minimum wage Australia 2019 laws, answering some of the most frequently asked questions.

What is a minimum wage?

A minimum wage is exactly as it sounds — it is the bare minimum that employers are required to pay their employees. According to the International Labour Office, more than 90% of countries have legislation in place regarding a minimum wage. Although legislation varies from country to country, minimum wage laws can declare how much employers must pay each hour, day, or month.

Typically, extensive economic studies go into determining the minimum wage. Minimum wage increases are often associated with living standards. As the cost of living increases, it’s often the case that the minimum wage will increase as well. Minimum wage increases ensure that full-time employees receive living wages from their primary place of employment.

What is the minimum wage in Australia? 

Australia’s minimum wage as it exists currently is $740.80 per week, based on Australia’s 38-hour work week. This breaks down to an hourly rate of $19.49. Each year, Australia’s Fair Work Commission (FWC) conducts an annual wage review and sets the minimum rates of pay thanks to the Fair Work Act 2009. In 2019, we saw another pay rise, the tenth straight year in which this was the case.

Minimum wages increased from $13.74 to $14.31 per hour from 2007 to 2008. In 2009, the FWC did not change the hourly minimum wage rates. However, after 2009, the organisation increased the minimum wage each year. In 2018, the hourly minimum wage was $18.93, resulting in weekly earnings of $719.20.

Obviously, this puts a lot of pressure on you as a business owner. When the FWC increases the minimum wage each year, it puts more pressure on you to increase revenue to meet the additional labor expenses. An increase of $20 per week for a worker who works 50 weeks results in an additional $1,000 in earnings per year.

If you have 10 employees, this means that you’ll end up spending $10,000 or more on increased wages. You may have to decide whether you can afford to keep the employees at that rate. The downside to this is that you lose valuable productivity and working hours if you let someone go. So, when hiring an employee, you should try to think not just about this year, but about future years as well.

Lastly, the minimum wage Australia 2019 rates are in place until the FWC announces changes. We can expect the FWC to announce the minimum wage Australia 2020 rates sometime during the month of May. The rates kick in on the first full pay period on or after July 1, 2020.

Economists suggest that minimum wage growth between 2019 and 2020 could be as high as 5%, with weekly earnings increasing to approximately $780.

How does Australia compare to other minimum wage rates? 

As mentioned, the current national minimum wage in Australia is $19.49 per hour. Let’s take a look at how this compares to those in other countries.

• United Kingdom: Minimum wage ranges from £3.90 to £8.21 depending on age and experience.
• New Zealand: NZD $14.16 for those in training or 16- and 17-year-olds, and NZD $17.70 per hour for those older than 18.
• France: €10.03 per hour.
• Germany: €9.35 per hour, although certain collective bargaining agreements often result in a higher minimum wage.
• Canada: The hourly rate ranges from CAD $11.32 to $15 per hour. Each province and territory sets its own minimum wage.
• United States: USD $7.15 per hour, although certain states may require a higher wage. The highest wage defined by any of the states is $14 per hour.
• Japan: Between ¥790 and ¥1,013 per hour. The rates are set on a prefectural and industry basis.
• Mexico: 123.22 Mexican pesos per day, although the wage is a bit higher in the Free Zone of the Northern Border.
• China: Between ¥10.60 and ¥21.00 per hour. Individual cities set wage rates.
• Brazil: 13,585 Brazilian real per year. Employers pay 1,045 real 13 times a year. Brazilian states may institute a higher minimum wage.
• India: Ranges from 160 to 750 rupees per day, depending on the city.

When compared with other economies, it’s clear Australia is paving the way for the underprivileged with one of the most generous minimum wages in the developed world.

What happens if you don’t pay the minimum wage? 

If the pay rates that you offer your employees fall below the national minimum wage, you subject yourself to penalties and fees. You are not permitted to pay an employee less than the minimum wage, even if the employee agrees to it.

It’s also important to note that these requirements also apply to employees who are not necessarily citizens of Australia but are instead here on visas. It applies to those who are:

• Temporary migrants
• Backpackers
• International students

Too often, owners pay visa-based workers less than minimum wage. Whether this is intentional or not on the part of small business owners, it’s a serious problem in Australia. One recent study, Wage Theft in Australia, found that a third of the aforementioned individuals were making less than $12 per hour.

There seems to be a common misconception about the minimum wage in the eyes of migrant workers. The study found that 86% of visa-sponsored workers believed that ‘many, most, or all other people on their visas are paid less than the basic legal minimum wage’.

If you’re a small business owner who hires foreigners to work for you, you need to make sure you pay the current minimum wage, just as you would an Australian employee. Not only is it the right thing to do, it’s the law.

If you fail to pay your employees the Australian minimum wage, there is no set determination for what your fine could be. TheFair Work Ombudsman will evaluate your company and your case, and fine you based on the circumstances surrounding your violation of the law.

Other things to consider with the minimum wage

Although we’ve established what the standard minimum wage in Australia is, there are still a few things you need to consider to ensure you pay your employees properly.

First and foremost, there are different Australian minimum wage rates for apprentices and trainees. You’ll find that there are also pay rates for junior employees, as well as for those with disabilities.

Note that these pay rates can be tricky. For instance, the wages for apprentices depends on the length of the apprenticeship and how long the apprentice has been working. Good record and financial keeping can ensure that you pay your employees properly. Consulting with an accountant can also help clarify confusing situations.

The Fair Work Commission provides a pay calculator for Australian businesses so that you can figure out precisely how much you owe your employees.

One of the other things you’ll need to pay is a premium rate for casual employees. A casual employee is one who doesn’t have a firm commitment about how long they will be employed for or the actual hours or days they must work.

Casual employees are also those who work irregular hours or swap shifts with other employees. Lastly, casual employees do not receive sick or annual leave. Unless otherwise dictated in an employment contract or registered agreement, casual employees can end their employment without notice. Casual employees receive at least a 25% higher base rate of pay than part- and full-time workers because they do not receive benefits.

Note that casual employees are noticeably different from part-time or full-time workers. These workers have a fixed-term contract and work regular hours each week. As an employer, you are also required to offer sick and annual leave to your part and full-time workers.

So, you may think that it’s cheaper to hire a casual worker since there is no commitment and you don’t have to pay annual or sick leave. However, because the base rate of pay is significantly higher for casual employees under the national minimum wage order, you may not end up saving much money at all.

Is the minimum wage standard across all industries? 

In short, no. One of the other unique things about the Australian minimum wage is that there is something known as a modern award. Modern awards outline the basic entitlements that employees in each industry are required to receive. These include both wages and the conditions of employment.

If you don’t work in an industry that’s subject to modern awards, then the workers are subject to the national minimum wage as a default. But if you work in an industry subject to modern awards, then you’re going to have to pay your employees more than the national minimum wage. The minimum conditions laid out by modern awards include:

• Wage rates
• Public holidays recognised
• Annual leave
• Defined hours of work
• Penalty rates

Before you assume that you owe your employees the minimum wage, you shouldconsult this resource to see if you’re part of an industry with modern awards. You may also want to contact a trusted accountant to clarify the situation.

Keep the minimum wage in mind when growing your business 

As your business grows, you must pay particularly close attention to your financial reporting regulations, including keeping detailed records of all types of staff payments.

Part of that is knowing how much you need to pay your part-time and full-time employees. Failure to pay your employees the minimum wage could put you in hot water and subject your business to stiff penalty rates.

Because the FCA introduces new minimum wages annually, you may want to consider setting a reminder on your calendar or in your accounting software so that you know when you need to change your base rate. If you do so, you’ll keep yourself out of financial hot water and will also keep your employees happy.