Getting ready for 1 July - What employers need to know

As we approach 1 July, it is important to assess changes in the employment landscape for the next financial year.

Employers should consider how these changes will impact their business. For many the changes will result in an increased financial burden accompanied by additional compliance considerations.

Key takeaways for 1 July 2022

Employers need to get across changes to:

• the minimum wage and award rates of pay;
• higher thresholds for unfair dismissal and the high income guarantee, and
• changes to superannuation contributions and the superannuation contributions base.

Increases in the National Minimum Wage and modern award rates

Effective 1 July 2022, the national minimum wage will increase by 5.2% to $21.38 an hour or $812.60 a week. The announcement by the Fair Work Commission is based on the recommendations of the 2021-22 Annual Wage Review.

There will also be a 4.6% increase to full-time minimum wage rates in modern awards, which is subject to a minimum increase for award classifications of $40 per week based on a 38-hour week for a full-time employee. This means minimum award wages above $869.60 per week will get a 4.6% increase, and award wages below $869.60 per week will get a $40 per week increase.

However, for 10 awards in the aviation, hospitality and tourism industries, the increase will not come into effect until 1 October 2022 (to allow further time for those industries to recover following the pandemic).

Changes to the High Income Threshold

On 1 July 2022, the high income threshold will increase to $162,000 per annum (up from $158,500 per annum). This is relevant because the high income threshold:

• limits an employee’s access to the unfair dismissal jurisdiction. If an employee’s annual rate of earnings is more than the high income threshold, the employee is not able to bring an unfair dismissal claim (unless they are covered by an award or enterprise agreement);
• increases the maximum compensation for unfair dismissal to $81,000 (half of the high income threshold);
• sets the minimum amount of guaranteed earnings for an employee to classify as a “high income employee” for the purposes of award coverage. This means that if a guarantee of annual earnings is entered into, the employee is not subject to the application of a modern award.

Changes to Superannuation

From 1 July 2022, superannuation contributions will increase to 10.5% per annum.

The superannuation contributions base will change to $60,220 per quarter (or $240,880 per annum), up from $58,920 (or $235,680 per annum). The maximum superannuation contributions base is used to determine the maximum limit under the superannuation guarantee legislation on any individual employee’s earnings base for each quarter of any financial year.

Also, the minimum earnings threshold of $450 per month will be removed from 1 July 2022. This means that superannuation guarantee contributions are payable in respect of employees regardless of whether the employee has earned less than $450 in that month.