Minimum Wage Increase

By Russell Drake

 

The dilemma of the minimum wage increase

The Government announced that the minimum wage has been increased to $15.75 as of 1 April 2017, increasing the pay rate of the lowest remunerated Employees may become the least of the Employer’s problems.

Employee’s not directly affected by the increase in the minimum wage may soon become the party that voice concern about their own level of pay. Where a $0.50 - $1.00 relativity may currently exist between the ‘new-start’ Employee and the more experienced worker, the increase in the minimum wage by $0.50 will close this gap significantly.

Where this has occurred previously (the last few increases in the minimum wage being $0.50 per hour) experienced workers have been quick to complain that the narrowed gap does not now adequately recognise the higher level of skill and experience that they bring to the role over (for instance) a school leaver with little or no practical work experience.

Adjusting the pay scale to maintain the relativities between new starts and the experienced Employee therefore creates the dilemma as to where the required level of increase ends, or does the $0.50 increase get passed on to all hourly paid workers.

The cost of passing the increase on to all Employees can be prohibitive and therefore many Employers will adopt the principle of ‘change what we must as a result of the enforced increase and provide a marginal increase only to those most affected at the next level’. Other Employers have adopted a practice of providing greater increases at the lower end of the pay scale to maintain the immediate relativity to the minimum wage Employee and then applying a graduated (decreasing) adjustment as the hourly rate increases. This approach maintains the ‘stepped’ approach to the wage scale although the relativities between steps are decreased. Generally this approach is accepted by staff without too much concern being expressed with the additional benefit being that the overall increase in wage costs to the Employer becomes more manageable.

Where an Employer has a collective agreement in place, with a wage scale that starts at close to the minimum wage, the only adjustment required is the change to those immediately effected by the change to the minimum wage, even if this evaporates the relatively to the next step completely. The steps, and relativities can then be reinstated during the next bargaining round.

If you have any questions in relation to how to apply the adjustment to the minimum wage please feel free contact us.

 

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