In terms of the rationale for the decision, the Panel concluded that a "significant increase" was warranted based on a review of current economic conditions which indicated that minimum wages were not providing the "fair and relevant" safety net that they were supposed to provide under the new Modern Award system. The Panel considered that the Australian economy had performed "better than expected" since March 2008 and therefore decided an increase of this size was necessary to protect the living standards and needs of those employed in minimum-wage reliant industries.

When viewed in the context of last year's pay freeze by the Australian Fair Pay Commission, a larger increase does not appear surprising. However, with the commencement of transitional arrangements under Modern Awards also occurring on 1 July 2010, most employers are already facing significant labour cost increases, albeit such increases will be incremental from 1 July and over a period of up to 5 years.

Even if Modern Awards don't apply in your workplace because you have in place an enterprise agreement or other AWA/ITEA, you should note that minimum or base rates of pay contained in a Modern Award will override any lesser rates provided in such industrial instruments to the extent that they are below those contained in the award (NB: Only employers with enterprise awards are free of this issue).

For more information and detail on the decision, you should contact your FCB Workplace Law advisor on (02) 9922 5188 or (03) 9614 3900.