Australia: Minimum wages increase by 3% – no exception for farmers affected by drought

Each financial year, the Fair Work Commission (Commission) is required to review modern award minimum wages and the national minimum wage and make a decision as to whether to increase them. Earlier this month, the Commission conducted its review and decided on increasing the minimum wages by 3%.

Here is the breakdown of this increase to the national minimum wage:

Significance for the agribusiness industry

This will have a widespread impact on the industry which employs many award-covered employees and employees who are paid the national minimum wage. The increase in labour costs will be particularly unwelcome for farmers or businesses who have been affected by the drought and are struggling with increased competition and costs of business.

What the Fair Work Commission considered in its decision

In its decision, the Fair Work Commission considered a wide range of factors including:

• the economic outlook for 2014-2015;
• employment growth and the unemployment rate expected for 2014-2015;
• the increase to the Superannuation Guarantee rate from 9.25% to 9.5% from 1 July 2014;
• relative living standards and the needs of low paid workers; and
• living costs and inflation.

As part of the annual review, parties are also welcome to make submissions seeking different treatment to certain awards or seeking that the Commission takes into account certain concerns of particular industries. However, the Commission will only agree to treat a particular industry or employees of a particular award differently if parties are able to show that there are exceptional circumstances that justify different minimum wages being applied to them.

Submissions regarding the hardships faced by farmers

This year, the Chamber of Commerce and Industry Queensland (CCIQ) and the National Farmers' Federation (NFF) made submissions regarding the difficult circumstances faced by famers and businesses in the agribusiness industry as a result of the ongoing drought.

The CCIQ submitted that despite drought assistance being offered by the Government, agribusinesses in drought affected areas were still significantly impacted and were experiencing financial hardship.

The NFF described the impact on businesses including livestock producers being forced to increase the number of stock to slaughter and farmers reducing the planting of crops. It submitted how this drop in farming productivity has had an impact on the national economy, but also a compounding effect on small businesses in regional country towns.

Based on this common concern, the two groups sought different results.

The CCIQ sought an exemption from any increase to minimum wages for businesses predominantly in the farming and agriculture supply chain. It suggested that this exempt group could be limited to those businesses that had applied for drought relief and operate under the awards which cover the agricultural industry.

On the other hand, the NFF simply sought that the Commission consider the hardships as a result of the drought in making any determination to increase the minimum wages.

In accordance with the NFF's suggestion, the Commission acknowledged the difficulties faced by the industry and took this into account in its assessment of the national economy and its decision to increase minimum wages. However, it rejected CCIQ's suggestion and found that there was insufficient evidence that the drought constituted exceptional circumstances which would justify exempting agribusinesses affected by the drought.

The increases are to take effect from 1 July 2014.

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