This year’s Annual Wage Review impacts more than 120 modern awards and about one quarter of all Australian employees.

The FWC announced the National Minimum Wage (NMW), based on C14 classification, “was too low and no longer constituted a proper minimum wage safety net” and will now be based on the slightly higher C13, effectively increasing the NMW by 8.6 per cent.

The FWC framed the minimum wage as being 5.75 per cent higher because that is the increase for the C13 classification that the minimum wage will now be aligned with.

The NMW increase will see wages lift to $23.23 per hour or $882.80 per week.

In explaining its decision the FWC said it consulted with a range of stakeholders.

“While we have taken the submissions made into account, ultimately our statutory task is to make our own assessment of what constitutes a safety net of fair minimum wages.

“In our consideration, we have placed significant weight on the impact of the current rate of inflation on the ability of modern award-reliant employees, especially the low paid, to meet their basic financial needs. Inflation is reducing the real value of these employees’ incomes and causing households financial stress.

“We have also taken into account the recent robustness of the labour market, and the fact that increases to modern award minimum wage rates will provide a disproportionate benefit to female workers and thus may contribute to reducing the aggregate gender pay gap across the workforce.

“We acknowledge that this increase will not maintain the real value of modern award minimum wages, nor reverse the reduction real value which has occurred over recent years. However, the level of wage increase is what we consider to be justified in the current economic circumstances.”

The FWC said it was concerned at ongoing gender inequality, which will inform next year’s review.

“There are significant issues concerning the potential gender undervaluation of work in modern award minimum wage rates applying to female-dominated industries and occupations.

“The scope and timing of the present Review has prevented these gender equality issues being addressed to finality.

“The Commission will soon commence a research project to identify occupations and industries in which there is potential gender pay inequity and gender undervaluation of work and qualifications, and once completed this will underpin the consideration and determination of the identified issues.”

Prior to today’s announcement, the Australian Chamber of Commerce and Industry (ACCI) advocated for a four per cent rise.

Factoring in a superannuation guarantee rise of 0.5 per cent to 11 per cent, the bottom-line increase for business will be 6.25 per cent per eligible employee.

ACCI chief executive Andrew McKellar said the FWC’s decision will add $12.6 billion to the wages bill, which represents a significant burden for small business.

“Today’s decision will come as a hammer blow for the 260,000 small and family-owned businesses who pay minimum and award wages,” Mr McKellar said.

“The Fair Work Commission has made a dangerous choice to chase after the supply-side inflation shock that we are experiencing. An arbitrary increase of this magnitude consigns Australia to high inflation, mounting interest rates and fewer jobs.

“Businesses in the accommodation, food, construction, manufacturing, and retail sectors have experienced falling profits over the past two years. The reality is many of the small and family firms in these industries will be unable to absorb this extra cost without raising prices.

“The commission has disregarded the message it conveys to the wider labour market and the influence it holds over entrenching high inflation as the Australian economy faces a worsening outlook in the years ahead.

“A 5.75 per cent increase will make the job of the Reserve Bank more difficult to control ongoing inflationary pressures, inflicting pain on families and small business when they are already down to the wire.”

“In our submissions to the annual wage review, ACCI proposed a fair and responsible increase of 4 per cent that aligned with efforts to contain inflation and return it to the Reserve Bank’s target range.”