As everyday costs continue to climb, the Fair Work Commission (FWC) has announced a 3.5% pay rise that will take effect this July, offering some relief to those feeling the pinch.

From 1 July, the national minimum hourly wage will increase from $24.10 to $24.94. This means full-time workers on the minimum wage who work a 38-hour week will see their weekly pay rise to $948.

So, who stands to gain from this increase — and what does it really mean for workers across the country? Breaking it down, below.

How to know if you will benefit from the minimum wage increase

This increase applies to workers earning the national minimum wage. Less than 100,000 are currently on the nation minimum wage. But the increase also applies to minimum award wages.

So, if you are currently working on the minimum rate for your award, then you will receive the 3.5% increase too. Even if your wages are more than the national minimum wage.

The decision will impact one in five Australian workers on an award wage, which translates to roughly three million workers.

What is an 'award' and how do you know if you're working under one?

An "award worker" is someone whose job pay and conditions are set by a legal document called a modern award. These awards are created and updated by the Fair Work Commission and set the basic rules for wages, work hours, and other rights for certain industries or jobs.

Just some of the dozens of awards include an animal services and veterinary award, a textile, clothing and footwear award, a marine tourism award, a models award and a gardening award. All of these awards will set out a minimum pay rate for that particular industry.

If you are working under an award, it should say in your contract. If it doesn't you can ask your HR department or your boss who should be able to provide you that information. If you are earning the minimum rate for your industry/award, the minimum wage increase applies to you.

While there are awards for many profession types, award workers tend to be concentrated in the services industries. This means accommodation and food services, health care and social assistance, retail trade, and administrative and support services sectors. They are also disproportionately female, with more than half employed casually.

How is the minimum wage increase determined? And why was there a push back?

The Australian Council of Trade Unions (ACTU) was arguing for a for a rise of up to 4.5 per cent. At the other end of the spectrum, groups like the Australian Retailers Association and the Australian Chamber of Commerce and Industry wanted the increase capped at 2.5 per cent which is the current rate of inflation. They argued that anything higher would put disproportionate stress on employers, especially small businesses who are often the employers of award employees. Especially in an economy where productivity is declining, and businesses do not have the capacity to pay employees more.

Productivity in Australia is measured by comparing input into a business to an output of a business. For example, if a business is doing the same amount of work with the same number of employees as last year, but earning less from that same work this year, the productivity of that business has decreased.

Declining productivity is a key concern for many including our central bank, the RBA. Some experts argue that increasing wages could drive increase productivity, since increasing wages means average consumers have more disposable income to spend at small businesses.

Feature image via Pinterest.