Key Takeaways
The Fair Work Commission has announced a 4.75% wage increase for modern awards and a 5.97% increase to the National Minimum Wage, effective 1 July 2026. This means the National Minimum Wage will rise from $24.95 per hour to $26.44 per hour, or $948.00 to $1,004.90 per week, based on a 38-hour work week.
What does this mean for employers?
If you have employees that are:
- covered by a modern award;
- paid the National Minimum Wage; or
- covered by an Enterprise Agreement,
you must ensure that, from the first full pay cycle on or after 1 July 2026, the wages paid to your employees are compliant with the minimum wage increase, otherwise you are exposed to an underpayment claim.
These changes will have a flow-on effect, impacting penalty rates, overtime, loadings, allowances, and superannuation obligations.
Given the broad impact of these changes at a time where the economic landscape is already strained, understanding and accurate implementation is critical for employers.
Changes to Award Classifications
In addition to the minimum wage increases, the Fair Work Commission has announced their intention to phase out the lowest-paid classifications in modern awards, the C13 and C14 wage rates. The C12 wage rate will eventually become the minimum wage rate. They will complete this in three stages, with the first stage commencing as of 1 July 2026.
In this first stage, the:
- C13 classification will align with the National Minimum Wage of $26.44 per hour or $1,004.90 per week; and
- C14 entry-level classification will be for a period of no more than six months at $25.74 per hour or $978.10 per week.
What did the Commission consider?
In reaching their decision, the Fair Work Commission considered the performance and competitiveness of the national economy, the need to achieve gender equality, the need to promote social inclusion through increased workforce participation, and the relative living standards and needs of the low paid.
They also gave consideration to the impact of the Middle East conflict on inflation – namely, the price of petrol and diesel and the ongoing impact of those rising costs. This inflation has caused the wage gap to substantially open yet again, with the forecast for the year to June 2026 to be 4.8%.
The Fair Work Commission acknowledged that it would require a significant minimum wage increase of over 5% to close the re-emerged gap but, in light of inflation challenges faced by Australians, it would not be practical or responsible to do so in our current economic climate. Accordingly, to minimise the adverse impact on employees, they set the minimum wage increases beginning at 4.75%.
Looking Forward
The Fair Work Commission has stated their intention to continue their action in eliminating gender-based undervaluation of work in modern awards to ensure female workers are equally remunerated where appropriate. They hope to complete this by the 2027 review and believe it will further decrease the gender pay gap.
Next Steps for Employers
We recommend employers:
- review employee salaries or wages (against the relevant award rates, if applicable) to ensure compliance in accordance with the increases;
- review payroll systems to ensure the new National Minimum Wage rate, award rates, and superannuation guarantee contributions are correct in preparation for the first full pay cycle on or after 1 July 2026; and
- consider taking the opportunity to review and update their employment agreements.
If you have any questions in relation to the upcoming increases, or would like assistance with award interpretation, reviewing your employment agreements or policies, or general workplace and employment advice, please contact our Employment team.
You can reach them on 1300 068 736 or by email at [email protected].
