The Fair Work Commission (FWC) handed down its Annual Wage Review decision on 3 June 2025. The FWC decided to increase the National Minimum Wage and all modern award rates by 3.5% (the rise in award rates over the last 3 years has been 3.75%, 5.75% and 4.6% respectively). The decision takes effect from 1 July 2025. The function of the FWC review is twofold. Firstly to review and make the National Minimum Wage (NMW) order which applies only to persons NOT covered by a modern award or enterprise agreement (only a small proportion of the workforce is paid the NMW). The second function is to review and adjust modern award minimum wages. The FWC noted that:
- about 20.7% of all employees are paid at the minimum wage rates in the 121 current modern industry and occupational awards;
- many of these employees are female, more than two thirds work part-time, more than half are casual employees and more than one third are low paid;
- the wages for this sector constitute only about 10.5% of the national “wage bill”.
The FWC concluded that the direct effect of the minimum wage increase on wages growth was limited but more important for the award reliant sectors of accommodation and food services, health care and social assistance, retail trade and administrative and support services which account for over two thirds of all modern award reliant employees. The proportion of award reliant employees in other sections such as mining and finance insurance is negligible. In reaching their decision the FWC took into account that:
- since July 2021, NMW/award reliant employees have suffered a real wage rate reduction;
- this reduction has been the result of several years of inflation which has caused the FWC to defer reversing the decline in real wages given concerns about contributing to higher inflation;
- the result has been a squeezing of living standards for these employees and the low paid;
- inflation has now sustainably returned to its target range of 2-3% which provided the opportunity to provide a real increase in the NMW and award wages;
- a failure to provide a real increase could result in the permanent embedding of the loss of real wage value and entrenchment of reduced living standards;
- the labour market remains strong overall with reductions in interest rates likely to lead to increased consumer demand and a higher level of economic growth;
- the level of non mining profits has been maintained in real terms and profit margins are at about their pre pandemic level.
The FWC noted that continuing poor performance in labour productivity, particularly in the healthcare and social services sectors, was a restraining factor but made it clear an ongoing reduction of real wages would not solve the problem. Matters such as the upcoming superannuation guarantee increase, uncertainty caused by US trade policies and indications of weakness in the accommodation and food services sectors were also moderating factors in the increase awarded by the FWC. The FWC did note its intention to push forward with a targeted program of reviewing particular award classifications in order to eliminate gender based undervaluation of work in modern awards. Its next priority is to review all professional classifications requiring university degrees.
The National Minimum Wage and award rate increases will take effect from the first full pay period after 1 July 2025. This means that the federal weekly minimum full time wage will increase as of 1 July 2025 from $915.90 per week ($24.10 per hour) to $948.00 per week ($24.95 per hour). There will also be award increases from this date and allowances will also be affected. It is important to check your particular award for commencement of the increase. A summary and the detailed FWC decision can be found at FWC Annual Wage Review 2025. Employers should check the Fair Work Commission website (www.fwc.gov.au) for pay rate revisions to their particular modern award/s and implementation dates. You can also subscribe to electronic award updates from the Commission. The Fair Work Ombudsman also has online pay checking resources (www.fairwork.gov.au/pay-and-wages).
Remember that employees cannot be paid less than the amount required by an applicable modern award (including overtime, penalty rates and allowances). It is only trainees, apprentices and junior employees, employees to whom training arrangements apply and employees with a disability who may be paid less than these minimum rates and then only if specified in an applicable award or enterprise agreement. For non award employees, the obligation is for employers to ensure that an employee is being paid more than the minimum wage rate for all their hours of work. Care also needs to be taken in relation to annualised wage and common law salary arrangements.
Also, from 1 July 2025, the compulsory employer Superannuation Guarantee rate will increase from 11.5% to 12%. Finally, the unfair dismissal high income threshold (the annual remuneration level, above which award/enterprise agreement free employees cannot bring unfair dismissal claims) will increase to $183,100 (from $175,000 excluding superannuation and non guaranteed amounts, eg commission) and the maximum compensation for unfair dismissals will increase to $91,550. Please contact us if you would like any further information or help.