The Fair Work Commission (FWC) handed down its Annual Wage Review decision on 2 June 2026. The FWC decided to increase the National Minimum Wage by 6% and all modern award rates by 4.75% (the rise in award rates over the last 3 years has been 3.5%, 3.75% and 5.75% respectively). The decision takes effect from 1 July 2026. 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 21.1% of all employees (almost 2.8 million people) are paid at the minimum wage rates in the 121 current modern industry and occupational awards;
- the characteristics of minimum award wage employees differ markedly from the workforce as a whole;
- over 60% of this cohort are female, over 70% work part time, more than half are casual employees and more than third are low paid;
- the wages for this sector constitute only about 11.2% 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 lower paid workers, with over two thirds working in the award reliant sectors of accommodation and food services, health care and social assistance, retail trade and administrative and support services. In reaching their decision the FWC noted this year’s review had been particularly challenging and took into account that:
- until February 2026, most elements of economic and business performance had been sound;
- capacity constraints had resulted in increased inflation with resultant interest rate increases likely to slow the economy in the year ahead;
- the Middle East conflict had accelerated inflation and added economic uncertainty although economic forecasts had not substantially changed;
- award wages remain, in real terms, lower than they were in July 2021 and the “real wage gap” between the Consumer Price Index (CPI) and award wage rates had particularly affected the living standards of the low paid;
- a wage rate increase of well over 5% would be needed to close this gap.
The FWC concluded that it would not be practicable or responsible to award an increase to close this gap. However, the FWC did consider it should at least ensure that award reliant employees were not generally worse off in real terms than they were at the same time last year. The FWC also considered that measures should be taken to protect the lowest paid. To do this, the FWC decided to phase out the lowest C13 award wage rate in three stages.
The National Minimum Wage and award rate increases will take effect from the first full pay period after 1 July 2026. This means that the federal weekly minimum full time wage will increase as of 1 July 2026 from $948.00 per week ($24.95 per hour) to $1,004.90 per week ($25.74 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 2026. 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).
Remember that employees cannot be paid less than the amount required by an applicable modern award (including overtime, penalty rates and allowances) in each pay period. 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.
The compulsory employer Superannuation Guarantee rate stays the same this year at 12%. Finally, the unfair dismissal high income threshold (the annual remuneration level, above which award/enterprise agreement free employees cannot bring unfair dismissal claims and contractors cannot bring unfair contract claims) is expected to increase to $190,100 (from $183,100 excluding superannuation and non guaranteed amounts, eg commission) and the maximum compensation for unfair dismissals would accordingly increase to $95,050. Please contact us if you would like any further information or help.