The Fair Work Commission (FWC) has increased the national minimum wage by 6% and modern award wages by 4.75% from July 1, following its annual wage review.
The increase will affect around 2.8 million employees, or 21.1% of the workforce.
The decision lands between union calls for a 6% rise and submissions from Australian Chamber of Commerce and Industry (ACCI) for a “moderate but reasonable” 3.5% increase, reflecting what the FWC described as a “challenging” economic environment marked by high inflation, rising interest rates and global uncertainty.
“Today’s decisions further delink wage outcomes from productivity, and economic activity will suffer as a result,” said David Alexander, ACCI Chief of Policy and Advocacy.
“For businesses already facing interest rate hikes, high inflation and elevated fuel costs, this decision will only add to the burden.”
ACCI estimates the increase will add around $11.7 billion in costs across the economy.
What’s changing and when
From the first full pay period on or after July 1, 2026, employers will need to factor in:
- A 4.75% increase to all modern award minimum wage rates
- An increase to the National Minimum Wage to $1,004.90 per week, or $26.44 per hour
- An effective 6% increase at the lowest end of the pay scale, driven by structural changes
While relatively few employees are directly paid the National Minimum Wage, modern awards cover a significant portion of the workforce particularly in sectors such as retail, hospitality, care and administrative services.
Structural changes to the lowest pay rates
Beyond the headline increase, the FWC has introduced a structural shift that employers will need to monitor closely.
The C13 classification – currently the lowest ongoing award wage level – will be phased out, with the C12 classification becoming the new minimum for ongoing employment.
The first stage of this change will take effect this year, lifting C13 rates by an additional amount above the 4.75% increase. Entry-level C14 rates will also rise to maintain relativities.
This adjustment will affect around 100,000 of the lowest-paid workers.
What this means for employers
Key considerations include:
- Payroll adjustments: all modern award rates must be updated from the first full pay period on or after July 1. This includes ensuring that the base rate of pay applicable to employees under any enterprise agreement does not fall below the relevant modern award base rate of pay.
- Award classification reviews: particularly where employees are classified at or near C13/C14 levels
- Budget impacts: especially for labour-intensive sectors with high award reliance
- Flow-on effects: potential wage pressure on employees paid above award rates
Sectors most affected are those with a higher proportion of award-reliant workers, including hospitality, retail, aged care, childcare and cleaning services.
Alexander said productivity growth had been “anaemic” for an extended period and is expected to fall back to zero in the middle of 2026. Wage setting must remain disciplined and anchored to productivity realities, he said.
“In an environment of weak and uneven productivity, the economy’s capacity to absorb large, mandated wage increases is fundamentally constrained,” he said.
“The Reserve Bank has cautioned that when productivity is weak and the economy is operating with excess demand, higher labour costs are more likely to flow through to prices rather than be absorbed through efficiency gains.”
Gender pay and award reform continues
The FWC also flagged ongoing structural reforms aimed at addressing gender-based undervaluation in modern awards.
Targeted wage increases for female-dominated industries, including care, health and related professions will continue to be phased in over coming years, alongside further reviews of professional classifications.
“While the increase will provide some relief to low-paid workers, it also highlights the ongoing tension between cost-of-living pressures and economic constraints,” said Business Law WA’s Legal Director, Workplace Relations, Laura Fry.
“For employers, the priority will now shift to ensuring compliance, managing cost impacts, and preparing for continued wage pressures as the economic environment evolves.”
CCIWA’s Employee Relations Helpline provides an Industrial Award subscription service which includes up to date communication with award variations, allowing businesses to be across crucial changes. Business Law WA, CCIWA’s wholly-owned subsidiary and incorporated legal practice, can also perform Wage Spot Checks to assist employers with minimising underpayment risks.
What employers need to do now
From July 1, 2026, businesses will need to ensure they are meeting the new minimum wage requirements.
- Update payroll systems
Apply the 4.75% increase to all modern award rates from the first full pay period on or after July 1. - Review employee classifications
Check employees at C13/C14 levels, as structural changes will affect minimum rates.
- Confirm National Minimum Wage compliance
Ensure employees not covered by an award or agreement are paid at least $26.44 per hour.
- Assess cost impacts
Factor higher wage costs into budgets, particularly if your workforce is award reliant.
- Review pay relativities
Consider whether increases are needed for employees paid above award rates to maintain internal equity.
- Communicate changes
Be clear with employees about how and when pay increases will apply.
For more information on minimum and award rates, contact the Employee Relations Helpline on 08 9365 7660 or [email protected].
This article is authorised by Business Law WA, an incorporated legal practice and wholly owned subsidiary of CCIWA. The content of this article is general in nature and is not legal or professional advice and should not be relied upon as such.
