The Fair Work Commission has announced a 4.75% increase to award wages and a 6% increase to the National Minimum Wage from 1 July 2026. Learn what it means for your business, payroll compliance, contracts and labour costs.

For many business owners, this announcement means more than simply updating pay rates. It creates an immediate need to review payroll systems, employment contracts, annualised salary arrangements, award compliance and labour budgets.

If your business employs staff covered by a Modern Award, now is the time to start preparing.

What has changed?

The Fair Work Commission has confirmed

  • A 75% increase to all Modern Award minimum wage rates
  • A 6% increase to the National Minimum Wage

New rates take effect from the first full pay period commencing on or after 1 July 2026.

The benchmark C10 classification under the Manufacturing Award will increase from

  • $28.12 per hour to $29.45 per hour
  • $1,068.40 per week to $1,119.14 per week

The National Minimum Wage will increase from

  • $24.95 per hour to $26.44 per hour
  • $948.00 per week to $1,004.90 per week

While relatively few employees are paid the National Minimum Wage, approximately 2.8 million Australian workers rely on Modern Award rates, making this decision highly relevant for employers across most industries.

Why didn’t the commission award a larger increase?

The Commission acknowledged that many workers are still feeling the effects of rising living costs and that real wages remain below pre-pandemic levels. However, it also highlighted several economic concerns

  • Inflation remains above the Reserve Bank’s target range
  • Interest rates have increased
  • Economic growth is slowing
  • Global instability, particularly in the Middle East, continues to create uncertainty

The Commission ultimately concluded that while workers needed support, awarding a significantly larger increase could place additional pressure on businesses already managing rising operating costs.

Which businesses are most likely to be impacted?

Businesses with employees covered by Modern Awards should review their arrangements immediately. Industries commonly affected include

  • Veterinary Practices
  • Healthcare and Allied Health
  • Hospitality and Tourism
  • Retail
  • Professional Services
  • Community Services
  • Manufacturing
  • Construction
  • Transport and Logistics
  • Childcare and Education
  • Pharmacies
  • Agriculture

Awards we regularly assist clients with include

  • Veterinary Services Award
  • Clerks – Private Sector Award
  • Health Professionals and Support Services Award
  • Hospitality Industry (General) Award
  • Restaurant Industry Award
  • General Retail Industry Award
  • SCHADS Award
  • Manufacturing Award
  • Professional Employees Award

The hidden risk many businesses miss

One of the biggest compliance mistakes we see after annual wage increases is assuming that employees paid “above award” automatically remain compliant. Unfortunately, it isn’t that simple. Businesses should review the following areas

Annualised Salary Arrangements

Many employers pay a flat salary intended to compensate for

  • Overtime
  • Penalty rates
  • Allowances
  • Weekend work
  • Public holidays

A wage increase can quickly erode the buffer built into those arrangements. An employee who was compliant on 30 June may become underpaid on 1 July without any change to their working hours.

Flat Hourly Rates

We regularly see businesses paying a higher flat hourly rate rather than applying award penalties separately. This approach can be compliant, but only if a proper Better Off Overall Test (BOOT) or award reconciliation is undertaken. The increase in minimum rates may require these arrangements to be recalculated.

Employment Contracts

Businesses should also review

  • Salary clauses
  • Annualised wage provisions
  • Set-off clauses
  • Allowance references
  • Award references

Many contracts drafted several years ago may no longer adequately protect the business.

Gender Pay Equity Changes Continue

An important development from this year’s decision is the Fair Work Commission’s ongoing focus on gender-based undervaluation. The Commission has already delivered additional increases in several female-dominated industries, including

  • Pharmacy Industry Award
  • Health Professionals and Support Services Award

Further cases are currently before the Commission involving:

  • Flight Attendants
  • Nurses (excluding aged care workers)

This signals that wage increases driven by work value and gender equity considerations are likely to continue over the coming years. Business owners should expect ongoing changes beyond the annual wage review process.

Practical steps business owners should take now

Identify which Awards apply

Many businesses operate under multiple awards without realising it. Understanding which awards cover your workforce is the foundation of compliance.

Review payroll settings

Ensure payroll systems are updated before the first pay period after 1 July 2026.

Audit Salaries and Flat Rates

Review

  • Salaried employees
  • Annualised wage arrangements
  • Above-award rates
  • Flat hourly rates

Confirm employees remain better off overall once new minimum rates apply.

Check Allowances

Many award allowances also increase each year and should not be overlooked.

Review Labour Budgets

The increase will impact

  • Base wages
  • Superannuation
  • Payroll tax
  • Workers compensation premiums
  • Leave liabilities

Budgeting early helps avoid surprises in the new financial year.

Review Employment Contracts

Ensure contracts remain legally robust and reflect current legislation and award obligations.

We can help with

Annual wage reviews create compliance risks that are often invisible until a complaint, audit or underpayment issue arises. Our team can assist with

  • Award interpretation and coverage reviews
  • Payroll and wage compliance audits
  • Better Off Overall Test (BOOT) assessments
  • Salary and annualised wage reviews
  • Employment contract reviews and updates
  • Remuneration benchmarking
  • Workforce planning and budgeting support
  • Manager and payroll team training

For many businesses, a short proactive review now can prevent significant underpayment exposure later. The 2026 Annual Wage Review reinforces a reality many employers are already facing, labour costs continue to rise, and compliance expectations continue to increase.

The good news is that with some proactive planning before 1 July, businesses can manage these changes confidently while reducing risk. If you’re unsure whether your current pay arrangements remain compliant, now is the ideal time to undertake a review before the new rates take effect.

Need help understanding how the wage increase impacts your business? Contact us for practical, commercially focused advice tailored to your workforce and industry.

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