The Fair Work Commission (FWC) today announced a 4.75% increase to modern award minimum wage rates and an increase to the National Minimum Wage, effective from 1 July 2026.

As the National Minimum Wage applies to employees who are not covered by a modern award, today’s decision will impact employers and employees across Australia. The changes are expected to have a particularly significant impact in industries heavily reliant on award-covered workers including health care, hospitality, retail, administration and support services.

The increase follows the FWC’s Annual Wage Review process and represents one of the more significant minimum wage increases in recent years.

What are the new minimum wage rates?

The National Minimum Wage will increase by approximately 6% to align with the new lowest ongoing modern award rate.

The FWC also confirmed that modern awards containing a C13 classification level will see that level phased out.

As a result:

The lowest wage rate for ongoing employment under the modern award system will increase to:

• $1,004.90 per week, or
• $26.44 per hour

The lowest wage rate for entry-level employment for up to six months will increase to:

• $978.10 per week, or
• $25.74 per hour

The weekly rate is based on a 38-hour working week for a full-time employee.

Employees will generally be entitled to the increased rates from the first full pay period on or after 1 July 2026.

These changes will require many employers to review payroll systems, employee classifications, budgets and remuneration arrangements ahead of 1 July 2026.

Who will be impacted?

The increase will affect approximately one in five Australian employees who are paid minimum award wages.

According to the FWC:
• More than 60% of award-reliant employees are female
• More than 70% work part-time hours
• More than half are casual employees
• A large proportion work in:

• accommodation and food services
• health care and social assistance
• retail trade, and
• administrative and support services

Businesses operating in these sectors are likely to experience the most immediate financial and operational impact from the increases.

Why did the FWC increase wages?

In its decision, the FWC acknowledged that economic conditions throughout much of 2025 remained relatively strong, including continued employment growth, increased productivity and business investment.

However, the Commission also noted inflation increased significantly during the second half of 2025, driven in part by global instability and the ongoing conflict in the Middle East.

The FWC found this widened the “real wage gap” between inflation and modern award wage increases, impacting the living standards and financial capacity of low-paid workers.

While the FWC did not award an increase sufficient to fully close that gap, it stated the increase was intended to ensure award-reliant employees were generally not worse off in real terms than they were as at 1 July 2025.

What should employers do now?

With the changes taking effect from 1 July 2026, employers should begin preparing now.

Key steps may include:

• Reviewing applicable modern awards and employee classifications
• Updating payroll systems and pay rates
• Reviewing casual, part-time and entry-level employee arrangements
• Checking annualised salary arrangements remain compliant
• Reviewing whether enterprise agreements linked to annual wage review increases require updating
• Assessing workforce planning and budgeting impacts
• Ensuring employment contracts and remuneration structures remain compliant

Employers should also be aware that award compliance remains a key enforcement focus for the Fair Work Ombudsman, particularly in industries with large casual or award-reliant workforces.

Businesses should familiarise themselves with any specific modern award amendments applying to their workforce before 1 July 2026 to ensure compliance.

Failure to implement updated rates from the first full pay period on or after 1 July 2026 may expose employers to underpayment claims, penalties and compliance investigations.

How we can help

Hillhouse Legal Partners regularly advises employers on award compliance, employment contracts, payroll obligations and workplace risk management.

If you would like assistance reviewing your workplace arrangements ahead of the 1 July 2026 changes, please contact our Employment & Industrial Relations team.

This article is general information only and does not constitute legal advice.