Pay Rates Are Changing on 1 July – Are You Ready?

The Fair Work Commission has handed down its 2026 Annual Wage Review decision — and for employers, the clock is ticking. If you have award covered employees, or pay minimum rates, you need to ensure your rates of pay are complaint from 1 July 2026.

Here is what you need to know, and what you need to do.

The Headlines

Modern award wages are increasing by 4.75% from 1 July 2026.

The National Minimum Wage is increasing by approximately 6% to $26.44 per hour ($1,004.90 per week).

These are the largest minimum wage increases since the FWC’s 2023 decision.

The increases apply from the first full pay period on or after 1 July 2026 — not necessarily from 1 July itself. So if your pay cycle starts mid-week and 1 July falls partway through, the new rates start from the start of the next full cycle.

Who Is Affected?

Any business that employs employees covered by a modern award. This means most employers will be affected, and should be ensuring that if they pay above award rates and/or salaries, these remain above the new minimum requirements.

Changes to Lowest-Paid Classifications — Don’t Miss This

The FWC is phasing out the C13 classification — the lowest ongoing wage rate in the modern award system — and replacing it with the higher C12 level. This is happening in three stages, with stage one taking effect from 1 July 2026.

The result:

• Lowest ongoing rate: $1,004.90/week | $26.44/hour
• Entry-level rate (C14, max 6 months): $978.10/week | $25.74/hour

This structural change affects an estimated 100,000 workers. If you have employees on C13 or C14 classifications, you cannot simply apply the 4.75% increase — the new floor rates above must be met.

If you do not know whether this applies to your business, get advice as soon as possible and before 1 July 2026.

What You Need to Do

1. Check whether you have employees covered by a modern award
2. Paying at award rates? You must update pay rates from the first full pay period on or after 1 July.
3. Have an enterprise agreement? Check that base rates of pay remain at or above the applicable modern award minimums. This applies to base rates only — not allowances, penalties, or loadings. Remember: even an expired enterprise agreement remains in force until replaced or terminated.
4. Paying above-award with set-off or annualised salary arrangements? Review whether the new minimums can still be absorbed by your salary or above award payment. The absorption principle means you only need to increase pay if the new minimum exceeds what you are currently paying — but you should audit this carefully. Given recent compliance activity by the Fair Work Ombudsman in relation to annualised salary arrangements, this is an area that warrants close attention.
5. Have employees on C13 or C14 levels? Ensure the new structural floor rates (not just the 4.75% increase) are applied.

Why Did the FWC Decide This?

The FWC described this year’s decision as “particularly challenging.” It pointed to rising inflation (currently 4.2% annually), the Reserve Bank’s interest rate increases, and the economic uncertainty flowing from the Middle East conflict that erupted in February 2026.

The FWC acknowledged that award-reliant workers’ real wages remain below where they were in July 2021, but said it would not be “practicable or responsible” to close that gap entirely given the current economic climate. The 4.75% increase was designed to ensure workers are at least no worse off than they were as at 1 July 2025.

The Australian Chamber of Commerce and Industry (ACCI), which had sought a 3.5% increase, expressed disappointment, warning the decision would add to cost pressures for businesses “already struggling with interest rate hikes, high inflation and high fuel prices.”

On the Horizon

There are two additional developments of which employers should be aware:

Gender pay equity reviews: The FWC is continuing its program to address gender-based undervaluation in awards. Phased wage increases are coming for children’s services employees, dental assistants, disability home care workers, pharmacists, and other health professionals. Major cases concerning nurses and flight attendants will be determined within the next year.

We’re Here to Help

Navigating pay compliance can be complex — particularly where annualised salaries, set-off arrangements, enterprise agreements, and structural classification changes all interact. Our team can review your current pay arrangements, check your enterprise agreement against the new minimums, and advise on any exposure before 1 July. If you would like assistance, please get in touch.

Please do not hesitate to get in touch, we would be glad to help you get ahead of the 1 July deadline.