Page 4 Page 5 FOCUS HR | IR July Update 2026 FOCUS HR | IR July Update 2026 NATIONAL MINIMUM WAGE DECISION When: Applies to the first full pay period after 1 July 2026 On 2 June 2026, the Fair Work Commission (FWC) handed down its Annual Wage Review decision, confirming significant increases to both the National Minimum Wage and minimum award wages from 1 July 2026. Key Changes The National Minimum Wage will increase by 5.97%, rising from $24.95 per hour to $26.44 per hour, or from $948.00 to $1,004.90 per week for a full-time employee working a 38-hour week. For employees covered by modern awards, the Commission has awarded a 4.75% increase to minimum wage rates. The FWC’s Rationale A key issue considered by the Commission was the impact of the significant inflation experienced during 2022 and 2023. In its decision, the FWC noted that many award-reliant employees remain worse off in real wage terms than they were prior to the post-pandemic inflation spike. The Commission found that minimum wage increases in recent years had not fully restored the purchasing power lost during that period. However, the FWC also acknowledged the challenges facing employers and stated that it would not be responsible, in the current economic environment, to grant increases large enough to fully restore real wages to their July 2021 position. Instead, the FWC determined that the increase should broadly ensure that modern award-reliant employees are not worse off in real terms than they were on 1 July 2025. The decision sits below the 6% increase sought by unions but significantly above the outcomes proposed by most employer groups. Important changes to award classifications Alongside the wage increase, the FWC announced changes to the lowest-paid classifications in the modern award system. Following a multi-year review, the FWC has decided to phase out the C13 classification as the lowest rate applicable to ongoing employment. Instead, the C12 classification will become the minimum wage rate for ongoing employees across the award system. As a result, the lowest wage rate for ongoing employment under modern awards will now align with the National Minimum Wage of $1,004.90 per week or $26.44 per hour. The Commission has retained the C14 entry-level classification, which may apply during an initial period of employment of up to six months. The C14 rate will increase by 6.01% to $978.10 per week or $25.74 per hour. The Impact The decision represents one of the largest wage increases delivered by the Fair Work Commission in recent years, second only to the 2023 Annual Wage Review. The decision will affect millions of Australian workers and employers, particularly those operating in award-reliant industries such as horticulture, hospitality, retail, aged care, childcare, manufacturing and community services. While only a relatively small proportion of employees are paid the National Minimum Wage, approximately 21% of Australia’s workforce (around 2.8 million employees) are paid according to minimum award rates. While the increase will be welcomed by many employees, it will create additional cost pressures for employers at a time when many businesses continue to face rising operating costs, increased insurance premiums, higher energy costs and ongoing (albeit softening) labour shortages. The decision also continues a trend that many employers have highlighted in recent years: wage growth is increasingly occurring independently of productivity growth. While the Commission’s focus remains on maintaining living standards for low-paid workers, concerns about the widening gap between wage increases and productivity outcomes are likely to remain a key issue. LEGISLATION CHANGES Practical Tips for Employers 1. Check and update where needed: • Contracts of Employment • Individual Flexibility Arrangements • Enterprise Agreement Rates 2. Review salaries and all-inclusive hourly rates to ensure they remain compliant 3. Ensure your payroll system updates to new Award and Superannuation rates 4. Communication! We can’t stress this one enough. Don’t leave employees wondering or guessing what might be happening to their wages. Even if they are not receiving an increase, communicate the decision. 5. To increase productivity or performance through remuneration incentives, break the link between NMW increases (which are mandatory) and discretionary (performance based) pay increases. Wage increases applied around 1 July will be seen by employees as an entitlement linked to NMW increases, rather than recognition of their performance or value to the organisation.
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