Annual Wage Review 2026: What Employers Need to Know Before 1 July
On 2 June 2026, the Fair Work Commission (Commission) handed down their Annual Wage Review Decision (Decision) that will affect the National Minimum Wage and modern award minimum wage rates.
Effective the first full pay period on or after 1 July 2026, the National Minimum Wage and modern award minimum wage rates will be increased.
The National Minimum Wage will see an approximate 6 per cent increase to $1,004.90 per week or $26.44 per hour for permanent, adult employees.
The lowest modern award minimum wage rates will increase by 4.75 per cent provided that they do not fall below the National Minimum Wage. If a modern award has an entry-level rate that is applicable to no more than the first six months of employment, this minimum rate must be no less than $978.10 per week or $25.74 per hour.
The rationale
On 2 June 2026, the Fair Work Commission handed down their Annual Wage Review Decision that will affect the National Minimum Wage and modern award minimum wage rates.
Effective the first full pay period on or after 1 July 2026, the National Minimum Wage will increase to $1,004.90 per week or $26.44 per hour. A 25 percent casual loading is added for casual employees.
Modern award minimum wage rates will increase by 4.75 per cent provided that:
1. the lowest rate in any modern award applicable to ongoing employment must be at least $1004.90 or $26.44 per hour (i.e., no less than the National Minimum Wage); and
2. any entry-level rate that is applicable to no more than the first six months of employment must be at least $978.10 per week or $25.74 per hour.
How to prepare
In preparation for these upcoming increases, we recommend that employers review their current pay rates to ensure that they continue to satisfy the relevant minimum entitlements under applicable industrial instruments.
The following are some practical considerations to keep in mind when reviewing pay rates ahead of these changes
Know your instrument
Understand which industrial instruments cover your employees and what minimum entitlements apply based on patterns of work, rosters, and requirements that may entitle an employee to an allowance.
It is important that the correct industrial instrument is employed and employees are correctly classified to reduce risk of underpayment or non-compliance with the relevant industrial instrument.
If you are unsure which industrial instruments apply to your business and employees, Norfolk can assist you in identifying the appropriate industrial instrument along with which minimum entitlements are applicable to employees.
Review pay rates
Review your current pay rates to ensure they continue satisfy the new modern award minimum rates of pay (and allowances, where applicable) effective from 1 July 2026, including if you pay above-award rates in satisfaction of award entitlements.
In line with the relatively recent decision in FWO v Woolworths Group Limited; FWO v Coles Supermarkets Australia Pty Ltd [2025] FCA 1092, an employee’s remuneration needs to satisfy all applicable minimum entitlements in the pay period (as prescribed by the relevant industrial instrument) in which they arise, and payments made in other pay periods can generally not be used to offset shortfalls in a particular pay period. We recommend regularly reviewing employees’ remuneration upon any increases to minimum rates or allowances by the Commission and when employees’ work circumstances change that could trigger additional entitlements (e.g., to overtime, penalty rates, specific allowances etc.).
Consider whether an increase is required
If current pay rates continue to exceed the relevant minimum rates prescribed, an employer may be able to absorb the increase.
Where the rate of pay no longer satisfies the applicable minimum rate in light of the minimum wage increase, employers should calculate exactly how much of an increase is needed to ensure minimum entitlements are satisfied (i.e., it may not necessarily be 4.75 per cent).
Review the employment contract
Employers need to ensure that their employment contracts are up to date and provide the required protection, particularly where an employer intends to pay employees a higher rate of pay in satisfaction of any minimum entitlements.
That is, ensuring:
· common law set-off terms are robust and provide the intended protections;
· hours of work are properly structured (such as clearly defining ordinary hours of work and structuring rosters correctly); and
· remuneration terms are clear and concise (such as differentiating between base and all-inclusive/composite rates of pay, and having a separately identifiable casual loading).
There must be an agreement between the employer and employee that an employee’s remuneration is in satisfaction of any minimum entitlements under the relevant instrument, and can be used to satisfy any other entitlements that may arise.
In the absence of such common law set-off clause, or where a set-off clause is not properly drafted, an employer may not be able to rely on the higher rate to satisfy minimum entitlements owing to an employee under a relevant industrial instrument. As such, risks of underpayment and of non-compliance with the relevant modern award may arise.
Communication
Where increases to employee rates of pay are required, consider how these changes will be communicated to the impacted employees.
Where employees’ remuneration can absorb the increase and the employer chooses to do so, consider how this decision and rationale is communicated to employees where appropriate (e.g., where an employee queries a wage increase).
Other matters
Allowances
Following this Decision, will usually be an adjustment in modern awards to wage-related allowance (e.g., all-purpose allowance) and there may be an adjustment to expense-related allowances (e.g., motor vehicle allowance). Any adjustments will be reflected in the relevant modern award.
Documents to provide to employees
In light of these increases, modern awards and the Fair Work Information Statement (FWIS) will be updated to reflect the new minimum rates.
Many modern awards require an employer to ensure that copies of the modern award and the National Employment Standards (NES) are available to all employees to whom they apply. This can be done in a number of ways, such as by displaying conveniently located notice board at or near the workplace or through accessible electronic means (e.g., emailing copies of the FWIS and NES, or hyperlinks to access them, or including these in the company’s intranet).
Employers should ensure that they are providing or making available the most current FWIS and NES documents with the updated rates.
How we can assist
Modern awards are complex instruments. At Norfolk, our team of specialist consultants have substantial experience advising on minimum entitlements under industrial instruments, and assisting employers in structuring their pays effectively to ensure continued compliance.
We offer Better Off Overall Tests (BOOTs), pay reviews and compliance audits. Where risk is identified or where otherwise appropriate, we can arrange for these services to be provided under legal professional privilege through our sister company, Pragma Lawyers.
Where necessary, our team can also support you with effective remediation and communication strategies to help ensure any messages are received positively and reduce the risk of misunderstandings, dissatisfaction or disputes.
The Norfolk team is available to provide expert advice and practical solutions to support your business. Get in touch with our team today to find out more.