From 1 July 2026, modern award minimum wages rise across 121 modern awards. Here's what changed, who it affects, and what employers should do before the first pay period hits.

The Fair Work Commission handed down the Annual Wage Review 2026 decision on 2 June 2026. Modern award minimum wages increase by 4.75% from the first full pay period on or after 1 July 2026. For most employers on a weekly or fortnightly pay cycle, that date is now days away.

If your payroll system is not updated in time, you may be underpaying award-covered employees, particularly where pay rates sit at or near award minimums. From 1 January 2025, intentional underpayment of wages became a criminal offence in Australia. Employers that deliberately underpay employees can face significant penalties, including fines and imprisonment. While genuine mistakes are not criminal offences, they can still result in back-pay obligations, civil penalties and Fair Work investigations.

Key takeaways

• Modern award minimum wages increased by 4.75% from the first full pay period on or after 1 July 2026.
• Around 2.8 million employees are paid according to modern award minimum rates.
• C13 and C14 classifications received additional structural adjustments.
• Employers should review award rates, overtime, penalty rates, casual loadings, wage-related allowances and salary arrangements.
• Employers in sectors affected by the Fair Work Commission's gender undervaluation program should also monitor separate award increases.

What the decision actually says

The 4.75% increase applies across 121 modern awards. It also flows through to many calculations based on the minimum award rate, including overtime, penalty rates and casual loadings.

Many wage-related allowances are also affected, although not every allowance increases automatically, as some are expense-based or adjusted under separate award provisions. Updating only the base rate while overlooking these related calculations is one of the most common ways employers inadvertently create payroll compliance issues.

The decision also includes a structural adjustment to the two lowest award classifications.

The C13 rate, the lowest wage applicable to ongoing employment, increases by more than 4.75% as part of a three-stage plan to phase it out and replace it with the C12 classification as Australia's minimum ongoing award rate.

The C14 rate, which applies to entry-level employees during their first six months of employment, increases by the same percentage as C13 to maintain its relativity.

The new minimum rates are:

• C13: $1,004.90 per week ($26.44 per hour)
• C14: $978.10 per week ($25.74 per hour)

The Fair Work Commission estimates this structural adjustment affects approximately 100,000 workers.

Approximately 2.8 million employees, or 21.1% of the Australian workforce, are paid according to modern award minimum rates.

The industries with the highest concentration of award-reliant employees include:

• Accommodation and Food Services
• Health Care and Social Assistance
• Retail Trade
• Administrative and Support Services

If your workforce operates in any of these sectors, this decision is likely to have a significant impact on your labour costs.

The part most payroll teams will miss

The 4.75% headline increase is the easy part.

Most payroll systems can update a base rate.

The real compliance exposure sits elsewhere.

Annualised salary arrangements

Several modern awards require employers to reconcile annualised salaries against what employees would have earned under the relevant award.

If your salaried employees are covered by one of these awards, the 4.75% increase raises the minimum salary required for those arrangements to remain compliant.

Arrangements that were compliant on 30 June 2026 may no longer meet award obligations from 1 July 2026.

All-inclusive salary packages

If you pay employees a single salary intended to absorb award entitlements such as base pay, overtime and penalty rates, you should verify that the revised award minimums are still fully covered.

A package that comfortably exceeded award requirements before 1 July may now result in underpayments if it is not reviewed against the updated award rates.

Gender undervaluation phase-ins

Separate from the 4.75% Annual Wage Review increase, the Fair Work Commission is continuing its program to address gender-based undervaluation in a number of female-dominated occupations.

Occupations affected include:

• Children's services employees
• Dental assistants
• Pathology collectors
• Disability support workers
• Home care employees
• Pharmacists

These increases are being phased in over several years. They are separate from the Annual Wage Review and have their own implementation dates. Employers in healthcare, aged care, disability and community services should monitor these award changes independently.

Why a static interpretation of your award is a liability

Modern awards are not set-and-forget documents.

The Fair Work Commission regularly varies awards through:

• Annual Wage Reviews
• Work value cases
• Gender undervaluation proceedings
• Award modernisation

An award interpretation that was accurate when your payroll system was originally configured may no longer reflect the current award. This is where many mid-market employers unknowingly create compliance exposure. The issue is rarely intentional. More often, payroll systems continue applying outdated award interpretations long after the Fair Work Commission has amended the underlying award. For organisations with large, multi-site, shift-based workforces, that risk compounds quickly.

A single incorrect interpretation applied across hundreds of employees, multiple locations and many pay periods can create a significant back-pay liability before anyone identifies the issue. The Fair Work Ombudsman can recover up to six years of unpaid wages. Where deliberate underpayment is established, criminal penalties may also apply.

What good looks like from here

Every employer should aim to complete these three steps before the first full pay period on or after 1 July 2026.

1. Update payroll calculations

Confirm your payroll system has applied the 4.75% increase to all relevant base rates and that all associated calculations—including overtime, penalty rates, casual loadings and any applicable wage-related allowances—have also been updated where required by the relevant award.

2. Review salary arrangements

Review annualised salary and all-inclusive salary arrangements against the revised award minimums.

Where a shortfall exists, update those arrangements before processing payroll.

3. Monitor additional award changes

Identify whether any employees are covered by awards subject to the Fair Work Commission's ongoing gender undervaluation program and track the specific implementation dates for those phased increases.

The bigger challenge is not the 1 July increase.

It is every other award variation made throughout the year.

The Fair Work Commission regularly updates awards through work value decisions, gender undervaluation reviews, transitional provisions and technical amendments.

Keeping payroll configurations aligned with those changes is an ongoing operational challenge for HR and payroll teams.

Where the implementation burden sits

Understanding that an award has changed is only the first step. The harder task is translating those changes into accurate payroll rules. Determining which award provisions have changed, understanding how they interact with existing payroll configurations, and applying those updates correctly across classifications, shift types and employment arrangements requires specialist expertise.

For many payroll teams, that work competes with business-as-usual responsibilities and tight payroll deadlines. For organisations already using OAHI WFM with OAHI Pay Rules, the OAHI Managed Service handles that implementation. Where award changes affect your workforce, OAHI interprets the amendments and applies them correctly within your payroll rules.

For everyone else, the starting point is understanding whether your current award interpretation capability can keep pace with ongoing Fair Work Commission changes.

Keeping pace with award changes

The 1 July wage increase is only one of many changes employers need to manage each year. Annual Wage Reviews, work value decisions, gender undervaluation cases and award variations all require payroll rules to be reviewed and, where necessary, updated.

For many organisations, keeping track of every Fair Work Commission change while managing day-to-day payroll operations is a significant challenge.

With OAHI Managed Service, our specialist can explain what the relevant award and EBA changes mean for your workforce, and implement the updates to your OAHI WFM and OAHI Pay Rules configuration.

Talk to OAHI about how our Managed Service can help you keep your award configurations up to date.

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