The Fair Work Commission (FWC) has just handed down its 2026 Annual Wage Review decision. The changes take effect in just a few weeks which means that it’s time for all Australian employers to review their payroll.

As your HR partners, we know that managing your overhead labour costs while keeping your team motivated is a delicate balancing act. Here is a clear breakdown of what is changing, why it’s happening, and exactly what you need to do to get your business ready.

The Headlines: What’s Changing?

This year’s decision brings the largest minimum wage increases we’ve seen since 2023.

• Modern Award Wages: Increasing by 4.75% from 1 July 2026.
• National Minimum Wage: Increasing by approximately 6% to $26.44 per hour ($1,004.90 per week).

The FWC states that they balanced a complex economic cocktail: sticky inflation (currently at 4.2%), recent RBA interest rate hikes, and broader economic uncertainty stemming from the conflict in the Middle East that began earlier this year.

While the FWC acknowledged that real wages for award-reliant workers are still lower than they were in 2021, they stated it wouldn’t be responsible to close that gap all at once in the current climate. The 4.75% increase is designed to keep your workers’ purchasing power from falling behind where it was last July.

Who Does This Affect?

Almost every Australian business will feel the ripple effect of this decision. If you employ staff under a modern award, you must adjust your base rates.

If you already pay above-award rates or annual salaries, you aren’t automatically off the hook. You still need to run an audit to ensure your loaded rates or annual salaries haven’t been “swallowed up” by these new, higher minimum benchmarks.

Your HR Action Checklist

To ensure your business remains compliant and your payroll transition is seamless, follow these five steps before 1 July:

• Audit Your Awards: Double-check which modern awards and classification levels apply to your team members.
• Update Award-Paid Staff: If you pay strictly at award rates, ensure your software or payroll provider updates the base rates from the first full pay period on or after 1 July.
• Review Enterprise Agreements: If you operate under an Enterprise Agreement (even an expired one, which remains legally binding until replaced), you must ensure the base rates of pay remain at or above the new modern award minimums.
• Test Your Annualised Salaries & Above-Award Rates: Take a close look at your flat-rate or salaried staff to ensure salaries adequately cover the award rates and specific award provisions. A thorough compliance check is highly recommended.

Looking Ahead: What’s Next?

Payroll compliance isn’t a “set and forget” task. Keep an eye out for changes to Junior Worker Pay Rates – phased changes to junior pay rates for certain awards will start to come into effect from December.

Also keep an eye out for ongoing gender pay equity reviews. The FWC is continuing its targeted program to fix historical undervaluation in awards, which will mean further phased wage increases coming soon for sectors like children’s services, disability home care, dental assistants, and pharmacists.

Need a hand navigating these changes?

Calculating new award rates, allowances, and checking salary absorption can be overwhelming when you’re trying to run a business. If you aren’t sure how these changes impact your team, or you want a professional eye over your annualised salary arrangements, reach out to our HR consulting team today.

Nick Hedges is the founder of Resolve HR, a Sydney-based HR consultancy specialising in providing workplace advice to managers and business owners. He recently published his first book, “Is Your Team Failing Or Kicking Goals – Take Control of Your People & Their Performance”. It is a practical response to the most pressing HR challenges, which can be found at https://resolvehr.com.au/.

Disclaimer: The contents written do not constitute legal advice and do not cater for individual circumstances.   The information contained herein is not intended to be a substitute for legal advice and should not be relied upon as such.