The Fair Work Commission has handed down its decision to increase the National minimum wage and all wage rates within the Modern Awards by 3.5%, effective 1 July 2025. This is in addition to the already mandated increase in compulsory super contributions from 11.5% to 12% that takes effect from 1 July 2025.
In its statement, the Commission highlighted that the number of modern award-reliant workers is not evenly distributed across the economy. The data show that only around 10.5% of the total wages bill in Australia is comprised of those on either the National Minimum Wage or a minimum wage specified in an Award. These employees, who are in the lowest-paid category, are disproportionately female, part-time, or casual workers.
As well as accounting for over two-thirds of Modern Award reliant workers, those workers are in 4 key industries:
- Accommodation and food services
- Health care and social assistance
- Retail trade
- Administrative and support services
What to do between now and July 1, 2025.
- The modern award pay rates will commence being updated on the Fair Work website. If you have staff covered by an award, you can subscribe to the Fair Work updates, meaning you will receive notification when there is a change to that Award. https://www.fwc.gov.au/subscriptions
- Consider the current structure of your pay. Suppose you pay a rate inclusive of penalties, allowances, annual leave loading, and some overtime. In that case, you will need to consider whether this rate continues to cover your workers after the minimum wage increase is applied.
- Review salaries of your lowest-paid workers and confirm you are meeting the minimum wage rates.
- Some award-based allowances and penalties are based on a percentage of an award rate; these penalty rates and allowances will also increase in line with the 3.5% minimum wage increase.
- Consider the impact of the 0.5% increase to superannuation on your workers, particularly those with a salary package and total super contributions. The salary of higher-income workers may also now exceed the maximum SGC contributions earnings base, which should be considered before finalising salary packages for next year.
- Review and update your letters of offer, employment contracts and other wage-based HR documentation.
- Also consider employees who are award-free or are currently paid an above-award pay rate – they will see that a 3.5% increase has been provided, and (even though they are not the target of this wage review), will probably think of that amount as a benchmark for annual pay rise negotiations. Discuss with your staff why they may receive a lower, higher, or no change in their pay rise percentage during salary reviews.
It is also important to remember that an award-based employee remains an award-based employee even if their salary package is significantly higher than the Award pay rates and therefore needs to be referenced accordingly in their employment documentation.
If you aren’t sure whether an award covers your workers or not, don’t leave it to chance – ask us to organise a review for you by our licensed HR Advisor colleagues.
