Disclaimer: This guide contains wage and compliance information current as of February 2026. The Fair Work Commission reviews and adjusts minimum wage rates annually, typically effective from 1 July each year. Award rates, penalty percentages, and allowances vary by industry and classification. Employers must verify current rates applicable to their specific award and employees using the Fair Work Commission's Pay Calculator or industry-specific Pay Guides before calculating wages. Civil penalty amounts are indexed annually and vary based on the nature and severity of contraventions.
Australian employers must comply with minimum wage laws set by the Fair Work Commission. These laws establish the lowest hourly and weekly rates you can legally pay employees, with additional requirements for casual loading, penalty rates, and allowances depending on the employee's circumstances and industry.
Getting wage calculations wrong exposes your business to significant penalties, back-payment claims, and potential criminal prosecution for serious wage theft. Beyond legal compliance, paying employees correctly is fundamental to attracting and retaining staff in a competitive labour market.
This guide explains Australia's minimum wage framework, how rates apply to different employee types, and what employers must do to stay compliant with Fair Work requirements.
The national minimum wage is the baseline rate set by the Fair Work Commission for employees not covered by a modern award or enterprise agreement. As determined by the Fair Work Commission Annual Wage Review effective from 1 July 2025, the national minimum wage is $25.05 per hour or $952.90 per week for a full-time employee working 38 ordinary hours.
This rate applies to permanent employees aged 21 and over who are not covered by an award or agreement and are not in training arrangements like apprenticeships. The national minimum wage sets the absolute floor, but most employees are actually entitled to higher rates under their applicable modern award.
The Fair Work Commission reviews the national minimum wage annually, typically announcing the new rate in June with implementation from the first full pay period starting on or after 1 July. The percentage increase in the national minimum wage generally flows through to award wages as well, though the Commission can decide different increases for different award classifications.
It's important to understand that the national minimum wage is not the rate most Australian employees receive. Modern awards set higher minimum rates for specific industries and occupations, and these award rates override the national minimum wage for covered employees.
Most Australian employees work under a modern award rather than the national minimum wage. Modern awards are industry or occupation-based minimum employment standards covering pay rates, penalty rates, allowances, and other conditions specific to different types of work.
Common awards include the General Retail Industry Award, Clerks Private Sector Award, Restaurant Industry Award, Manufacturing and Associated Industries Award, Building and Construction General On-site Award, and Storage Services and Wholesale Award. Each award contains detailed pay scales with different rates for different job classifications and experience levels.
Award rates are typically higher than the national minimum wage. For example, following the July 2025 wage review, award minimum rates across various industries generally increased by similar percentages to the national minimum wage increase, resulting in rates that exceed $25.05 per hour for most classifications. However, specific award rates vary significantly by classification level, and employers must check the current pay tables for their specific award rather than relying on general figures.
To determine which award covers your employees, consider the industry your business operates in and the type of work your employees perform. The Fair Work Ombudsman's website provides tools to identify applicable awards based on business type and job role. Once you've identified the correct award, you must pay at least the award rate for your employee's classification level, not the lower national minimum wage.
Many awards have complex classification structures. A retail employee might start at Level 1 with basic duties, then move to Level 2 with additional responsibilities, and Level 3 with supervisory tasks. Each level has a different minimum rate. You must classify employees correctly based on their actual duties and pay the corresponding rate.
The principle is straightforward: if an award covers your employee's work, you must pay the award rate. The national minimum wage only applies to the small minority of employees whose work is genuinely not covered by any modern award.
Casual employees receive higher hourly rates than permanent employees to compensate for the casual nature of their employment. This additional payment is called casual loading, typically calculated at 25% above the permanent rate for the same work.
The 25% casual loading primarily compensates for lack of paid leave entitlements including annual leave, personal leave, and public holiday pay that permanent employees receive. Casual employees work on an irregular basis without guaranteed hours and can have their engagement terminated at the end of any shift. The loading recognises this employment insecurity.
Calculating casual rates is straightforward. Take the permanent hourly rate for the classification and multiply by 1.25. For example, if the permanent award rate for a position is $26.00 per hour, the casual rate is $32.50 per hour. This applies to ordinary hours worked during standard business hours, with additional penalty rates applying to weekend and public holiday work on top of the casual rate.
It's important to understand that casual loading and penalty rates are not the same thing and both can apply simultaneously. A casual employee working on a Sunday might receive their casual rate (permanent rate plus 25%) plus the Sunday penalty rate. The penalty rate typically applies to the permanent rate, not the casual rate, though specific award provisions vary.
Recent changes to casual employment definitions and conversion rights mean employers must carefully manage casual employment arrangements. Employees working regular and systematic hours may have rights to convert to permanent employment after a qualifying period, even if originally hired as casual. Ensure you understand casual conversion obligations under the relevant award and Fair Work regulations.
Employees under 21 years old are generally paid a percentage of the adult wage rate. These junior rates recognise that younger employees typically have less experience and may be in education or training while working.
National minimum wage junior percentages (subject to periodic review):
However, these percentages apply only to the national minimum wage. Many modern awards use different age bands and percentages for junior rates. Some awards start adult rates at 20 years old, others at 21. Some awards have different percentage scales entirely. The classification level within the award may also affect how junior rates are calculated.
For example, some awards set junior rates as a percentage of the Level 1 rate regardless of the employee's actual classification, while others apply the percentage to the employee's specific classification rate. These differences significantly affect pay calculations, so employers must check the specific junior wage provisions in the applicable award.
Junior rates don't apply to all awards. Some modern awards specify that adult rates apply from age 18 or even younger for certain classifications, particularly in industries where young workers perform the same duties as adult workers without restriction.
When calculating casual junior rates, apply both the junior percentage and the casual loading. The casual loading is typically calculated after applying the junior percentage. For a 17-year-old casual employee where the adult rate is $26.00 per hour, you would calculate approximately 56.8% of $26.00 (around $14.77), then apply the 25% casual loading, resulting in approximately $18.46 per hour. Always verify the specific calculation method in the relevant award, as some awards may specify different approaches.
Apprentices and trainees receive wages based on a percentage of the relevant award rate, with percentages increasing as they progress through their training. These structured wage progressions recognise that apprentices and trainees are developing skills while working.
Apprentice wage structures vary significantly by award and trade. The calculation typically depends on:
For example, apprentices in some trades might start at 55% of the tradesperson rate in their first year, increasing to 65% in second year, 80% in third year, and 95% in fourth year. However, these percentages are examples only and vary dramatically across different awards and qualifications. Some awards use school-based apprentice rates that differ from full-time apprentice rates.
The Building and Construction Award, for instance, has particularly complex apprentice wage tables with different percentages depending on whether the apprentice was under 21 or 21 and over when they commenced their apprenticeship, and these tables have multiple progression points beyond simple annual increases.
Trainees typically follow the national training wage schedule, which sets minimum wages for trainees in structured training arrangements. The trainee wage depends on:
Higher qualification levels and later training years attract higher wages.
Employers engaging apprentices or trainees must verify the correct wage rates in the specific award covering the trade or occupation. Don't rely on general guidance or assumptions. The Fair Work Ombudsman provides detailed information on apprentice and trainee wages, but the most reliable source is the actual award wage tables for your specific circumstances.
Penalty rates are additional payments for work performed at times that interfere with normal personal and social activities, such as weekends, public holidays, and outside ordinary hours. The rates vary significantly by award and employment type.
Common penalty rate ranges (indicative only - check specific awards):
These ranges are indicative only. Specific awards have specific penalty rate tables, and some industries have negotiated different penalty structures through enterprise agreements. The Hospitality and Retail awards, for instance, have detailed penalty rate schedules that differ from Manufacturing or Construction awards.
Casual employees may receive different penalty rates than permanent employees, and some awards reduce penalty rates for casuals on the basis that casual loading already provides premium pay. However, this varies by award, and some awards apply full penalty rates to casuals in addition to casual loading.
Overtime rates apply when employees work beyond their ordinary hours. Common overtime rates include time-and-a-half (150%) for the first two or three hours of overtime, and double time (200%) after that. Saturday and Sunday overtime may attract higher rates. Public holiday overtime can reach 275% or more in some awards.
Unless an award expressly permits averaging arrangements under specific clauses, you cannot average hours across pay periods to avoid overtime obligations. If an employee works 45 hours one week and 30 hours the next week, the 45-hour week triggers overtime even though the average is below 38 hours. Some awards do contain averaging provisions for certain industries or circumstances, but these must be explicitly provided for in the award and properly implemented.
Allowances compensate employees for specific circumstances or costs incurred during work. Common allowances include tool allowances for employees required to provide their own tools, uniform allowances where employees must wear specific clothing, first aid allowances for employees holding first aid certificates and performing first aid duties, and various other allowances for specific circumstances like working in extreme temperatures, hazardous conditions, or remote locations.
Allowances are set amounts specified in the award and must be paid in addition to the base wage when the relevant circumstances apply. They're not optional and can't be rolled into the hourly rate unless a specific written agreement permits this consolidation.
Employers must maintain detailed records for all employees for seven years. These records must include:
Pay slips must be provided to employees within one working day of payday. Pay slips can be electronic or paper but must be readily accessible to the employee. Each pay slip must clearly show the pay period, gross and net pay, any deductions, and the employer's ABN.
The Fair Work Ombudsman conducts audits and investigations of employers, often triggered by employee complaints but sometimes random or industry-focused. During an audit, you must produce employee records demonstrating compliance with minimum wages, penalty rates, leave entitlements, and other award provisions. Incomplete or inaccurate records can result in penalties even if you actually paid employees correctly, as you cannot prove compliance without proper documentation.
Wage theft laws have been strengthened in recent years. Serious and systematic wage underpayment can result in criminal prosecution under federal and state laws. Penalties for non-compliance with Fair Work requirements can be substantial. Civil penalties apply per contravention, and serious or repeated contraventions attract higher penalties. Companies and individuals (directors, managers) can both be penalised for the same contraventions.
The Fair Work Ombudsman has various enforcement tools including compliance notices requiring rectification within specified timeframes, enforceable undertakings where employers commit to specific actions to address non-compliance, litigation for serious contraventions, and public naming of non-compliant employers.
Beyond legal penalties, wage underpayment damages your business reputation, affects employee morale and retention, and can trigger industrial action if employees are unionised. The reputational damage from public wage theft allegations often exceeds the financial penalties, particularly for customer-facing businesses.
The Fair Work Commission conducts an annual review of minimum wages, typically announcing decisions in June with implementation from 1 July. This review considers economic conditions, cost of living changes, business competitiveness, employment growth, and social factors when determining wage increases.
Employer groups, union representatives, government submissions, and economic experts all provide evidence to the Commission about what wage increase is appropriate. The Commission must balance ensuring employees maintain living standards against not creating undue pressure on businesses or employment levels.
The announced increase typically applies to both the national minimum wage and modern award minimum rates, though the Commission can determine different increases for different awards or classifications if economic or industry circumstances warrant it.
Once the decision is announced, employers must implement the new rates from the first full pay period starting on or after 1 July. This means if your pay period starts on 27 June and runs to 10 July, you apply the old rate for that entire period. If your next pay period starts on 11 July, you apply the new rate from 11 July onward.
Some employers delay implementation hoping employees won't notice, but this creates underpayment liability from the effective date regardless of when you actually increase wages. Employees can claim back-payment for the period between when new rates should have applied and when you actually implemented them.
The Fair Work Ombudsman publishes updated pay guides and rate calculators shortly after the annual decision. Use these tools to verify you're paying correct rates for your employees' classifications and circumstances.
Modern payroll software significantly reduces compliance risk by automating award interpretation, penalty rate calculations, and superannuation management. Quality payroll systems maintain current award rates, updating automatically when Fair Work Commission decisions take effect.
Costs vary significantly based on employee count and required features. Basic payroll services start from approximately $5 to $10 per employee per month, depending on features and service levels, with more sophisticated platforms charging higher rates for advanced award interpretation and compliance features.
However, payroll software is only as good as its configuration and the data entered. If you classify employees incorrectly or select the wrong award in the system setup, the software will calculate wages incorrectly despite its technical accuracy. Many underpayment issues arise from configuration errors rather than software failures.
Software doesn't eliminate the need for human oversight. Finance staff or external bookkeepers should review payroll outputs regularly, checking that penalty rates applied correctly, overtime calculated properly, and allowances paid when applicable. Spot-checking individual employee pays against manual calculations helps identify systematic errors before they become large underpayment liabilities.
Small businesses with straightforward employment arrangements may manage payroll in-house using software, but businesses with complex awards, multiple classifications, or numerous employees often benefit from professional payroll services that provide both software and expert oversight.
Many Australian businesses outsource payroll to ensure compliance without needing in-house expertise. Professional payroll services handle pay calculations according to relevant awards, process pays on scheduled dates, manage superannuation contributions, prepare and lodge PAYG payment summaries, and handle STP reporting.
Beyond basic payroll processing, compliance services include award interpretation to ensure employees are on correct rates, regular reviews when awards change or employees' duties change, and audit preparation if the Fair Work Ombudsman requests information. Professional services maintain required records for the statutory seven-year retention period and provide expert support if underpayment issues are identified, including calculating back-payments and liaising with Fair Work.
Outsourcing payroll costs vary based on employee count, award complexity, and service level. Basic processing might cost $100 to $300 per month for small businesses with under 10 employees, while comprehensive compliance services including award interpretation and ongoing monitoring typically range from $300 to $1,000+ monthly depending on complexity.
The value proposition is reducing compliance risk significantly compared to managing payroll without award expertise. Professional services maintain insurance covering errors and underpayments resulting from their work, providing protection beyond what internal processing offers. Many businesses find outsourced payroll liberates internal staff to focus on revenue-generating activities rather than compliance administration, and the peace of mind from knowing wages are calculated correctly and records properly maintained justifies the investment.
For businesses operating under complex awards with multiple penalty rate scenarios or dealing with mixed employment types including juniors, casuals, and apprentices, professional payroll services often identify and prevent errors that would otherwise create significant financial liability.
Do I need to pay the national minimum wage or the award rate?
If your employees' work is covered by a modern award, you must pay the award rate for their classification. The national minimum wage only applies to the minority of employees genuinely not covered by any award. Use the Fair Work Ombudsman's award finder tool to identify which award applies to your business and employees.
Can I pay a salary instead of hourly rates?
Yes, but the salary must be high enough that when divided by the hours worked, it meets or exceeds all award entitlements including penalty rates and overtime. Many businesses underpay salaried employees by setting salaries that don't account for regular weekend work or overtime. Calculate what the employee would earn under hourly award rates for their actual working pattern, and ensure the salary exceeds this amount.
How do I calculate casual loading on penalty rates?
This depends on the specific award provisions. Generally, you calculate the casual rate (permanent rate plus 25%), then apply the penalty rate to the permanent component, but some awards specify different methods. Check the casual employment provisions in the relevant award for the correct calculation method.
What happens if I accidentally underpay an employee?
You must back-pay the employee for the full underpayment amount plus superannuation on that amount. Interest may apply if the underpayment period was extended. Self-report the issue to Fair Work Ombudsman, which may reduce penalties compared to waiting for the employee to complain or an audit to discover the error. Document how the error occurred and what you've done to prevent recurrence.
Do penalty rates apply to salaried employees?
Yes, unless the employee is genuinely award-free or covered by an enterprise agreement that specifically trades penalty rates for other benefits. Award-covered salaried employees must receive penalty rate entitlements, either through higher base salary that accounts for regular penalty rate work or through separate penalty payments when penalty rate conditions occur.
How often do minimum wage rates change?
Annually, following the Fair Work Commission's June decision with implementation from 1 July. Occasionally, awards are varied at other times for specific reasons, but the major wage updates occur once per year.
Can I reduce an employee's pay if their duties change?
Only with the employee's written agreement and only if the new pay still meets or exceeds the award rate for the employee's new classification. Unilateral pay reductions breach employment contracts and minimum wage laws. If duties change to a lower classification, you can pay the lower classification rate going forward, but you cannot reduce below the applicable award minimum.
What if an employee agrees to work for below award rates?
Such agreements are unenforceable. Award minimum rates are exactly that - minimums that cannot be contracted out of regardless of employee agreement. The employee can subsequently claim full award entitlements plus penalties, and you face Fair Work penalties for the underpayment even though the employee agreed.
Ensuring your business pays employees correctly requires understanding provisions, maintaining detailed records, and keeping current with annual wage adjustments. Scale Suite provides professional payroll services that handle these obligations without requiring you to build internal expertise. We handle professional payroll setup and ongoing processing, ensuring wages calculate correctly with all penalty rates and allowances applied.
The combination of correct initial setup, ongoing expert payroll processing, and regular compliance verification creates substantial protection against wage underpayment risks that can threaten business viability.
We review and update our articles periodically. At the time of writing in February 2026, this information was assessed as current according to Fair Work Commission requirements. Minimum wage rates, penalty percentages, and allowances are subject to annual review and variation. Employers must verify current rates applicable to their specific circumstances using official Fair Work resources before calculating employee wages.
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