Each year, the Fair Work Commission hands down its Annual Wage Review — and each year, it ripples through payroll systems, budgets and workforce planning across the country. The 2026 decision is now in, and it carries a clear message: protect the lowest-paid workers from falling further behind, without overcorrecting in an uncertain economy.
Here’s what employers need to know.
The Annual Wage Review – The Headline
Modern award minimum wages will rise by 4.75% from 1 July 2026, lifting the National Minimum Wage to $26.44 an hour ($1,004.90 a week for a 38-hour week), with additional targeted increases for the lowest-paid workers.
If you only read one line, that’s it. But the detail behind the decision is worth understanding — particularly the structural reforms aimed at the bottom of the pay scale.
Who’s actually affected
It’s easy to assume a wage review touches everyone, but award-reliant workers are a specific slice of the workforce. Around 21.1% of Australian employees — roughly 2.8 million people — are paid under a Modern Award.
That cohort has a distinct profile:
- More than 60% are women
- Over 70% work part-time
- The majority are casual
- They are disproportionately low-paid
Despite their numbers, award-reliant workers account for just 11.2% of total national wages — which is part of why the Commission judged the broader economic impact of the increase to be contained.
The rules the Commission plays by
The Commission doesn’t set wages in a vacuum. Under the Fair Work Act 2009, it must maintain a “safety net of fair minimum wages” while balancing a set of competing objectives:
- Economic performance
- Gender equality
- Social inclusion
- The needs of the low-paid
Every decision is a balancing act between these — and 2026 is no exception.
The economic backdrop
This year’s decision was made against a genuinely difficult macroeconomic picture:
- Inflation forecast at around 4.8% for 2025–26
- Interest rate tightening continuing to slow the economy
- Global uncertainty, including Middle East conflict pushing up oil prices
In other words: The Commission are saying the cost-of-living pressure on workers is real, but so is the risk that an overly generous increase could feed inflation or strain businesses already under pressure.
The real wage problem
Here’s the tension at the heart of the decision. Modern award wages, in real terms, remain below where they sat in July 2021. Workers have lost ground.
Fully closing that gap would have required an increase of more than 5% — and the Commission concluded that was neither practicable nor responsible under current conditions. So 4.75% is a deliberate compromise: enough to stop further erosion, but short of a full recovery.
A structural shift worth watching
Beyond the headline percentage, 2026 brings a meaningful structural reform aimed squarely at the lowest-paid.
The C13 classification is being phased out, with workers transitioning to C12 as the new minimum ongoing rate through a three-stage process. The practical outcome:
- Lowest ongoing award rate: $26.44/hr
- Entry-level (C14): $25.74/hr, applicable for a maximum of six months
This signals a longer-term direction: continued reform at the bottom of the pay structure, not just an annual percentage bump.
What the Commission did — and didn’t — do
What the Commission says it delivered:
- ✅ It Protected workers from further real wage decline
- ✅ Provided Stronger increases for the lowest-paid employees
- ✅ Provided support for female-dominated workforce segments
What it held back on:
- ❌ The commission did not fully restore lost real wages
- ❌ It did not close the CPI gap completely
The reasoning: inflation risk, broader economic uncertainty, and the potential impact on businesses. They are saying, this is a targeted protection measure, not a full recovery.
What this means for your business
Immediate actions:
- Update payroll rates from the first full pay period on or after 1 July 2026
- Review your award classification mapping — pay particular attention to C13 and C14 roles affected by the structural change
- Check junior and entry-level pay structures
Sectors most exposed:
- Hospitality, retail and care
- Any business with high award reliance
Looking ahead:
Expect continued structural wage reform at the lower end of the scale, and watch for further adjustments in the 2027 Annual Wage Review if inflation begins to ease.
The bottom line
The 2026 Annual Wage Review decision is designed to keep low-paid workers from slipping further behind, prioritises the lowest-paid classifications, and tries to do so without tipping an already-strained economy. For employers, the to-do list is clear: get your rates and classifications right before 1 July, and keep an eye on the structural changes that will continue to reshape the bottom of the award system.
You can download a copy of the Fair Work Commissions Annual Wage Review Decision from – Annual Wage Review 2026 | Fair Work Commission
Need help mapping your award classifications or preparing for the 1 July changes? The People Smartz team is here to help — get in touch.