Annual Wage Review 2026: What Australian Small Businesses Need to Know

Every year, the Fair Work Commission (FWC) conducts an Annual Wage Review (AWR) — a comprehensive assessment of the national minimum wage and modern award minimum wages. The outcome of this review determines what you must pay your employees from 1 July.

For small business owners, the Annual Wage Review is one of the most critical compliance events of the year. Miss the new rates, and you are underpaying your workforce from the moment the new rates take effect.

What Is the Annual Wage Review?

The Annual Wage Review is conducted by the Expert Panel of the Fair Work Commission each year. The panel:

1. Accepts submissions from employers, employee organisations, and the public
2. Reviews economic data including inflation, productivity, and business conditions
3. Determines the appropriate increase to the national minimum wage
4. Sets the increase to modern award minimum wages

The decision is typically handed down in June, with new rates taking effect from the first full pay period commencing on or after 1 July.

What the AWR Covers

The National Minimum Wage

The national minimum wage is the minimum hourly rate for adult employees not covered by a modern award or enterprise agreement. As of the 2025 decision, the rate was $24.10 per hour ($915.90 per week based on a 38-hour week).

The 2026 review will determine whether this rate increases, and by how much.

Modern Award Minimum Wages

The AWR also increases the minimum pay rates in every modern award. If your employees are covered by a modern award — which applies to the vast majority of Australian employees — the new award rates take effect from the first full pay period after 1 July.

The increase is typically expressed as a percentage or a flat dollar amount, applied to each classification in each award.

Why This Matters for Small Businesses

You Must Update Pay Rates

If you do not update your pay rates following the AWR, you are underpaying your employees from 1 July. This is a breach of the Fair Work Act regardless of whether you were aware of the new rates.

"I didn't know the rates had changed" is not a defence. The obligation to pay at least the award minimum applies automatically once the new rates are in force.

Payroll Software Does Not Update Automatically

Most payroll software — including Xero, MYOB, and Employment Hero — does not automatically update modern award rates when the AWR decision is released. You must manually update the pay rates for each employee, or ensure your payroll provider has done so correctly.

If your software shows pay rate updates as part of a subscription service, verify that the update has actually been applied to your specific employees' rate cards — not just to the default award template.

The Penalty Rate Cascade

When base rates increase, penalty rates, overtime rates, and some allowances also change — because they are calculated as a percentage of the ordinary rate. An increase in the base rate from $24.10 to $25.00 per hour flows through to:

• Saturday rates (125–150% of ordinary rate)
• Sunday rates (150–200%)
• Public holiday rates (225–250%)
• Overtime rates (150%–200%)
• Some allowances calculated as a percentage of base rates

This means the impact of the AWR on your payroll is larger than the base rate increase alone suggests.

The 2026 AWR: What to Expect

Note: As of the date of this article (May 2026), the Annual Wage Review decision for 2025–26 has not yet been handed down. The decision is typically released in June, with new rates effective from 1 July 2026.

Based on recent economic conditions and submissions to the FWC, commentary suggests:

• Inflation has been moderating but remains above the Reserve Bank's target band
• Low-wage workers have been disproportionately affected by cost-of-living pressures
• The ACTU has submitted for a significant increase; employer bodies have argued for a more moderate rise

The actual decision will be published on the Fair Work Commission's website (fwc.gov.au) and widely reported in the business media.

How to Prepare Before 1 July

1. Identify all applicable awards

List every modern award that applies to your employees. If you have a mix of workforce types (e.g., hospitality, administration, professional services), multiple awards may apply.

2. Know your employees' classifications

For each employee, confirm their award classification (e.g., Level 3 under the Restaurant Industry Award). The new rate you need to apply depends on the classification.

3. Monitor the AWR decision

Watch for the FWC's AWR decision in June. This will be published on the FWC website and reported in business media. Note the specific rates that apply to your employees' classifications.

4. Update payroll before 1 July

Update pay rates in your payroll system before processing the first payroll that covers 1 July or later. Remember that the new rates apply from the first full pay period on or after 1 July — which for weekly payrolls might be the week of 7 July if your pay week runs Monday to Sunday.

5. Check your enterprise agreement

If you have an enterprise agreement, check whether its pay rates are still above the new award minimum for each classification. If an enterprise agreement rate falls below the award minimum, the award minimum applies.

6. Update casual loading calculations

Casual employees must receive the standard 25% casual loading on top of the new base rate. If you are calculating casual loading on a previously lower base rate, the loading amount also increases.

The Consequences of Missing the Update

If you fail to update rates from 1 July and an employee notices or the FWO audits your business, you will face:

• Back-pay obligations for all affected employees from 1 July
• Interest on the underpaid amounts
• Potential civil penalties (up to $19,800 per contravention for an individual)
• Reputational risk if the matter is reported in the media

From January 2025, deliberate wage theft — which could arguably encompass knowingly failing to update rates after the AWR — is a criminal offence. The better approach is to never be in a position where deliberateness could be alleged.

After the Update: Record-Keeping

Once you update your pay rates:

• Keep a record of when you updated the rates and who authorised the change
• Retain evidence that you received and reviewed the AWR decision
• Document your process for checking future AWR decisions

This documentation demonstrates that you take your pay rate compliance seriously and review rates when required.

How Reguladar Helps

The Annual Wage Review is one of the most important recurring compliance events for Australian SMBs — but it is easy to miss in the busy month of June and July. Reguladar tracks the AWR cycle and alerts you when the decision is released and when you need to update your pay rates, based on the awards applicable to your specific business.

Rather than relying on a note in your calendar or hoping your payroll software has handled it, you get a proactive alert to review and update your rates before the new rates take effect.

Never miss an Annual Wage Review again. Start your free compliance check at Reguladar and stay on top of every pay rate change that affects your business.