Nearly three months have passed since Australia’s minimum wages changed on 1 July 2026. By now, most employers will have updated their payroll software or asked their payroll provider to apply the new rates.
That does not necessarily mean every employee is being paid correctly.
The applicable rate can depend on an employee’s award, classification, age, employment type, duties and working hours. Penalty rates, overtime, loadings and allowances can add another layer of complexity. An across-the-board percentage increase may therefore leave some employees underpaid.
This is a good time to review your payroll employee by employee and confirm that the 1 July changes have flowed through correctly.
What changed on 1 July 2026?
Following the Fair Work Commission’s Annual Wage Review, minimum award wages increased by 4.75%, subject to specified minimum floors for certain low and entry-level rates.
The National Minimum Wage for award and agreement-free employees aged 21 and over increased to:
- $26.44 per hour
- $1,004.90 per week for a 38-hour week
- $33.05 per hour for casual employees, including the 25% casual loading
The new rates applied from the first full pay period starting on or after 1 July 2026. This is important because the operative date may not have been 1 July for every employer. If a pay period began before that date, the new rate generally applied from the following full pay period.
The increase may also affect employees covered by an enterprise agreement because an agreement’s base rate cannot be lower than the applicable modern award base rate.
Start with the correct award or agreement
Before checking a rate, confirm which workplace instrument covers the employee.
Many employees are covered by a modern award based on their employer’s industry or the work they perform. Others may be covered by an enterprise agreement, while some are award and agreement free.
Do not rely on the business name, the employee’s job title or the award used for another employee. Different awards can apply within the same business, particularly when employees perform different types of work.
The Fair Work Ombudsman’s Find my award tool can help identify a potentially relevant award. Employers should then read its coverage and exclusion clauses. If an enterprise agreement applies, check its current rates and compare the base rate with the relevant award.
Check classifications against the work actually performed
Once you have identified the applicable award, check each employee’s classification or level.
Classifications are generally based on matters such as duties, skills, experience, qualifications, responsibility and supervision. A job title alone may not provide the answer.
Consider whether anything has changed since the employee was last classified. Have they taken on supervisory responsibilities? Are they regularly performing more complex duties? Have they completed a qualification, training period or apprenticeship stage?
It can help to compare the employee’s role with the classifications immediately above and below their current level. Document why the selected classification is appropriate and check whether the award requires you to notify the employee of it.
Account for age and employment type
Confirm whether each employee is full-time, part-time or casual and whether their age affects the applicable rate.
Casual employees may be entitled to a casual loading, but the calculation of weekend, evening and public holiday rates varies between awards. Employers should use the applicable award tables or the Fair Work Ombudsman’s Pay and Conditions Tool rather than assuming that 25% can simply be added to every rate.
Some awards contain junior rates based on age. An employee’s rate may therefore change on their birthday, even when their duties stay the same. Different rules can apply to apprentices and trainees, including progression based on age, experience, qualifications or time served.
There are also special provisions in some awards. For example, particular duties may attract an adult rate even when the employee would otherwise receive a junior rate.
Keep possible future changes separate
The 1 July 2026 wage increases are confirmed and already in effect.
Separately, the Fair Work Commission has announced upcoming changes to junior wages under the Retail, Fast Food and Pharmacy Awards. As at 22 September 2026, the Fair Work Ombudsman says these changes could begin from 1 December 2026, but further proceedings are required to settle how and when they will be introduced.
Employers should not treat a possible commencement date as a current payroll rule. Monitor official updates and change payroll settings only when the operative requirements are confirmed.
Recalculate penalties, overtime and allowances
A new minimum hourly rate can affect more than an employee’s ordinary pay.
Depending on the applicable award or agreement, employers may also need to update:
- Weekend and public holiday penalty rates
- Evening, early morning and shiftwork rates
- Overtime rates
- Casual loadings
- Allowances calculated by reference to a wage rate
- Annual leave loading and other applicable payments
Review actual rosters and timesheets rather than checking only the employee’s standard payroll profile. This can reveal whether the correct rate was applied to each type of hour worked.
Some awards also underwent separate changes around the end of June 2026. Employers covered by awards such as the Children’s Services Award or Pharmacy Award should check whether more than one rate change applied.
Do not overlook salaries and above-award rates
Paying an employee a salary or an hourly rate above the award minimum does not remove the need for a review.
A 4.75% increase in minimum award wages does not necessarily mean that every employee’s actual pay must increase by 4.75%. An employee who was already paid above the minimum may still be receiving enough to meet the new base rate.
However, employers must also consider any applicable employment contract or enterprise agreement and whether the amount paid continues to cover all relevant award entitlements. These may include overtime, penalties, allowances and annual leave loading.
Annualised wage arrangements can carry additional calculation, reconciliation and record-keeping requirements. Employers should obtain workplace relations or legal advice if they are unsure whether a salary or offset arrangement remains compliant.
Check the first affected payslips and payroll records
Select payslips from the first full pay period starting on or after 1 July and compare them with the applicable rates.
Check:
- The employee’s base rate
- Their classification and employment status
- The number and type of hours recorded
- Penalties, overtime, loadings and allowances
- Leave payments where relevant
- Gross pay and payroll calculations
- The payroll system’s effective date for the new rate
Employers must generally keep time and wage records for seven years. Good records also make it easier to investigate and correct discrepancies.
What if you find an error?
Act promptly rather than waiting for the next scheduled payroll review.
Work out the period affected, what the employee should have received and what was actually paid. Include all relevant entitlements, not just the base rate. Explain the issue to the employee, make the back payment as soon as possible and record the correction properly.
An underpayment can also have tax, superannuation and payroll tax consequences. Depending on the circumstances, input from your accountant, payroll specialist or employment lawyer may be appropriate.
Make payroll reviews routine
Annual wage changes are an obvious review point, but employee pay can change throughout the year. A birthday, promotion, qualification, change in duties or new roster may all affect an employee’s entitlement.
Regular checks, supported by clear records and current award information, are far easier than reconstructing an underpayment months or years later.
If you would like help reviewing your payroll processes or checking how the 1 July changes have flowed through your records, contact our team. Where workplace relations or legal interpretation is required, we can work alongside you and your employment law adviser.
This article provides general information only and does not constitute financial, tax or legal advice. Employment obligations depend on the circumstances of the business and each employee.