Fair Work Commission announces 3.5 per cent increase to the minimum wage
The National Minimum Wage increases by 3.5 per cent to $24.95 per hour, or $948.00 per week for a 38 hour week, based on a full-time, award-free adult employee who is not an apprentice or a trainee.
This increase came into affect from the first full pay period on or after 1 July 2025. The modern award minimum wage also increased by 3.5 per cent from 1 July 2025. The minimum wage increases also affect other payments such as penalty rates, overtime, allowances, etc.
Minimum Wage definition
The national minimum wage applies to employees who are not covered by an award or enterprise agreement. It is the minimum amount of wage an employer must pay certain employees. The minimum wage refers to the amount of pay before tax is taken out (gross pay). An employee’s minimum wage may be set by the National Minimum Wage or the minimum wage set out under their industry award or agreement. Some employees may also have a different minimum wage, depending on their employment type, age, or work capacity, for example, apprentices or junior employees.
National Minimum Wage
The National Minimum Wage is the minimum wage set for employees not under an award or agreement. The minimum wage is the lowest amount you can legally pay an employee who works for a business that falls under the National Workplace Relations System.
Modern Award Minimum Wage
For employees under an award, minimum wage entitlements are set by the award that covers their industry or occupation. There are a lot of different awards (121), so it’s important as an employer to ensure you're paying your employees under the correct award.
Under a modern award, an employee may get paid more than the minimum rate for award-free employees. This is based on their classification under an award and the hours they have worked, and when they worked them.
The minimum wage can also apply to businesses that are covered by a registered agreement based on that award, such as an enterprise agreement, that has been approved by the Fair Work Commission. An enterprise agreement or employment contract may also provide a rate of pay that is higher than the National Minimum Wage or applicable award rate.
Australian State Minimum Wage
If an employee is not covered by an award or agreement, then the national or state minimum wage applies, depending on whether the business is covered by the Fair Work system or the Western Australia State System.
When does the Minimum Wage increase?
The minimum wage is reviewed annually and set by the Fair Work Commission’s Expert Panel. Each year the panel reviews the current minimum wage.
The decision to increase the national minimum wage and the amount is usually announced in June. The new minimum wage then comes into effect from the first full pay period on or after 1 July.
The panel is made up of seven people, including a President, three full-time members, and three part-time members. The members of the panel are chosen for their expertise in workplace relations, economics, commerce, and social policy.
The Fair Work Act (2009) entitles individuals, businesses, unions, and other organisations to submit formal requests to be considered before it sets a new minimum wage. The Act also demands research conducted by the panel is published, ensuring transparency on how important minimum wage decisions are made.
Application of Minimum Wage increase
The Australian minimum wage increase impacts businesses and employees under the National Workplace Relations System. These are businesses covered by the Fair Work Act 2009 (the Fair Work Act). The Fair Work Act covers most private businesses in Australia.
For example, in Western Australia, any business that is not a constitutional corporation – if the business is not a proprietary limited company and is a sole trader – is covered by the Western Australian State System. The minimum pay rate for businesses with employees that fall under the Western Australian State System is decided by the Western Australian Industrial Relations Commission (WAIRC).
Impact on part-time and casual employee wages
Part-time employees
Part-time employees have the same minimum wage entitlements as full-time employees, but on a pro-rata basis, according to their working hours. This means a part-time employee is entitled to the same minimum hourly rate as a full-time employee for the job they do but will generally be paid less overall because they work less than full-time hours.
Casual employees
Casual employees are entitled to a higher rate of pay as they are not entitled to benefits enjoyed by permanent employees, such as paid sick leave and annual leave. Casual workers in Australia are entitled to an additional payment called ‘casual loading.’ Casual loading is paid in addition to a casual employee’s fixed hourly wage.
The percentile rate of casual loading is determined by the applicable modern award, enterprise agreement, or other registered agreement. For award free or agreement-free employees, the rate of casual loading is determined from the National Minimum Wage Order.
To calculate a casual employee pay rate, you must multiply the minimum award rate for the employee’s classification by the percentage of the casual loading rate, as stated in the relevant modern award or other registered agreement.
Junior employees and minimum wage
Awards and agreements may stipulate a percentage of the adult wage for anyone who is defined as a junior employee. If a business is deemed to be award free under both the Fair Work system and the Western Australian State legislation, generally junior rates will apply until the age of 20.
The rates tend to increase in increments and as such the rate for a 16-year-old will differ from that of a 17-year-old. The percentage is calculated according to the employee’s age, and it increases every year on their birthday. Once the employee reaches 21 in this circumstance, the full adult minimum wage will apply.
Apprentices and minimum wage
Apprentices are entitled to a minimum rate of pay which will primarily depend on what apprenticeship they are completing and what modern award they fall under. An apprentice’s minimum rate of pay is affected by:
- Level of schooling they have completed.
- How long ago they left school.
- What stage of the apprenticeship they are at.
A mature-age apprentice is an apprentice who is 21 or older. An adult apprentice receives a higher minimum pay rate than a junior apprentice. They may require an even higher rate of pay if they have worked in the business before starting their apprenticeship.
How Peninsula can help you
The minimum wage can be confusing, and it’s not a ‘one size fits all.’ As an employer, you need to stay up to date with the ages of your staff, their circumstances, and any award changes to ensure you pay all your employees correctly.
Call us for free initial advice to help you understand what Workplace Relations System and minimum wage rate applies to your business.
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