Minimum Wage Increase 2026: What Employers Should Check Now
Australia's new minimum wage is now in effect.
From 1 July 2026, the National Minimum Wage increased to $26.44 per hour, or $1,004.90 per week based on a 38 hour week. Minimum wages under modern awards have also increased by 4.75%. These rates apply from the first full pay period starting on or after 1 July 2026.
For many businesses, this is more than a payroll update. It is a good opportunity to check that employees are being paid correctly, payroll systems have been updated, and employment arrangements still reflect the work people actually do.
It is also worth reviewing clauses dealing with confidentiality and restraint of trade clauses, particularly for senior employees or roles involving client relationships.
What changed on 1 July 2026?
The Fair Work Commission's Annual Wage Review introduced the following changes:
The National Minimum Wage increased to $26.44 per hour or $1,004.90 per week for a full-time employee working a 38 hour week.
Minimum wages under modern awards increased by 4.75%.
The new rates apply from the first full pay period starting on or after 1 July 2026.
That means the increase may not have applied on 1 July itself if your current pay period started before that date. Instead, the new rates begin from your first full pay period after 1 July.
Which employers should review their payroll?
Every employer should understand how these changes affect their workforce, but it is particularly important if your business:
employs staff covered by a Modern Award
pays annual salaries
employs casual employees
pays penalty rates, overtime or allowances
has recently promoted employees or changed job responsibilities
has not reviewed employee classifications for some time.
Even if you use payroll software, it is worth checking that everything has been updated correctly.
Employer checklist after the minimum wage increase
Now that the new rates are in effect, it is worth taking a few minutes to review your payroll and employment records.
Check employee classifications
One of the most common payroll mistakes starts with the wrong classification.
As businesses grow, employees often take on additional responsibilities. If their role has changed, their award classification may also need to change.
If you're also unsure whether someone should legally be treated as an employee or an independent contractor, our guide on Contractor vs Employee explains the key differences.
Review Modern Award coverage
Not every employee is covered by the same award, and some roles may not be covered by an award at all.
Confirming the correct award applies is one of the simplest ways to reduce the risk of underpayments.
Update hourly pay rates
Employees paid at or near the minimum award rates should now be receiving the updated rates that apply from the first full pay period on or after 1 July.
Review annual salaries
Paying someone a salary does not automatically satisfy award obligations.
If an employee is covered by a Modern Award, their salary should still leave them better off overall than they would have been under the award once overtime, penalty rates and allowances are taken into account.
Check overtime, penalty rates and allowances
Many award entitlements increase when minimum wages increase.
Review any overtime, weekend work, shift penalties and allowances that apply within your business.
Update payroll software
Payroll software is a helpful tool, but it still relies on accurate information.
If an employee has been classified incorrectly or an award has not been updated properly, payroll software will continue calculating pay using those settings.
Review employment contracts
This is also a good opportunity to make sure employment agreements still reflect each employee's current role, responsibilities and remuneration.
Can payroll software get it wrong?
Yes.
Payroll software does not decide which award applies or whether an employee has been classified correctly.
Those decisions still need to be made by the employer.
While many payroll systems automatically update wage rates, they cannot identify changes in an employee's duties or determine whether the correct award classification has been selected.
That is why an annual payroll review remains an important part of meeting your workplace obligations.
What happens if employees are underpaid?
Many underpayments are not intentional.
Common causes include:
applying the wrong Modern Award
using an incorrect employee classification
failing to update payroll settings
salary arrangements that no longer cover award entitlements.
If an underpayment occurs, employers may need to repay outstanding wages and superannuation. Depending on the circumstances, it may also lead to complaints, Fair Work investigations or financial penalties.
Finding and fixing issues early is usually far easier than dealing with them after they have been identified by an employee or regulator.
Frequently asked questions
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Not necessarily.
Employees paid an annual salary may already earn more than the new minimum rates. However, if they are covered by a Modern Award, employers should still check that the salary leaves them better off overall than they would have been under the award.
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The new rates apply from the first full pay period starting on or after 1 July 2026.
If your pay period began before 1 July, the increase generally takes effect from the next full pay period.
Do I need to update employment contracts?
Not always.
However, the start of the new financial year is a good opportunity to review employment agreements and make sure they accurately reflect current pay arrangements, duties and employment conditions.
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Not always.
However, the start of the new financial year is a good opportunity to review employment agreements and make sure they accurately reflect current pay arrangements, duties and employment conditions.
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The Fair Work Ombudsman publishes updated Pay Guides and provides the Pay and Conditions Tool (PACT), which can help employers identify the correct minimum rates for their employees.
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Many businesses contact an employment lawyer when they are:
unsure which Modern Award applies
reviewing annual salary arrangements
concerned about employee classifications
updating employment contracts
planning to terminate an employee and wanting to follow a fair process
responding to a payroll issue or underpayment.
Getting advice early can often prevent a small payroll issue from becoming a much larger workplace problem.
A good time for an employment review
The annual wage increase is more than just a change to hourly rates. It is an opportunity to make sure your employment arrangements still reflect how your business operates today.
As businesses settle into the new financial year, reviewing payroll, employee classifications and employment contracts can provide confidence that everything is up to date and compliant.
If you have questions about your obligations as an employer or would like assistance reviewing your employment arrangements, our employment law team can help you understand your options and reduce workplace risk before problems arise.
Connected Legal + Commercial is a Sydney-based commercial law firm. This article is general information only and does not constitute legal advice. For advice specific to your situation, please contact us.