How Australia’s Annual Wage Review Works
Synopsis
Australia’s Annual Wage Review determines minimum wage increases each year, impacting millions of workers. The 2026 decision introduced a 4.75% rise, lifting the National Minimum Wage and award rates. This explains how the system works, who sets wages, and what employers and employees need to know about the changes.
Millions of Australian employees see their wages go up each year without going on strike, or switching their employment. This happens in the way wage-setting works in Australia, specifically by the formal process of agreeing minimum wages and award rates once a year.
The decision of the Fair Work Commission is usually a big headline story but there is still a lot of confusion amongst workers and employers regarding the changes, who gains the benefit and how the system works.
The 2026 Annual Wage Review has raised these issues, as the Fair Work Commission announced on 2 June 2026 that the National Minimum Wage and modern award wages will increase by 4.75%. This determination will impact around 2.8 million workers and will come into effect on the first full pay period after 1 July 2026.
So what is the Annual Wage Review?
The Fair Work Commission (FWC) holds the Annual Wage Review annually to decide if the minimum wages need to be raised and, if so, how much.
The review includes two main aspects:
- The minimum wage for the nation.
- Modern awards specify minimum rates of pay.
Usually, this starts in March with the invitation of submissions from groups of employers, unions, industry organizations, governments and economists. The Commission then reviews the economic data, labour market conditions, inflation and productivity trends, and makes a decision around June. New wages typically apply from July.
Who Decides Minimum Wages?
The Fair Work Commission Expert Panel for Annual Wage Reviews is an independent panel that is established under the Fair Work Act, and is responsible for determining minimum wages in Australia.
The panel is expected to consider a number of factors such as cost of living, inflation, job growth, productivity, competitiveness of businesses and other economic considerations. The task is to make sure that wages changes contribute to the living standard of the workers and to jobs that are sustainable.
What Changed in 2026?
The National Minimum Wage was raised to:
- Hourly rate: $26.44
- Weekly rate (38 hours): $1,004.90
This translates to a boost of about $47 per week for minimum wage full-timers, before tax. The rates have been introduced from the first full pay period after 1st July 2026.
The difference between National Minimum Wage and Award Wages.
One of the misconceptions people often have is the difference between the National Minimum Wage and award wages.
National Minimum Wage is the lowest legally required wage rate. Typically, the minimum wage for people in the national workplace relations system is this level.
Modern awards, on the other hand, establish minimum pay rates and conditions for a specific industry. The rates are frequently higher than the National Minimum Wage and can be different for different jobs and areas.
Many workers receive wages in practice higher than the national minimum, based on award rates.
What is a modern Award?
Modern awards are legally binding documents that set out minimum pay rates and other conditions of employment for a particular industry and occupation.
There are over 100 modern awards for employments in retail, hospitality, construction, healthcare, transport, manufacturing and professional services in Australia.
Awards outline the workplace conditions, including penalty rates, overtime, allowances, breaks and shift arrangements, in addition to wages. Award pay rates generally increase when the Annual Wage Review is finalised, with increases generally in line with the National Minimum Wage.
How do Enterprise Agreements compare to?
Employers and employees negotiate enterprise agreements at the workplace level, these agreements can often provide pay rates that are higher than those in the awards.
But the AWV doesn't necessarily extend to enterprise agreements. Pay changes only if the agreement specifically provides that wages will be adjusted if there are award changes, or if there are mechanisms in the agreement for pay changes to be reviewed.
If such provisions do not exist, wages will not be affected unless they are renegotiated.
Can An Enterprise Agreement Pay Less Than An Award?
Enterprise agreements must satisfy the Better Off Overall Test (BOOT) in order to be approved. This means that staff are as better off as they are under the award they are covered by.
Consequently, employers are unable to implement a pay reduction in an enterprise agreement that would be below award minimum requirements.
The reasons for some awards changing at different times.
Most wages will apply from the first full pay period on or after 1 July, but some awards may have different pay period start dates as a result of structural changes or industry specific changes.
For instance, the Pharmacy Award has, on occasion, been given different implementation dates. Employers should always check the relevant award for their employees for specific timing, as it may vary.
What Employers Need to Do
Businesses are left with a clear compliance obligation in the Annual Wage Review. Employers should review:
- Award classifications
- Payroll systems
- Enterprise agreement provisions
- Casual loadings
- Penalty rates
- Superannuation settings
Inaccurate pay rate updates can result in underpayment issues and regulatory fines.
The Broader Context
Australia's wage setting system is multitiered. Advances in pay rates are subject to the National Minimum Wage, modern awards outline the standard of pay for industries, and enterprise awards can create specific pay arrangements for the workplace.
At the heart of this process is the Annual Wage Review. It guarantees that minimum wage complies with the economy and balances welfare and sustainability for businesses.
The 2026 growth is for around 2.8 million workers and underscores the ongoing significance of this trend in Australia's labour market.
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