The Fair Work Commission has handed down its Annual Wage Review decision for 2026, awarding a 4.75% increase to modern award minimum wage rates, effective from the first full pay period on or after 1 July 2026. The decision will directly affect approximately 2.8 million award-reliant employees, representing around 21.1% of the Australian workforce.
For Queensland employers, the decision means businesses may wish to consider reviewing payroll systems, employment contracts, annualised salary arrangements and budgeting assumptions to ensure compliance from the start of the new financial year.
What’s changed?
The Commission has determined that:
- Modern award minimum wage rates will increase by 4.75% the first full pay period on or after 1 July 2026.
- The National Minimum Wage will increase to $1,004.90 per week or $26.44 per hour.
- Additional increases will apply to the lowest-paid award covered employees as part of a phased removal of the C13 classification level present in some awards.
The Commission described this year’s review as particularly challenging due to the competing pressures of inflation, economic uncertainty and the ongoing impact of cost-of-living pressures on low-paid workers. While economic growth, employment and business investment remained relatively strong through much of 2025, inflation accelerated beyond expectations, prompting further interest rate increases and creating uncertainty for businesses.
Why the Fair work Commission reached this decision
A key factor in the decision was the Commission’s finding that many award-reliant employees remain worse off in real terms than they were before the significant inflationary period that commenced in 2021.
The Commission noted that while last year’s wage increase helped narrow the gap between wages and inflation, rising living costs throughout 2025 and early 2026 had again eroded purchasing power for many low-paid workers. The Review therefore sought to strike a balance between:
- Maintaining living standards for award-reliant employees;
- Supporting workforce participation and gender equality;
- Avoiding undue pressure on business costs and employment; and
- Considering broader economic conditions and inflationary risks.
Importantly, the Commission stopped short of awarding an increase sufficient to fully restore all lost real wages, citing ongoing economic uncertainty and inflation concerns.
Additional supports for Australia’s lowest-paid workers
Beyond the headline 4.75% increase, the Commission has commenced a structural adjustment to the lowest award classifications.
As foreshadowed in last year’s review, the Commission has begun a three-stage process to phase out the C13 classification, which currently represents the lowest ongoing classification rate within the award system. The first stage of that transition will take effect from 1 July 2026.
As a result:
- The C13 classification will receive an additional increase beyond the general 4.75% adjustment.
- The C14 entry-level classification will also receive a corresponding increase to maintain existing relativities.
- The new minimum ongoing award rate will become $1,004.90 per week ($26.44 per hour).
- The minimum entry-level rate (C14) will become $978.10 per week ($25.74 per hour).
The Commission estimates that these structural changes will benefit around 100,000 of Australia’s lowest-paid employees.
Industries most likely to be impacted by the minimum wage increase
The decision will have the greatest impact on industries with a high proportion of award-reliant employees. The Commission identified four sectors that account for more than two-thirds of all award-reliant workers:
- Accommodation and Food Services;
- Retail Trade;
- Health Care and Social Assistance; and
- Administrative and Support Services.
Businesses operating within these sectors may experience more significant increases in labour costs and should review workforce budgets accordingly.
What employers can do now
With the increase taking effect from the first full pay period on or after 1 July 2026, employers can begin preparation now by:
- Reviewing award pay rates – Confirm which employees are paid under modern awards and identify any classifications affected by the increase.
- Checking annualised salaries- Employers using annualised salary or salary absorption arrangements should ensure employees remain better off overall once new award rates take effect.
- Updating payroll systems – Payroll software, timesheets and pay templates should be updated to reflect new minimum rates from the first full pay period on or after 1 July 2026. The first date that the increase will apply from will depend on individual business operations as changes do not occur partway through a pay cycle. For example, they will only take effect from 6 July 2026 if you run a weekly pay cycle starting on a Monday.
- Reviewing enterprise agreements- Employers operating under enterprise agreements should consider any flow-on effects for scheduled increases timed to the annual wage review and Better Off Overall Test (‘BOOT’) compliance.
- Budgeting for increased labour costs – Businesses should assess the financial impact of the increase across wages, superannuation, payroll tax and workers’ compensation premiums where relevant.
How can Business Chamber Queensland help?
Business Chamber Queensland members with Workplace Relations Advisory Services included as part of their membership are encouraged to contact our Workplace Advisory team for support in understanding and implementing the Annual Wage Review changes.
Our team of workplace specialists can assist with:
- Interpreting award classifications and pay obligations;
- Reviewing wage rates and payroll compliance;
- Assessing annualised salary and absorption arrangements;
- Understanding the impact on enterprise agreements; and
- Managing broader workforce planning and compliance considerations.
Business Chamber Queensland members with HR services as part of their membership are invited to contact the Workplace Advisory Services team. Consultancy fees apply for non-members.
