The Fair Work Commission today handed down their decision to increase the National Minimum Wage and all wage rates within the Modern Awards by 3.5%, effective 1 July 2025.
Uneven Distribution of Award-Reliant Workers
In their statement, the Commission highlighted that the number of modern award-reliant workers is not spread evenly across the economy. Data shows only around 10.5% of the total wages bill in Australia is made up of those on either the National Minimum Wage or a minimum wage within an Award. These employees are disproportionately female, part-time, or casual workers.
Key Industries Affected
Over two-thirds of modern award-reliant workers are concentrated in four key industries:
- Accommodation and food services
- Health care and social assistance
- Retail trade
- Administrative and support services
The Commission noted that the proportion of award-reliant workers in Mining and Finance & Insurance Services is negligible.
Factors Influencing the Decision
The Commission considered submissions from industry associations, unions, and government agencies. However, the decision was primarily based on:
- The performance and competitiveness of the national economy
- The need to achieve gender equality
- Promotion of social inclusion through increased workforce participation
- Relative living standards and the needs of the low paid
Addressing Real Wage Decline
Since July 2021, award-reliant employees have experienced a persistent decline in real wages due to inflation, interest rates, and cost-of-living pressures. The Commission had previously been cautious about large increases due to inflation concerns. However, with the Reserve Bank’s assessment that inflation has sustainably returned to its 2–3% target range, the Commission felt confident in providing a ‘real increase’ to modern award wages.
Other Economic Considerations
The Commission also acknowledged:
- The 0.5% increase to superannuation from 1 July 2025
- Ongoing uncertainty from US trade policies
- Weaknesses in the Accommodation and Food Services sector
- Australia’s poor labour productivity performance, which contributed to a conservative increase
Upcoming Review of Professional Classifications
The Commission announced its next priority: reviewing professional classifications in modern awards—specifically those requiring a university degree. It remains unclear whether the focus will be on clarifying when a professional becomes award-free or on bringing more professionals back under award coverage. More details are expected in the future.
What to Do Before 1 July 2025
- Monitor Award Updates: Subscribe to Fair Work updates to receive notifications when your relevant award is updated. Fair Work Subscriptions
- Review Pay Structures: If you pay an all-inclusive rate, ensure it still meets minimum requirements after the increase.
- Check Minimum Wage Compliance: Review salaries of your lowest-paid workers.
- Adjust Allowances and Penalties: These will also increase in line with the 3.5% wage rise.
- Account for Superannuation Changes: Consider how the 0.5% increase affects salary-packaged employees.
- Update HR Documentation: Revise letters of offer, contracts, and other wage-related documents.
- Communicate with Staff: Even award-free or above-award employees may expect changes. Be transparent about how wage reviews are determined.
Need Help?
Not sure whether an award covers your workers? Don’t leave it to chance—talk to us if you have any questions about this. An award-based employee remains award-based even if their salary package is significantly higher than the award rates. This should be clearly referenced in their employment documentation.
