On 2 June 2026, the Fair Work Commission (FWC) Expert Panel (Expert Panel) handed down its decision in the Annual Wage Review 2026. The decision will deliver a 4.75% increase to the national minimum wage (NMW) and modern award minimum wages, far less than the 6% increase sought by the unions. A special increase for the lowest-paid classifications in modern awards at the C13 and C14 rates has also been delivered.
In reaching its decision, the FWC Expert Panel placed particular weight on the effect of inflation and the ‘wild card’ of the Middle East conflict which has accelerated inflation and added to uncertainty as to the trajectory of the Australian economy. These factors were balanced against the fact that most award-covered employees are still in a position where their ‘real wages’ remain lower than they were in July 2021, prior to the post-pandemic spike in inflation.
Accordingly, while the FWC determined to increase the NMW and modern award wages, it acknowledged that the increase falls below the Reserve Bank of Australia’s forecast for headline inflation for the year to June 2026 being 4.8%. This means that the increase will not represent real wage increase for NMW and modern award wage covered employees, save for those modern-award reliant employees on the lowest-paid C13 and C14 rate classifications, who will receive a special increase.
For those modern-award reliant employees on C13 and C14 rate classifications, the FWC will phase out the C13 rate and make the (higher) C12 rate the lowest wage rate applicable to ongoing employment. In this first of three phases, the FWC announced an additional increase of 1.2% (i.e. total wage increase of 5.95%) to be applied to the C13 rate. The C14 rate, a special entry-level wage rate applicable to a limited initial period of employment of no more than 6 months, will also receive the additional increase of 1.2% (i.e. total wage increase of 5.95%) to maintain relativity to the C13 rate. This special increase has the objective of maximising assistance to the lowest-paid modern award-reliant employees in circumstances where wage growth had not kept pace with inflation over the last five years.
Key outcomes from the Annual Wage Review
The key outcomes for the 2026 Annual Wage Review are as follows:
- The NMW will be increased by 4.75%, which will see:
- the current weekly minimum wage increased from $948.00 to $1,004.90 (an increase of $56.90 per week)
- the current hourly minimum wage increased from $24.95 to $26.44 (an increase of $1.49 per hour).
- a 4.75% increase will apply to modern award minimum wages across the board effective from 1 July 2026, provided that:
- the lowest rate in any modern award applicable to ongoing employment (currently aligned to the C13 rate) must be at least $1,004.90 per week or $26.44 per hour
- any entry-level rate that is applicable to no more than the first six months of employment (aligned to the C14 rate) must be at least $978.10 per week or $25.74 per hour
- the current casual loading figure for award or agreement-free employees will remain at 25%. The decision did not address the casual loading for modern award-covered employees.
The NMW and modern award wage increases will take effect in relation to a particular employee from the first full pay period on or after 1 July 2026.
Reasons from the expert panel
In coming to this decision, the FWC’s Expert Panel noted that the “[t]he determination of this year’s Review outcome has been particularly challenging because of the unusual degree of complexity in the interaction of the matters we are required to take into account”. The Expert Panel had particular regard to the fact that “the rate of inflation increased by more than forecast” and that “the Middle East conflict… added uncertainty as to the trajectory of the economy at least in the near future”.
The Expert Panel noted that these matters needed to be balanced against the real wage gap which is significantly impacting the standard of living of the lowest-paid workers.
While the Expert Panel acknowledged the gap, it determined that the economic context weighed against awarding a real wage increase, which would require an increase of well over 5%, and instead determined it was appropriate to award a lower increase of 4.75%, save for those modern-award reliant employees on the lowest-paid C13 and C14 rate classifications, who will receive a special increase.
The Expert Panel noted the following factors in favour of increasing the NWM:
- until February 2026 most economic elements were sound, showing “healthy economic growth and growth in jobs and hours worked, productivity, and business profits and investment”
- most modern award reliant employees, are still in a position where their ‘real wages’ are lower than what they were in July 2021
- because modern award-reliant employees are predominantly female, the increase is likely to result in some contribution to reducing the gender pay gap
- 0nly 0.7% of workers nationally are paid NMW and therefore the increase will not have discernible macro-economic effects.
In coming to their decision, the Expert Panel also considered the following to be moderating factors:
- during the latter half of 2025, the economy encountered capacity restraints which resulted in inflation increasing by more than forecast
- the Middle East conflict has increased uncertainty as to the trajectory of the economy and the possible impacts on the labour market
- the uncertainty engendered by the Middle East conflict, as well as the effect of increasing interest rates, are likely to put pressure on business in terms of increasing input costs and softening demand in discretionary expenditure, but there is very little available data as yet by which the extent of this may be assessed
- over the 12 months to April 2026, the rate of inflation for non-discretionary items was 5.1%, significantly exceeding the CPI (4.2% and the inflation rate for discretionary items (2.9%)
- the increase to NMW in the previous financial year represented a real wage increase and narrowed the real wage gap to a significant degree
- assessment of the likely effect of the outcome of the Review on business required a focus on those industry divisions in the market sector in which modern award reliant employees are concentrated, as these are the sectors which would experience the greatest impact, specifically with regard to business operating costs.
Key takeaways for employers
Employers should review their current pay arrangements to ensure that:
- award/agreement-free employees: Any employee not covered by a modern award or enterprise agreement will, from the first full pay period on or after 1 July 2026, be entitled to a minimum weekly wage for 38 hours of work equal to $1,004.90, or $26.44 an hour (plus the 25% casual loading in respect of casual employees).
- modern award covered employees: From the first full pay period on or after 1 July 2026, any employees covered by a modern award are paid no less than the new modern award wage in respect of the employee’s classification under the modern award. This change also includes casual loading and other loadings, penalties, allowances or overtime, which are calculated by reference to the modern award minimum pay rates. The FWC will hand down further decisions setting out the New Modern Award Wage for each modern award to assist employers
- all-inclusive salary employee: Review salary packages of employees who receive ‘all-inclusive salaries’. The increase may affect the lawfulness of that all-inclusive salary if it is no longer adequate to compensate them for their award entitlements arising in each pay period.
- enterprise agreement covered employees: From the first full pay period on or after 1 July 2026, any employees to whom an enterprise agreement applies should be paid base rates of pay under the enterprise agreement that are:
- for employees not covered by a modern award – not less than the national minimum wage
- in the case of an employee covered by a modern award – not less than the wage specified in respect of an employee’s classification under a modern award.
- Guarantees of annual earnings: For employers who intend to guarantee pay above the high-income threshold for certain employees, they should review whether the annual rate of earnings paid to the relevant employees exceeds the high-income threshold. Employers should note that the high-income threshold will increase on 1 July 2026.
You can read the full Annual Wage Review Decision 2026 here and the summary of the decision here.
If you have any questions about this announcement, please get in touch with a member of our Workplace Relations & Safety team below.
Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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