Annual Wage Review 2026: 4.75% Award Wage Rise and $26.44 Minimum Wage From 1 July

Every June, the Fair Work Commission hands down the Annual Wage Review decision. Every July, the new rates take effect. And every year, a predictable number of Australian employers miss the update, not out of bad faith, but because payroll runs on a schedule, award interpretation takes time, and the change lands in the busiest compliance window of the year.

The 2026 decision has now been announced. On 2 June 2026, the Commission confirmed new minimum wage settings for the 2026-27 financial year. The National Minimum Wage rises to $26.44 per hour, or $1,004.90 per week for a 38-hour week. Modern award minimum wages increase by 4.75%, with an entry-level award floor of $25.74 per hour or $978.10 per week. The new rates apply from the first full pay period starting on or after 1 July 2026.

In 2025, a missed payroll update became more serious. From 1 January 2025, intentional underpayment of wages, leave, allowances, and penalty rates is a federal criminal offence under Part 3A-1 of the Fair Work Act. The word that matters there is intentional, but it is worth being precise about what that means in practice, and why the Annual Wage Review is the wrong time to be casual about payroll compliance.

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1. What the Annual Wage Review actually changes

The Annual Wage Review sets two things simultaneously:

The National Minimum Wage: the floor rate for employees not covered by any modern award or enterprise agreement. This applies to a relatively small proportion of the workforce.

Modern award minimum rates: minimum rates under modern awards move in line with the Annual Wage Review decision. This is the mechanism in section 285 of the Fair Work Act. For 2026, the headline award increase is 4.75%, with the entry-level award floor moving to $25.74 per hour or $978.10 per week.

Approximately 2.7 million Australian workers, around 20.7% of the workforce, are paid at award minimum rates. Every one of those minimum rates changes for the relevant first full pay period on or after 1 July.

If you employ anyone covered by a modern award at or near the minimum classification rate for that award, you have a compliance obligation that activates through your July payroll cycle.

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2. The awards most likely to affect your workforce

The award rate increase from the Annual Wage Review applies across modern award minimum rates. The practical impact varies by award structure. In awards with many classification levels, including SCHADS, the Health Professionals Award, and the Nurses Award, the percentage increase applies at every relevant level, meaning a larger absolute dollar increase at higher classifications.

For employers paying above-award rates, the review matters in a specific and often overlooked way: if you pay a flat salary designed to absorb all award entitlements, sometimes called an "all-in" arrangement, the award rates rising underneath that salary may reduce or eliminate the amount by which your payment exceeds the minimum. An arrangement that was compliant in June may not be compliant in August.

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3. The criminal liability context: why this year is different

The wage theft provisions commenced on 1 January 2025. They are not theoretical. The Fair Work Ombudsman has been clear that the criminal pathway is reserved for intentional conduct, meaning employers who knowingly underpay and do not rectify. An honest mistake does not meet the criminal threshold.

But here is the practical risk for the Annual Wage Review. The ATO estimates that unpaid superannuation exceeded $6 billion in the last financial year. The FWO's enforcement data shows the most common underpayment source is not deliberate exploitation. It is employers who missed a rate update, applied the wrong classification, or did not know the award applied to their workers.

The criminal provisions require proof of intent. The civil provisions, which carry penalties of up to $19,800 per contravention for individuals and $99,000 per contravention for corporations, do not. A missed July rate update is a civil underpayment exposure regardless of intent.

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Since 1 January 2025, intentional underpayment is a criminal offence. But the civil penalty pathway, $19,800 per contravention for individuals and $99,000 for corporations, applies to any underpayment, regardless of whether it was intentional.

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4. Your five-step July compliance checklist

Step 1: Identify every modern award that applies to your workforce

If you are not certain which modern award covers a role, use the Fair Work Commission's award finder at fwc.gov.au. This is not optional. The award coverage determination is the starting point for every downstream calculation.

Step 2: Pull the current minimum rates for every classification in your workforce

The FWO's Pay and Conditions Tool (PACT) and updated pay guides at fairwork.gov.au are the most reliable sources. The new 2026 rates are available ahead of 1 July.

Step 3: Check every employee against their award classification

The most common compliance failure is not the rate update. It is misclassification. An employee doing the work of a Level 3 Clerk while being paid at Level 2 rates is underpaid regardless of what the July review does. If you have not reviewed classification against actual duties recently, this is the moment.

Step 4: Update your payroll system before the first full pay period on or after 1 July

The new rates take effect from the first full pay period starting on or after 1 July 2026. This is not automatically 1 July itself. It is the start of the next full pay cycle that begins on or after that date. For weekly pay cycles, that might be 1, 6, or 7 July depending on the rostered pay period. For fortnightly cycles, it may be later. Identify the date for your pay cycle now and set a calendar reminder.

Step 5: Review above-award salary arrangements

If you pay employees above-award salaries designed to absorb all entitlements, model what the new award minimum rates look like against that salary. Confirm the salary still exceeds the minimum when penalty rates, overtime, and allowances are taken into account. If it does not, you have an underpayment exposure from the relevant July pay period.

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5. The gender pay equity dimension

The 2026 review does not occur in isolation. The FWC's gender-based undervaluation priority award reviews, covering awards such as the Health Professionals and Support Services Award, the Children's Services Award, the Pharmacy Industry Award, and others, are rolling out additional increases on top of the Annual Wage Review percentage.

The Pharmacy Industry Award minimum rates, for example, are increasing by 14.1% in three phases on 30 June 2025, 30 June 2026, and 30 June 2027 following the FWC's finding of historical gender-based undervaluation. If you employ pharmacists, pharmacy assistants, or workers under any of the gender undervaluation priority awards, your rate obligations may be higher than the Annual Wage Review percentage alone.

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Key Takeaways

1. The FWC decision was announced on 2 June 2026. New rates take effect from the first full pay period starting on or after 1 July 2026.
2. The National Minimum Wage is now $26.44 per hour or $1,004.90 per week for a 38-hour week.
3. Modern award minimum wages increase by 4.75%, with an entry-level award floor of $25.74 per hour or $978.10 per week. Employers need to update every relevant award classification and pay rule before the first affected July pay cycle.
4. The civil penalty pathway for underpayment applies regardless of intent. From 1 January 2025, intentional underpayment is also a criminal offence.
5. Above-award salary arrangements must be rechecked against new minimum rates after each Annual Wage Review to confirm they still exceed the minimum entitlements.
6. Gender undervaluation awards carry additional increases beyond the Annual Wage Review percentage. Check whether any of your workforce falls under the priority award categories.

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Sources

1. [1] Fair Work Commission. Annual Wage Review 2026. Decision announced at 10 am AEST on Tuesday 2 June 2026. fwc.gov.au/annual-wage-review-2026
2. [2] Fair Work Ombudsman. Minimum wages increase from 1 July 2026. National Minimum Wage $1,004.90 per week or $26.44 per hour; entry-level award floor $978.10 per week or $25.74 per hour; increases apply from the first full pay period starting on or after 1 July 2026. fairwork.gov.au
3. [3] Fair Work Ombudsman. Pay guides and Pay and Conditions Tool updated with the rates that apply from 1 July 2026. fairwork.gov.au/pay-guides
4. [4] Fair Work Act 2009 (Cth) s.285: Annual wage review variation of modern awards; Part 3A-1: criminal offence of intentional wage underpayment from 1 January 2025.
5. [5] Fair Work Ombudsman. Gender undervaluation priority awards review and award-specific rate changes. fairwork.gov.au
6. [6] NSW Small Business Commissioner. Fair Work Commission pay increase: minimum wage and gender equality. Pharmacy Industry Award increase of 14.1% in three phases. smallbusiness.nsw.gov.au