Fair Work Commission delivers significant minimum wage increase for 2026–27
The Fair Work Commission (FWC) has handed down its Annual Wage Review decision, confirming significant increases to both the National Minimum Wage and minimum award wages from 1 July 2026.
The decision will affect millions of Australian workers and employers, particularly those operating in award-reliant industries such as horticulture, hospitality, retail, aged care, childcare, manufacturing, and community services.
What has changed?
The National Minimum Wage will increase by 5.97%, rising from $24.95 per hour to $26.44 per hour, or from $948.00 to $1,004.90 per week for a full-time employee working a 38-hour week.
For employees covered by modern awards, the Commission has awarded a 4.75% increase to minimum wage rates.
The increases will take effect from the first full pay period on or after 1 July 2026.
While only a relatively small proportion of employees are paid the National Minimum Wage, approximately 21% of Australia's workforce (around 2.8 million employees) are paid according to minimum award rates. As a result, the decision will have a broad impact across the economy.
Why did the Commission award the increase?
A key issue considered by the Commission was the impact of the significant inflation experienced during 2022 and 2023.
In its decision, the FWC noted that many award-reliant employees remain worse off in real wage terms than they were prior to the post-pandemic inflation spike. The Commission found that minimum wage increases in recent years had not fully restored the purchasing power lost during that period.
However, the Commission also acknowledged the challenges facing employers and stated that it would not be responsible, in the current economic environment, to grant increases large enough to fully restore real wages to their July 2021 position.
Instead, the Commission determined that the increase should broadly ensure that modern award-reliant employees are not worse off in real terms than they were on 1 July 2025.
The decision sits below the 6% increase sought by unions but significantly above the outcomes proposed by most employer groups.
Important changes to award classifications
Alongside the wage increase, the Commission announced a significant change to the lowest-paid classifications in the modern award system.
Following a multi-year review, the FWC has decided to phase out the C13 classification as the lowest rate applicable to ongoing employment. Instead, the C12 classification will become the minimum wage rate for ongoing employees across the award system.
As a result, the lowest wage rate for ongoing employment under modern awards will now align with the National Minimum Wage of $1,004.90 per week or $26.44 per hour.
The Commission has retained the C14 entry-level classification, which may apply during an initial period of employment of up to six months. The C14 rate will increase by 6.01% to $978.10 per week or $25.74 per hour.
What this means for employers
The decision represents one of the largest wage increases delivered by the Fair Work Commission in recent years, second only to the 2023 Annual Wage Review.
While the increase will be welcomed by many employees, it will create additional cost pressures for employers at a time when many businesses continue to face rising operating costs, increased insurance premiums, higher energy costs and ongoing (albeit softening) labour shortages.
For award-reliant businesses, the increases will flow through beyond base wage rates, affecting penalty rates, overtime, allowances and superannuation obligations.
The decision also continues a trend that many employers have highlighted in recent years: wage growth is increasingly occurring independently of productivity growth. While the Commission's focus remains on maintaining living standards for low-paid workers, concerns about the widening gap between wage increases and productivity outcomes are likely to remain a key issue.
Employers should begin reviewing payroll systems, budgets, employment contracts and award classifications to ensure they are ready to implement the new rates from the first full pay period on or after 1 July 2026.
Employers who engage employees under awards containing C13- or C14-like classifications should carefully review the impact of these changes on their payroll arrangements and classification structures.
A special note for horticulture growers
The Fair Work Commission's decision to phase out the lowest ongoing employment classification will have particular relevance for employers covered by the Horticulture Award 2020.
Under the Horticulture Award the current Level 2 classification is equivalent to the C13 rate, while Level 1 operates in a similar way to the C14 entry-level classification.
As a result, growers should anticipate that the Level 1 rate (which applies only during an employee's first three months working in the horticulture industry) will increase to at least $25.74 per hour from 1 July 2026, consistent with the new C14 entry-level rate.
Importantly, growers should also plan for the Level 2 rate to increase to at least the new National Minimum Wage of $26.44 per hour. This is because the Fair Work Commission has determined that the lowest ongoing employment classification in modern awards must not fall below the National Minimum Wage, and a standard 4.75% increase to the current Level 2 rate would not achieve that outcome.
The updated Horticulture Award wage rates have not yet been published and are unlikely to be available until closer to 30 June. However, growers should factor these higher rates into labour budgets and workforce planning now, particularly given the significant impact labour costs can have on horticultural operations.
Key takeaways
The National Minimum Wage will increase by 5.97% to $26.44 per hour.
Minimum award wages will increase by 4.75%.
The increases apply from the first full pay period on or after 1 July 2026.
The lowest ongoing award classification (C13) will be phased out and replaced by C12.
Employers should review payroll systems, budgets and award classifications ahead of implementation.
QFVG will release the Award rates for horticulture as soon as they are released by the Fair Work Commission. In the meantime, if you require assistance with broader wage compliance reviews, please reach out to our trusted Partner, Focus HR through the HR/IR support email on wrteam@qfvg.com.au.
Don’t forget to also register for the upcoming IR Updates event here where Focus HR will unpack the wage increase decision as well as other legislation changes and interesting case law from the last 12 months.
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