From 1 July 2025, Australia’s national minimum wage and all modern award minimum wage rates will increase by 3.5%, following the Fair Work Commission’s (FWC) Annual Wage Review decision. This marks another meaningful adjustment aimed at maintaining real wages amid ongoing cost-of-living pressures. To help you navigate these developments, our employment team has outlined what this means for your business, ensuring you’re informed and prepared for the changes ahead.
What is changing?
The 3.5% increase to the national minimum wage will see the hourly rate rise from $24.10 to $24.95, delivering a weekly increase of $32.10 for full-time employees. The national minimum wage increase applies across the board – to full-time, part-time, and casual employees who aren’t covered by a modern award or enterprise agreement.
In addition, the FWC has confirmed a 3.5% increase to all minimum award wages. While only a small portion of the Australian workforce is directly covered by the national minimum wage, about one in five employees are paid under minimum award rates, making this adjustment significant for many businesses.
Economic context
The decision comes against the backdrop of an annual inflation rate of 2.4%, meaning the 3.5% wage increase slightly outpaces inflation, providing a real wage boost of 1.1% for covered workers.
The wage increase is estimated to deliver an annual pay rise of close to $1,700 for full-time minimum wage earners. This will particularly benefit groups who are disproportionately award-reliant – namely, women and casual workers, with over half of award-dependent employees engaged on a casual basis.
However, employer groups, including the Australian Retailers Association, had advocated for a more modest increase capped at 2.5%, citing mounting pressure on business margins, particularly for small and medium enterprises. Conversely, the Australian Council of Trade Unions had called for a 4.5% rise to further address cost-of-living challenges.
While businesses may welcome the decision as a middle ground, many small employers already operating on tight profit margins will feel the impact, especially as rising wages coincide with other cost pressures.
Don’t forget superannuation
Employers should also be mindful that from 1 July 2025, the superannuation guarantee rate will increase from 11.5% to 12%. This change will further increase employment costs and should be factored into payroll and budgeting reviews.
Tips for Employers
To stay compliant and minimise risk, employers should:
- Review all applicable modern awards and adjust wage rates accordingly;
- Review existing employment contracts for award based employees, particularly if you are absorbing allowances, penalties or overtime into remuneration;
- Check the pay rates for non-award employees to ensure they are at least meeting the new national minimum wage;
- Review enterprise agreements to confirm alignment with the new minimum rates; and
- Consider superannuation obligations and review payroll systems and contracts to reflect the increase come 1 July 2025.
Early preparation will help businesses manage these changes smoothly and avoid potential back pay issues or non-compliance penalties.
If you would like to discuss any of the above information further or have questions relevant to the minimum wage increase, please contact our Employment Team on (02) 4927 2900.
