Annual Wage Review: What employers should think about this time of the year?

Each year, the Fair Work Commission (FWC) undertakes the Annual Wage Review (AWR) to determine whether to vary the National Minimum Wage and modern award minimum wages. For Australian employers, particularly those with award‑covered workforces, this review has practical and immediate implications for payroll compliance, labour costs and employment arrangements generally.

With the Annual Wage Review now underway, employers should be turning their attention to what may be coming from 1 July, what recent commentary suggests about the likely quantum of increases, and what steps can be taken now to prepare. As we enter quarter four of the financial year, budgeting will shortly be a key consideration for employers, so understanding what is potentially coming down range is important for employers.

The Annual Wage Review is conducted by an Expert Panel of the Fair Work Commission under the Fair Work Act 2009 (Cth). Each financial year, the panel reviews and sets:

• the National Minimum Wage, and
• minimum wage rates across all modern awards.

The Commission is required to consider a broad range of statutory factors, including:

• the needs of the low paid;
• relative living standards and cost‑of‑living pressures;
• inflation and economic conditions;
• productivity, employment and business competitiveness; and
• gender pay equity and the elimination of gender‑based undervaluation.

The decision is typically handed down in early June, with new rates taking effect from the first full pay period on or after 1 July.

At this stage, the Fair Work Commission has not indicated a specific outcome for the 2025–26 review. However, recent economic commentary, union submissions and expert analysis provide a useful guide as to the likely range.

The Australian Council of Trade Unions (ACTU) has publicly signalled it will seek an above‑inflation increase of around 5% in the 2026 review, arguing that award‑reliant workers have not yet recovered purchasing power lost during recent years of elevated living costs – particularly housing and rent pressures. [abc.net.au]

By contrast, employer groups have historically argued for more moderate outcomes aligned with productivity and inflation trends. Major bank and economist commentary suggests wage growth moderating, with headline wage inflation forecast to sit around 3.0–3.4% through 2026. [westpaciq.com.au]

On that basis, many commentators are forecasting that the Commission’s eventual decision is likely to land somewhere in the 3% to 4% range, absent a significant change in inflation, employment or economic conditions.

As always, the Commission retains discretion to depart from submissions where it considers this necessary to meet its statutory objectives.

Approximately one in five Australian employees are paid at, or close to modern award minimum rates. Even where employers pay above‑award or annualised salaries, award increases can still have significant compliance impacts.

Key risk areas include:

Award compliance and wage audits

All award‑covered employees must receive at least the updated minimum rates from 1 July. Employers should ensure:

• base hourly rates meet or exceed new award minimums;
• junior, apprentice and supported wage rates are adjusted proportionately; and
• allowances, penalty rates and loadings tied to award rates are correctly recalculated.

Over‑award salaries and set‑off arrangements

Where employees are paid a “salary above award”, or a flat rate intended to offset award entitlements, employers must reassess whether those arrangements still leave employees better off overall once award rates increase. This is a common compliance failure following Annual Wage Reviews.

Enterprise agreements

The Fair Work Act requires that base rates of pay in enterprise agreements must not fall below the relevant modern award minimum rates. Award increases can therefore trigger the need for salary adjustments under existing agreements.

Budgeting and workforce planning

Award increases also affect:

• payroll budgets for the coming financial year;
• labour‑hire and contractor cost models;
• pricing and tender assumptions; and
• bargaining strategies for enterprise negotiations commencing in the future.

While the precise outcome of the 2025–26 Annual Wage Review will not be known until the Fair Work Commission hands down its decision, the direction of travel is clear: award wages are likely to increase again from 1 July, and potentially at a level that continues to place pressure on costs for award‑reliant employers.

Mapien will be monitoring the AWR process and associated communications and will provide further information once announcements are made.

If you have questions regarding preparing for the annual wage review, please contact us below and one of Workplace Strategists will be in touch within 24 hours.