FWC Annual Wage Review 2025 Decision
The Fair Work Commission’s Expert Panel has awarded a 3.5% increase to the National Minimum Wage and the minimum wages in Modern Awards.
Accordingly, the National Minimum Wage will be increased to $948.00 per week or $24.95 per hour and all Modern Award minimum weekly wages will be increased by 3.5% from the first full pay period commencing on or after 1 July 2025.
The increase applies to minimum wages for all employees, including junior employees, trainees, apprentices, supported wages and piece rates that are contained in Modern Awards. Weekly wages will be rounded to the nearest 10 cents.
If an Enterprise Agreement applies to an employee and the employee would otherwise be covered by a Modern Award, then the employee’s base rate of pay under the Enterprise Agreement must not be less than the base rate of pay that would be payable to the employee under the Modern Award.
If an Enterprise Agreement applies to an employee and the employee is not covered by a Modern Award, then the employee’s base rate of pay under the Enterprise Agreement must not be less than the National Minimum Wage.
If no Enterprise Agreement or Modern Award applies to an employee, then the employee cannot be paid less than the National Minimum Wage.
What factors did the Panel consider?
The Panel advised that the principal factor driving this year’s decision was a commitment to real wage growth.
In the previous three Annual Wage Review Decisions, there was a necessary focus on the elevated rate of inflation and the Reserve Bank of Australia’s (RBA) tightening of monetary policy in response. However, since last year’s Annual Wage Review Decision, the rate of inflation has moderated to the point where this is of less concern. The ‘headline’ Consumer Price Index (CPI) rate has fallen within the RBA’s inflation target range of 2% to 3%.
It was noted that since July 2021, the real value of Modern Award wages has declined by 4.5% relative to inflation as measured by CPI. This has resulted in the living standards for employee’s dependent on Modern Award wages being “squeezed” and the low paid experiencing greater difficulty in meeting their everyday needs. The Panel are committed to reducing the impacts on those reliant on the Modern Award and National Minimum Wage and ensuring that this disadvantaged position is not entrenched into the Modern Award system permanently.
Despite the economic challenges of the past three years, the labour market remains strong overall, with continuing employment growth, low unemployment and historically high rates of participation in the workforce. Recent and anticipated reductions in interest rates are likely to lead to higher consumer demand and a higher level of economic growth than we have recently experienced. Despite the challenging circumstances of recent years, business conditions have remained reasonably healthy with the level of non-mining profits maintained in real terms and profit margins at approximately their pre-pandemic level.
The Panel highlighted a number of moderating factors that influenced their decision including the upcoming increase to minimum superannuation contributions from 11.5% to 12%, uncertainty from the United States trade policy and some indications of weakness in the accommodation and food service sector in which a significant proportion of Modern Award reliant workers are employed.
The Panel indicated that approximately 20.7% of employees in Australia are paid in accordance with Modern Award wages, with four key sectors heavily reliant on these wages. The four key industry sectors which contain the largest proportions of modern award reliant employees are accommodation and food services, health care and social assistance, retail trade and administrative and support services. The Panel reiterated, as they have done in previous years, that typically these employees work part-time or casual hours and are predominantly female.
In accordance with their continuing commitment to addressing gender equity in the Australian workforce, the Fair Work Commission announced the successful completion of their initial review of the gender-based undervaluation priority review as outlined in last year’s Annual Wage Review. The Panel confirmed that the next focus will be to initiate a review of all professional classifications in the Modern Awards requiring a university degree that have not yet been subject to a review to ensure alignment with the C1(a) benchmark rate determined in the Stage 3 Aged Care decision, as adjusted by the Annual Wage Review 2024 Decision which has been used broadly across the already completed gender based undervaluation review.
Interested to learn more?
If you would like more information on the impact that the minimum wage increase might have to your organisation, please contact us here and a Mapien Workplace Strategist will be in touch ASAP.