What the Minimum Wage Increase Means for Your Small Business

From 1 July, the national minimum wage in Australia is increasing by 3.5%. For small business owners, this annual adjustment isn’t just another line in the budget—it’s a trigger to review systems, agreements, and your broader employment strategy.

Here's what you need to know and do to stay compliant and keep your business running smoothly.

The Basics: What’s Changing?

The new national minimum wage will be $948.00 per week, or $24.95 per hour. This increase applies across all industries and has a direct impact on modern award minimum rates—there are 121 modern awards covering a broad range of roles and industries, from construction and healthcare to admin and hospitality.

If you employ staff under a modern award (and most do), their pay will increase by 3.5%. These changes affect full-time, part-time, and casual workers, including students and entry-level employees.

Immediate Actions to Take

1. Update Your Payroll Systems

Ensure your payroll software or processes are ready to reflect the new minimum wage from the first full pay period on or after 1 July. While the Fair Work Commission won’t release official updated pay guides until 1 July, a 3.5% increase is simple to estimate manually.

2. Review Employment Agreements

If you use individual flexibility agreements (IFAs) or annualised wage arrangements, now’s the time to re-crunch the numbers. These agreements must continue to meet the “better off overall” test compared to the relevant award. Over time, if not reviewed, they can fall out of compliance—especially if allowances or minimum rates change significantly.

3. Check Allowances

Don’t overlook award allowances like travel, uniform, or tool allowances. These can also be updated annually and can significantly affect total remuneration. Some changes—like travel allowance increases in recent years—have caught businesses off guard and led to underpayment issues.

The Risks of Inaction

Failing to apply these increases can lead to serious consequences. Employees can lodge back pay claims, and if the Fair Work Ombudsman gets involved, you may face a full payroll audit—not just for one employee, but for your entire team.

In addition, underpayments can affect superannuation contributions and workers compensation premiums. The ATO may also take an interest, especially if you’ve been misclassifying contractors or not adjusting superannuation contributions properly.

Ignorance isn’t a defence. The expectation is that employers are across these changes and ready to implement them without delay.

Strategic Considerations

1. Should You Adjust Your Prices?

Wage increases, even modest ones, add pressure to your operating costs—especially in the current environment where margins are already tight. It may be time to review your pricing strategy. Can your business absorb the increase, or do you need to pass it on?

2. Communicate with Your Team

Even if your staff are paid above award rates, they’ll be hearing about the wage increase. Be prepared for questions and potential pay rise requests. Clear communication about how your business handles wage reviews and the value you offer can help manage expectations.

3. Stay Ahead of Super Changes

From 1 July, the Superannuation Guarantee (SG) rate will also increase—from 11.5% to 12%. This is the final stage of the planned SG increases. Make sure your payroll system and budget reflect this as well.

Final Thought: Don't Set and Forget

Wage compliance isn’t just about ticking a box once a year. It requires ongoing attention—particularly if your workforce is a mix of award-covered roles, contractors, and casual employees.

If you’re unsure about any of the changes, consult with your accountant or HR advisor before 1 July. Getting it right from the start is far less costly than having to backtrack months or even years later.

With the Fair Work Commission also looking into further reforms—particularly around gender-based undervaluation in certain awards—this is a space that will continue to evolve. Keeping informed and proactive will serve your business well.

Disclaimer:

The information in this blog post is purely factual in nature and, therefore, does not constitute, and should not be relied upon as, legal, Tax or financial product advice. None of the information provided considers your personal objectives, financial situation or needs, and you will need to make your own decision about how to proceed. Alternatively, you should consider seeking advice from a Tax Agent, Lawyer, or licenced Financial Adviser.