This guide provides Australian small and medium businesses with essential information about minimum wage. It covers different minimum wage rates, how the minimum wage is calculated, employer obligations, and the impact of minimum wage on businesses.
Table of contents
What is minimum wage?
The minimum wage is the lowest amount an employer can legally pay an employee for their work. It's a safety net to ensure fair pay and protect employees from exploitation. In Australia, the minimum wage is generally determined by an industrial instrument that applies to an employee's employment, such as an award or enterprise agreement.
Minimum wage rates in Australia
While there is a national minimum wage, different rates can apply depending on an employee's age and employment type. It's important to understand the difference between the national minimum wage and award wages, as this can significantly affect different businesses.
For example, some businesses might have employees covered by awards with higher minimum pay rates than the national minimum wage, while others might have employees with introductory rates that are lower but still compliant with the relevant award. Here's a breakdown of the different minimum wage rates in Australia:
Rate Type
Hourly Rate
Applicability
National Minimum Wage
$24.10
Employees not covered by an award or registered agreement . It does not apply to all work done by employees if special pay rate awards or special working arrangements affect the minimum wage.
Casual Loading
25% on top of the hourly rate
Casual employees, to compensate for the lack of benefits like paid leave.
Junior Rates
Varies by age and industry
Employees under 21 years old are entitled to a percentage of the national minimum wage or the relevant award rate, which increases with their age. The specific percentages can vary depending on the industry.
Apprentice Rates
Varies by age, seniority, and industry
Apprentices and trainees have specific minimum wage rates.
It's important to note that award rates can sometimes be lower than the national minimum wage, for example, introductory rates for new employees. This is legal as long as it complies with the award.
How is the minimum wage calculated?
The Fair Work Commission (FWC) is an independent body that sets and reviews the national minimum wage every year. The FWC considers various factors, including:
✔ Changes in the cost of living, such as inflation, are taken into account to ensure the minimum wage provides a basic standard of living.
✔ The FWC considers the overall economic performance and employment rates to ensure the minimum wage is sustainable for businesses and the economy.
✔ The FWC also considers social needs, such as the needs of low-paid workers and their families, to ensure fair wages and reduce inequality.
In addition to these factors, the FWC also considers cost-of-living pressures and forecast wage growth, with recommendations from stakeholders like the Australian Council of Trade Unions, the federal government, and business groups. The FWC also commissions research during the annual wage review to inform its decision.
The FWC conducts a review process each year, typically in July, and any changes to the minimum wage usually take effect from the first full pay period on or after 1 July.
Minimum wage legal obligations
Employers have several legal obligations regarding the minimum wage. Failing to pay the minimum wage can result in severe penalties. Here are some of the key obligations:
Employee Communication Strategies
Employers must ensure all employees are paid at least the national minimum wage or the relevant award rate for their industry and occupation. This is a fundamental legal obligation.
It's crucial to understand which rate applies to each employee, as it can vary based on factors like age, experience, and the specific industry award. Regularly review your payroll to ensure compliance and avoid potential penalties.
It's crucial to classify employees correctly (e.g., full-time, part-time, casual) and determine the appropriate minimum wage based on their employment status. Each classification has different entitlements and obligations.
Misclassifying employees can lead to underpayment issues and legal repercussions. Consider the working arrangements and nature of the role when classifying employees to ensure accuracy. Clear employment contracts outlining the classification are essential.
Employers must keep detailed records of wages, hours worked, and entitlements for all employees for at least seven years. These records are vital for demonstrating compliance with minimum wage laws and other employment regulations.
Accurate record-keeping also helps resolve pay disputes and ensures employees receive their correct entitlements. Consider using payroll software or dedicated record-keeping systems to maintain organised and accessible records.
Payslips must be issued within one working day of payment, clearly showing wage details, deductions, and any extra rates like overtime or penalties. Payslips provide employees with a clear breakdown of their earnings and deductions, promoting transparency and helping them understand their entitlements.
Ensure payslips include all required information, such as the employee's name, pay period, and details of any deductions. Providing payslips electronically is often preferred for efficiency and accessibility.
Employers must stay informed about any changes to the minimum wage and adjust their payroll accordingly. Minimum wage rates can change periodically, so it's essential to keep up-to-date with these changes to ensure ongoing compliance.
Subscribe to updates from relevant industry bodies to stay informed about any adjustments to minimum wage or award rates. Proactive monitoring and timely adjustments are key for avoiding underpayment issues.
The Voluntary Small Business Wage Compliance Code can help businesses ensure they are paying their employees correctly. This code provides a framework for small businesses to understand and meet their minimum wage obligations.
By adhering to the code, businesses can demonstrate their commitment to fair pay practices and minimize the risk of non-compliance. Consider adopting the code as part of your business's commitment to ethical employment practices.
Job advertisements cannot include pay rates that breach the Fair Work Act or an award. All advertised pay rates must comply with minimum wage laws and any applicable industry awards.
Review job advertisements carefully to ensure advertised pay rates are accurate and compliant. Misleading or underpaying advertisements can lead to legal issues and damage your business's reputation.
Consequences of non-compliance
If an employer fails to meet their obligations regarding minimum wage, a court may impose the following:
❌ Court orders that may require an employer to comply with the law, pay outstanding entitlements (plus interest), or take specific actions like reinstating an employee or undergoing training.
❌ Civil penalties that can be substantial fines for each contravention, with higher penalties for serious contraventions of the Fair Work Act, awards, or agreements.
❌ A court may also issue an injunction to restrain an employer from engaging in unlawful conduct, such as underpaying employees.
Minimum wage impacts to businesses
The minimum wage can affect small and medium businesses in several ways. It's important to understand these effects and take proactive steps to manage them effectively:
Impact Area
Description
Increased labour costs
Higher minimum wages can increase labor costs, potentially impacting profitability.
Budgetary adjustments
Businesses may need to adjust their budgets and financial plans to accommodate higher wages.
Operational efficiency
Businesses may need to improve operational efficiency to offset increased labour costs. For example, businesses could consider streamlining processes, reducing waste, and investing in training to improve productivity.
Pricing and revenue strategies
Businesses may need to review their pricing strategies to maintain profitability. This could involve increasing prices for goods or services, but it's crucial to consider market dynamics and customer expectations.
Employee engagement and retention
Fair wages can improve employee morale and retention. It's important to communicate clearly with employees about wage changes and manage expectations to maintain a positive work environment.
Impact on 'would-be employees'
Minimum wage increases can also affect those who are unemployed or outside the labour force, potentially influencing their decisions to seek employment.
The minimum wage can have a significant impact on industries and occupations with high levels of minimum wage employment, such as factory process workers, farm, forestry and garden workers, food preparation and trades, and hospitality. Businesses in these industries need to be particularly aware of the potential effects of minimum wage changes on their operations and workforce.
Tips for managing minimum wage increases
Here are some practical tips for small and medium businesses to manage the impact of minimum wage increases:
✅ Analyse your current pricing structure and identify areas where adjustments might be necessary to offset increased labour costs.
✅ Explore opportunities to automate tasks or implement technology solutions to improve efficiency and potentially reduce labour costs.
✅ Identify areas where you can streamline processes, reduce waste, and optimise workflows to enhance productivity.
✅ If you're unsure about how to manage the impact of minimum wage increases, consider seeking advice from an accountant, lawyer, or business advisor.
Final thoughts
Understanding and complying with minimum wage laws is important for all businesses in Australia, especially for small and medium businesses that may have limited resources. By staying informed and fulfilling your legal obligations, you can ensure fair treatment of your employees, avoid potential penalties, and maintain a positive work environment.
If you need further assistance with minimum wages or other HR matters, our 24/7 Advice Line is available to all Australian business owners. Contact us on 1300 144 002 today for expert advice and support tailored to your business needs.
Frequently asked questions
The Fair Work Commission is responsible for reviewing and setting the national minimum wage in Australia. This is an independent body that conducts an annual review. In determining the minimum wage, they are required to consider a range of economic factors.
As of 1 July 2024, the national minimum wage in Australia is $24.10 per hour. This translates to $915.90 per 38-hour week before any tax deductions. It's important for business owners to be aware of this current rate.
This is the base rate, and some employees may be entitled to higher rates under specific industry awards or enterprise agreements. Always check if any awards or agreements apply to your business.
The Fair Work Commission typically announces its decision regarding any changes to the national minimum wage around May or June each year. If an increase is granted, the new minimum wage rate then comes into effect on 1 July.
Business owners should keep an eye out for these announcements and update their payroll systems accordingly to ensure they are compliant with the new minimum wage from that date.
Casual workers in Australia are entitled to the same base minimum wage as their full-time and part-time counterparts. However, in addition to this base rate, casual employees also receive a casual loading.
This loading is designed to compensate them for the lack of paid leave entitlements, such as annual leave and sick leave, as well as their lack of job security.
This casual loading is added to their base hourly rate. It's important for businesses employing casual workers to understand and correctly apply this loading to ensure compliance.
The minimum wage figures that are published and discussed are always pre-tax. This means that the stated hourly or weekly rate is the amount the employee earns *before* any income tax is deducted.
The actual amount of tax withheld from an employee's pay will depend on their individual tax circumstances.
The minimum wage is the legally mandated minimum *hourly* rate that an employee can be paid. It sets a floor for hourly pay rates.
A salary, on the other hand, is a fixed annual amount paid to an employee. Salaries are often used for professional or managerial roles and usually cover a standard number of working hours per week.
