Get Ready for July 1st: Australia’s 3.5% Minimum Wage Increase

As we approach the start of the new financial year, payroll teams across Australia need to prepare for wage adjustments coming into effect on July 1, 2025. The Fair Work Commission has announced a 3.5% increase to the National Minimum Wage and award minimum wages, marking an important change that will impact millions of workers and their employers.

What’s changing?

The Fair Work Commission’s decision will see minimum wages rise by 3.5% from July 1, 2025.

Who will be most affected?

This wage increase will have the most significant impact on:

Employees: Approximately three million workers on award wages will benefit from this increase. The sectors most affected include:

• Retail workers
• Cleaners and cleaning services
• Childcare workers
• Hospitality staff
• Security personnel
• Community services workers

Employers: Businesses in labour intensive industries with high numbers of minimum wage workers will face the greatest cost impact. Small to medium enterprises in retail, hospitality, cleaning, and community services should particularly prepare for increased labour costs.

Implementation Timeline: Critical for Payroll Teams

The new minimum wage rates will apply from the first full pay period starting on or after July 1, 2025. This means:

• If your weekly pay period starts on Wednesday, the new rates apply from Wednesday, July 2, 2025
• If your pay period aligns with July 1, the new rates apply immediately
• The timing varies depending on your specific payroll cycle

Action items for payroll systems

To ensure compliance and smooth implementation, payroll teams should:

Before July 1:

• Review all employee classifications to identify those on minimum wage or award rates
• Update payroll software with new minimum wage rates once officially confirmed
• Communicate changes to affected employees in advance
• Review and update employment contracts if necessary

System updates required:

• Base hourly rates for minimum wage employees
• Award rate tables for relevant industries
• Casual loading calculations (maintaining the 25% loading)
• Overtime rate calculations that reference minimum wage
• Leave entitlement calculations based on minimum wage

Post-implementation:

• Conduct payroll testing to ensure accurate calculations
• Monitor the first few pay runs for any discrepancies
• Keep detailed records of the implementation for compliance purposes

With approximately three million workers receiving this increase, the aggregate impact on the Australian economy will be substantial. Employers should factor this 3.5% increase into their budgeting, particularly those with significant numbers of minimum wage employees.

The increase represents a more moderate rise compared to last year’s 3.75% increase, but still represents a meaningful cost increase that requires careful financial planning.

Staying compliant

Remember that underpaying employees, even inadvertently, can result in significant penalties and back payment obligations. Ensure your payroll systems are updated promptly and accurately to avoid compliance issues.

For specific award interpretations or complex employment arrangements, consult with Australian Payroll Association or contact the Fair Work Ombudsman for guidance.