If you employ staff on award wages or the National Minimum Wage, there’s an important change you need to have already actioned — or need to action right now. According to the Fair Work Ombudsman’s Annual Wage Review 2026, from 1 July 2026, the National Minimum Wage increased to $26.44 per hour ($1,004.90 per week), and minimum rates under modern awards rose by 4.75%. That’s a meaningful jump, nearly 3 million Australian workers are covered by award wages, and if any of them work for you, your payroll costs have changed.

Employees paid the National Minimum Wage or a modern award’s minimum rate are affected. Those under enterprise agreements may not get automatic raises, but employers must verify the agreement to ensure base rates stay above legal minimums.

This isn’t a reason to panic, but it is a reason to act. The businesses that handle wage increases well are the ones that understand exactly who is affected, update their payroll before the first eligible pay period, and make a plan for the ongoing cost impact.

Who Is Actually Affected and Who Isn’t

Not every employee gets this increase automatically, so the first step is understanding which of your staff are covered.

National Minimum Wage employees are those not covered by a modern award or enterprise agreement. If you have casual or part-time staff on a basic employment contract with no specific award, the NMW applies.

Award employees are covered by one of more than 120 modern awards that set minimum pay rates and conditions for specific industries and roles. Common awards for small businesses include the General Retail Industry Award, the Hospitality Industry (General) Award, the Building and Construction General On-site Award, and the Cleaning Services Award. These award rates increased by 4.75% from 1 July 2026.

Enterprise agreement employees are covered by a negotiated agreement between your business and your employees. These rates do not automatically increase with the annual wage review – you need to check the terms of your specific agreement.

If you’re unsure which award covers your staff, the Fair Work Ombudsman’s Pay and Conditions Tool (PACT) at fairwork.gov.au is the fastest way to find out. Enter your employee’s role and industry, and it will tell you the applicable award and current minimum rate.

Update Your Payroll

The new rates have been in effect from the first full pay period that started on or after 1 July 2026. For most businesses that run weekly or fortnightly payroll, that means the change needed to be in place from early-to-mid July. If you haven’t updated your rates yet, do it immediately.

Here’s a simple checklist:

  • Log into your payroll system (Xero, MYOB, Employment Hero, etc.) and verify the award rates have been updated – most providers push automatic updates, but it pays to confirm.
  • Cross-check the updated minimum rates against what you’re currently paying each employee.
  • If any employee is being paid below the new minimum, adjust their rate with immediate effect and back-pay any shortfall from the first eligible pay period.
  • Update your employment contracts or pay rate schedules for any staff on written agreements that reference a specific dollar rate.

Underpaying employees – even unintentionally – is a compliance risk that can result in significant back-pay obligations and penalties. The Fair Work Ombudsman has increased its focus on underpayment compliance in recent years, and small businesses are not exempt from scrutiny.

Calculate the Real Cost Impact on Your Business

A 4.75% wage increase on your current payroll bill is a real number, and it’s worth calculating it precisely. Take your current total wages cost and multiply by 1.0475. That’s your new baseline. For a business spending $25,000 per month on wages, that’s roughly an additional $1,200 per month, or just over $14,000 per year.

Some of that cost may be partially offset by the increase in customers’ spending power, higher minimum wages generally flow into consumer spending. But for many small businesses, particularly in hospitality, retail, and care – labour is the single largest cost line, and this increase requires a deliberate response. Recent Prospa and YouGov research, reported by Accountants Daily, found that average SME cash reserves sat at around 2.6 months of expenses, with about one in seven SMEs holding no cash reserves, highlighting why wage increases can quickly become a cash flow planning issue.

Your options broadly fall into three categories: you could relook at your pricing, review your rostering to ensure you’re using labour as efficiently as possible, or you could look at options for accessing working capital to smooth the transition while you adjust. Always speak to a finance professional before making any decisions.

Think About Your Pricing

Many small business owners are reluctant to raise prices, they worry about losing customers. But the reality is that your competitors employing similar staff face exactly the same cost increase, which tends to level the playing field. A measured price adjustment that reflects genuine cost increases is a legitimate business decision, and most customers understand that input costs rise over time.

Before making any pricing change, calculate your break-even point on the wage increase. If the increase adds $1,200 per month to your costs, and your average transaction value is $80, you only need to generate 15 additional transactions per month or hold pricing and absorb through efficiency gains elsewhere. Either way, the decision is easier when you’ve run the numbers.

The 2026 wage increase is significant, but it’s manageable with the right approach. Check who’s affected, update your payroll, calculate the real dollar impact, and make a plan – whether that’s a pricing adjustment, a rostering review, or potentially a short-term working capital support to ease the transition. The businesses that handle this best are the ones that treat it as a planning exercise, not an emergency.