2025 Minimum Wage Increase: What Employers Need to Know Before 1 July

This update follows the Annual Wage Review 2025 decision, which aims to restore the real value of wages after several years of inflation-driven decline and it will affect millions of Australian workers across a range of industries.

So what does this mean for your business?

Let’s break it down.

• The National Minimum Wage (NMW)
• All minimum award rates (including the SCHADS Award)

The new rates take effect from 1 July 2025.

This decision applies to around 2.61 million workers, or 20.7% of the Australian workforce.

The Commission’s goal is to restore some of the purchasing power workers have lost due to inflation over the past few years:

• Since 2021, the real value of award wages fell by 4.5%
• The NMW lost 0.8% of its real value
• The Reserve Bank now considers inflation to be within its target range, opening the door for sustainable wage growth
  
  

The Commission also considered:

• Low unemployment
• Stable profits in most non-mining industries
• Expected cuts to interest rates
• The upcoming superannuation guarantee increase to 12% as a factor limiting a larger wage hike
  

This wage increase disproportionately impacts lower-paid, part-time, and casual workers — many of whom are women.

Key stats about award-reliant employees:

• 69.6% work part-time
• 52.8% are casual
• 58.6% are women
• 35.6% earn below $25.49/hour
  
  

The most affected sectors include:

• Accommodation and Food Services
• Retail
• Health Care and Social Assistance
• Administrative and Support Services
  
  

If you’re an employer in these industries, this decision will likely affect a large portion of your workforce.

While the 3.5% wage increase is a win for low-paid workers, it also raises concerns for many small business owners already under pressure.

According to the Council of Small Business Organisations Australia (COSBOA), this increase — which is above the current inflation rate of 2.4% — will stretch already thin margins. For small employers, each dollar added to base wages also increases the burden of:

• Payroll tax
• Workers’ compensation premiums
• Superannuation contributions (rising to 12% from 1 July)
  
  

Some business owners say they have limited ability to pass these costs onto customers, especially in price-sensitive industries like hospitality, retail, and community services.

It’s a challenging balance. On one hand, restoring real wages is critical for worker wellbeing and consumer demand. On the other, small businesses will need to absorb these increases without guaranteed productivity gains, at a time when many are still recovering from years of economic pressure.

Beyond the 3.5% increase, the 2025 decision signals a long-term structural shift in how the Fair Work Commission is approaching pay equity — particularly in female-dominated occupations where undervaluation has historically occurred.

The Commission reaffirmed its statutory obligation to eliminate gender-based undervaluation of work and flagged several steps it’s taking to address systemic pay inequities in the award system:

• Priority Awards Review: This ongoing review continues to examine awards with a high concentration of low-paid, female-dominated occupations, including aged care, social and community services, and early childhood education.
  
  
• New Professional Classifications Review: Fair Work will launch a new initiative to evaluate award classifications for professional roles that require a university degree, especially where current rates don’t align with appropriate benchmarks (like the C1(a) wage level).
  This is particularly relevant for industries like:
  
  
  • Aged care and disability support
    
  • Early childhood education
    
  • Nursing and midwifery
    
  • Pharmacy
    
    
• The Commission acknowledged that these professions have seen growth in workforce demand and responsibility, but wage structures haven’t always kept pace, especially compared to male-dominated professions with similar education and skill levels.
  
  

This marks a shift away from purely inflation-based wage updates toward more systemic reform of the modern award system, particularly where historic undervaluation has gone unaddressed.

For employers in these sectors, especially NDIS providers, this could signal further wage shifts and reclassification requirements in the near future. Staying informed and prepared will be key.

Alongside this year’s 3.5% wage increase, the Fair Work Commission is continuing its Priority Awards Review, a focused effort to modernise specific awards that may be structurally outdated or prone to pay inequity.

This review is part of a broader shift in how the Commission approaches wage setting, particularly in light of new obligations under the Fair Work Act to consider gender equity in all wage decisions.

The Priority Awards Review is:

• Separate from the standard 4-yearly award review process
• Focused on female-dominated industries with a history of undervalued work
• Looking closely at classification structures, career progression pathways, and wage alignment with skills and responsibilities
  
  

Awards currently under review include:

• Aged Care Award
• SCHADS Award
• Children’s Services Award
• Educational Services (Teachers) Award
• Health Professionals and Support Services Award
  
• And others with a high proportion of low-paid, university-qualified staff
  
  

If your business operates in one of these sectors, this review may lead to reclassifications and further wage increases in the future, even beyond the 1 July changes.

Staying on top of these developments now will help employers avoid compliance issues and plan for longer-term payroll adjustments.

Before 1 July:

• Audit your award classifications and pay rates to ensure compliance

• Review your payroll setup and update templates with the new rates

• Communicate upcoming changes to your team

• Keep an eye on the Priority Awards Review, especially if your workforce includes professional or care-based roles

And remember: even if you’re not paying the National Minimum Wage, these updates still apply if your employees are covered by any modern award.

For Pay Cat customers:
If your account is linked to a pre-built award template (like SCHADS), you’re covered! We’ll update the award template for you, and you’ll be able to select the appropriate date when applying the new rates.

If you’re using a custom template, you’ll need to update the rates manually. Not sure which setup you’re on? Reach out to support ahead of time so we can help you stay compliant.

With 1 July coming up, now’s the time to make sure your payroll setup reflects the latest changes. Even small updates can help you stay compliant and avoid issues down the line.

Need support?
Pay Cat offers a range of free resources to help you stay across modern award obligations — including webinars, modern award ebooks, and practical how-tos.

Further Reading

You can read the Fair Work Commission’s official documents below:

• 2025 Minimum Wage Decision Announcement (PDF)
  A short summary of the Commission’s announcement, released 3 June 2025.

• Full Annual Wage Review 2025 Decision (PDF)
  The complete written decision outlining the rationale, economic context, and future review plans.

Who is Pay Cat?

Pay Cat are payroll specialists dedicated to helping Australian businesses simplify payroll and ensure 100% compliance with modern awards. As Employment Hero Payroll experts, we provide tailored solutions that streamline payroll processes, reduce errors, and save time. For SCHADS businesses, our industry-first, 100% compliant SCHADS interpreter template guarantees accurate award interpretation and automation.