Every Australian business that employs staff must pay each employee at least the minimum wage that applies to them. That sounds simple, but the right rate depends on the award covering the role, the employee's age and experience, whether they are casual, and the hours they work. Get it wrong and the Fair Work Ombudsman (FWO) can compel back-pay, courts can impose penalties that run into the millions of dollars, and since 1 January 2025 intentionally underpaying staff has been a criminal offence that can carry jail time.
This guide sets out the minimum wage obligations that apply to employers: who the duty covers, how to work out the correct rate for each role, the records and documents the law requires, the annual review cycle you need to build into your payroll, and what happens if you fall behind.
Who the minimum wage obligation applies to
The obligation comes from the Fair Work Act 2009 (Cth) and applies to employers in the national workplace relations system, which covers virtually every private sector business in Australia. It bites from the moment you take on your first employee, whether they work full-time, part-time, casually or only on weekends. There is no turnover threshold and no probationary grace period: the duty to pay at least the minimum wage starts on day one.
A few people sit outside the system. Genuine volunteers and students on a lawful vocational placement are not employees for these purposes, and company directors or partners working in their own business are not employees unless they are separately engaged as one. If you are not sure whether someone is an employee or a contractor, the minimum wage question is only part of a larger classification issue that is worth resolving early, because misclassification is one of the most common causes of accidental underpayment.
Two other scoping points matter:
- Award coverage decides the rate: Most employees are covered by a modern award that sets minimum pay, loadings, penalty rates and allowances for their industry or occupation. Award rates usually sit above the National Minimum Wage, so the award is the floor that applies to you.
- Small business employers get some relief: An employer with fewer than 15 employees (a small business employer) is exempt from parts of the casual statement timing rules and does not face the higher penalty multipliers that apply to larger companies. The underlying duty to pay the right minimum wage is the same.
Pay the minimum wage that applies to the role
There is no single "minimum wage" in Australia. The rate is set by whichever instrument covers the role, in this order: the modern award, then an enterprise agreement (which cannot undercut the award), and only if neither applies, the National Minimum Wage.
Award-covered roles: classification is everything
Modern awards divide roles into classifications or levels tied to the duties performed, the skill required and, in many awards, the employee's experience. The classification determines the base rate, and the award then adds the extras: a casual loading instead of paid leave, penalty rates for evenings, weekends and public holidays, overtime for hours outside the ordinary span, and allowances for things like travel, tools, uniforms or first aid duties.
The most common pay mistake is not picking a rate at all, but picking the wrong classification, usually because the employee's day-to-day duties have outgrown the level they were hired at. An award that is not updated when a role changes will quietly produce an underpayment that only surfaces in an audit. If a role spans two awards, or duties sit on the boundary between classifications, that is a signal to get advice rather than guess.
Award-free roles: the National Minimum Wage
Employees not covered by any award or agreement must be paid at least the National Minimum Wage, which the Fair Work Commission sets each year in its annual wage review under s 285 of the Fair Work Act 2009 (Cth). From 1 July 2026 the National Minimum Wage is $1,004.90 per week for a 38-hour week, or $26.44 per hour. Award-free casual employees receive a 25% casual loading on top of that rate.
Lower special rates apply to award-free juniors (under 21), apprentices, trainees and employees whose disability affects their productivity, all set out in the National Minimum Wage Order. If an award does cover the role, award minimums are the floor even where they exceed the National Minimum Wage.
Enterprise agreements and annualised salaries
An enterprise agreement can set pay and conditions for a workplace, but it must pass the better off overall test, which means each employee covered must be no worse off than under the relevant award. An agreement cannot be used to pay below award minimums, and the National Employment Standards always apply.
Some awards also allow annualised salary arrangements, where one all-in amount covers base pay, loadings and penalties. These are lawful only where the award permits them and strict record-keeping applies, and the all-in figure must be at least what the employee would have earned under the award in every pay period. If you are considering an annualised salary, this is one of the highest-risk drafting decisions an employer makes, and it is worth having a lawyer check the numbers against the award before you sign.
Give new employees the right statements
Two statements are mandatory, not optional extras:
- Fair Work Information Statement (FWIS): You must give every new employee the FWIS before, or as soon as practicable after, they start work, under s 125 of the Fair Work Act 2009 (Cth).
- Casual Employment Information Statement (CEIS): Casual employees must receive the CEIS at the start of their employment, again after six months (unless you are a small business employer), and again at 12 months and at the end of each subsequent 12-month period, under s 125B of the Fair Work Act 2009 (Cth).
Both are published by the FWO and cost nothing to provide, but failing to give them is a contravention in its own right and a common finding in FWO audits.
Keep records and issue payslips
The record-keeping duties are set out in s 535 and s 536 of the Fair Work Act 2009 (Cth):
- Employee records: You must make and keep records for each employee for seven years, including hours worked, rates of pay, loadings, penalty rates, allowances, leave and superannuation contributions.
- Payslips: You must give each employee a payslip within one working day of paying them, showing the pay period, gross and net amounts, hours, rate, loadings, allowances, and super contributions.
These duties matter far beyond paperwork. If an underpayment dispute reaches court and you cannot produce proper records, s 557C of the Fair Work Act 2009 (Cth) reverses the burden of proof: you bear the burden of disproving the underpayment allegations. In practice, an employer with no records starts the case having already lost the evidentiary argument.
Review rates every year and pay super on time
Minimum wage rates are reviewed annually. The Fair Work Commission must conduct an annual wage review each financial year and make a new National Minimum Wage Order, with changes taking effect from 1 July. From 1 July 2026 the National Minimum Wage increased to $1,004.90 per week and award minimum wages rose by 4.75%, as set out in the FWO's pay guides. The increase applies from the first full pay period on or after 1 July, so a payroll system that is not updated on 1 July will underpay staff for the first weeks of the new financial year.
Superannuation sits alongside the wage duties. The super guarantee rate is 12% of ordinary time earnings, and since 1 July 2026 the "Payday Super" rules require employers to pay super for each payday rather than quarterly, so super payments now follow the same rhythm as wages. Missed super is a separate liability with its own penalties, and superannuation guarantee shortfalls are not forgiven by paying them late.
The FWO's free Pay and Conditions Tool can calculate the correct rate for a role, but it relies on you entering the right award and classification, which is exactly where mistakes happen.
What happens if you get it wrong
The consequences of underpayment are no longer limited to a back-pay bill:
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Back-pay and interest: Courts can order you to pay the shortfall, and interest on it, for every affected employee, often going back years.
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Civil penalties: Most minimum wage, record-keeping and payslip contraventions are civil remedy provisions. The maximum penalty for a standard contravention is 60 penalty units for an individual and 300 penalty units for a body corporate, and a serious contravention (one made knowingly or recklessly) carries 600 and 3,000 penalty units respectively. Each penalty unit is $364 from 1 July 2026, which puts the standard maximum at $21,840 for an individual and $109,200 for a company per contravention, and the serious contravention maximum at $218,400 and $1,092,000. Penalties apply per contravention, and underpaying many employees over many pay periods multiplies quickly.
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Multiples for larger employers: For a body corporate that is not a small business, the maximum penalty is five times the standard amount, and where a contravention involves an underpayment the court can impose the greater of that figure or three times the total underpayment. A serious contravention by a larger company can therefore reach millions of dollars on the multiplier alone, before the underpayment is even repaid.
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Criminal wage theft: Since 1 January 2025, intentionally underpaying an employee's wages or entitlements is a criminal offence under s 327A of the Fair Work Act 2009 (Cth), carrying up to 10 years imprisonment for individuals and fines of up to three times the underpayment or 5,000 penalty units ($1.82 million) for an individual and 25,000 penalty units ($9.1 million) for a company. Small businesses that self-correct and comply with the Voluntary Small Business Wage Compliance Code are protected from referral for prosecution, but only if they act before the FWO comes knocking.
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Enforcement toolkit: The FWO can issue compliance notices, infringement notices and enforceable undertakings, and can take employers to court. Its litigation outcomes are published, so a wage scandal becomes a permanent public record that customers, investors and future employees can find.
A practical compliance checklist
Run through these checks when you first set up each role and again at least once a year, and after any award or rate change:
- Classify each role against the award before you advertise it, so the budget and the job ad match reality.
- Check the current rate with the FWO pay calculator or pay guide, not a rate you memorised last year.
- Configure base rates, casual loadings, penalty rates and allowances in payroll before the first pay run.
- Give every new employee the FWIS and every casual the CEIS at the required times.
- Issue payslips within one working day of each pay day.
- Keep employee records for seven years, and make sure timesheets and rosters back up what payroll says.
- Pay super at 12% each payday under the Payday Super rules.
- Schedule a 1 July review of all rates and classifications each year, plus a quarterly spot-check of one random pay period.
- If you find an underpayment, calculate it, pay it with interest, and fix the process that caused it, before the FWO finds it for you.
When to get legal advice
A lawyer adds the most value at the points where a wrong guess is expensive: confirming award coverage and classification for a role that does not fit neatly into one category, drafting annualised salary or set-off arrangements, and remediating an underpayment that has already occurred, where the way you respond can be the difference between a civil back-pay order and a criminal referral. A short engagement to review your contracts, classifications and pay settings against the current awards is usually far cheaper than the first FWO investigation.
The cost of letting rates drift
Most underpayments are not deliberate. They come from a classification that was right at hiring and wrong two years later, an award rate that was never updated on 1 July, or a casual loading that was quietly dropped when payroll software changed. None of that matters to the penalty calculation: the law does not discount accidental underpayments, and since 1 January 2025 a pattern of underpayment that continues after you should have known about it starts to look intentional to a prosecutor.
The action that protects you most is the one you can take this week: pull the current pay guides for your awards, check every employee's classification and rate against them, and fix anything that does not match. A small, self-corrected error costs you the back-pay and interest. An error the FWO finds, after months or years of drift, costs you that plus penalties, legal costs and a public enforcement record, and it is the difference between a compliance problem and a criminal exposure.