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As a small business owner, it's essential you understand your obligations relating to minimum wage before employing anyone. It's not just about doing the right thing, it's about staying compliant with workplace laws. Missteps in wage payments, even if accidental, can lead to financial and legal consequences.
With a range of awards, agreements and legislative updates to consider, navigating wage requirements can feel complex. We break down essential information in this article, to help you make informed decisions and avoid costly errors.
What is the minimum wage?
The minimum wage is the legally mandated base rate of pay for employees in Australia. It applies to all workers, including full-time, part-time or casual, and must be paid before tax. As a business owner, ensuring your staff receive at least the minimum wage is not just good practice, it's a legal requirement under the Fair Work Act.
Helpful Fair Work resources:
Current minimum wage rates
The Fair Work Commission sets the national minimum wage and reviews it every year. They may change the minimum wage based on several factors, such as the economic climate or employment rates. If the minimum wage changes, business owners must pay the updated rate from the start of a new financial year.
Types of minimum wages
Most employees are covered by a modern award, which sets out specific minimum pay rates and employment conditions for different industries and roles. These rates may vary based on factors such as age, experience, qualifications and employment type.
From hospitality to carpentry, vehicle repair to personal training, there are over 100 industries covered by an award – so it's important you check which award covers your business. Having said that, there are some industries and situations where your business or role might not be classified under an award.
Minimum wage rates differ depending on your employee's classification:
- Award-based wages: Most employees fall under an industry-specific award. These awards outline minimum rates for adults, juniors, apprentices, trainees and employees with disability, as well as casual loadings and other entitlements.
- Award and agreement-free wages: If you find that a role or business isn't covered by an award, then you'll have to pay your staff the National Minimum Wage and follow the National Employment Standards:
- Fair Work pay calculator: To determine the correct rate, use the Fair Work Ombudsman's Pay and Conditions Tool (PACT) or consult the relevant award.
Who does the minimum wage affect?
- Full-time workers work around 38 hours each week. You must pay a full-time worker at least the minimum wage, but you can pay them more.
- Part-time workers work less than 38 hours each week, but these hours are usually consistent each week. You must pay a part-time worker at least the minimum wage, but you can pay them more.
- Casual workers don't have a set number of hours or days they work each week. Their schedule can change depending on the employer's needs. You must pay a casual worker casual loading or a specific rate for being a casual. Both of these payment options must be at least the minimum wage plus the required casual loading.
- Apprentices and trainees have unique pay and wage requirements under the Miscellaneous Award on their training contract.
- Junior employees are staff members under 21 years old. They are paid a certain percentage of the adult pay rate, depending on the award.
- Workers with disability have the same wage rights as other employees – unless they're covered by the Supported Wage System. This is when an employer pays wages to a worker with disability based on their working capacity.
- Employees with disability pay rates – Fair Work Ombudsman
- Learn more about this system on the Job Access website.
Does your business need to pay the minimum wage?
Like most things in life, there are consequences if you do the wrong thing. On 1 January 2025, intentional underpayment of wages was made a criminal offence. If you don't pay your staff the minimum wage, they can report you to a wage theft inspectorate. Penalties for wage theft can be severe, including fines and in some cases, imprisonment. Civil penalties may also apply for unintentional underpayments.
How much superannuation do you need to pay?
All employers need to contribute to their staff's superannuation if the staff member is over 18 years old, or is under 18 years old and works over 30 hours a week. The superannuation contribution that an employer must pay is currently 11 per cent of the employee's pay and will go up to 12 per cent on 1 July 2025. Employers must pay their staff's super into their nominated account at least every three months. This applies to full-time, part-time and casual employees. Like with wage theft, your staff can report you to the Australian Taxation Office (ATO) if you don't pay their superannuation.
Helpful government resources:
Next steps
Before hiring staff, ensure you understand your legal obligations:
- Visit the Fair Work Ombudsman to identify the correct award and pay rates for your business.
- For superannuation guidance, go to the ATO's employer superannuation portal.
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