What is a minimum wage?
A minimum wage is a minimum amount an employer has to pay employees for performing a specific job. The Fair Work Commission’s Expert Panel reviews the national minimum wage each year and adjusts it, typically upwards. When making its decision, the panel considers submissions from individuals and organisations, stating whether they think the minimum wage should change or remain the same. Minimum rates not only ensure that employees earn a minimum living wage but also promote the fair distribution of an organisation’s successes. What’s more, minimum wages help to reduce poverty and increase equality by supporting the right to receive equal pay for performing work of equal value. The national minimum wage must be paid by all businesses that are covered by the Fair Work Act – in other words, by most private companies in Australia. It’s worth noting that different workers are subject to different minimum wage rates. The rate depends, among other factors, on whether or not your worker is covered by a regular employment contract, an award or an enterprise agreement.
Many workplaces are covered by a modern award, which sets the minimum wage for a particular industry. This is usually higher than the national minimum wage of Australia. A modern award stipulates the minimum wage and other terms and conditions for workers in specific industries and occupations. Minimum wages under modern awards may include:
- wage rates for adults, in some cases at different rates according to experience and qualifications
- wage rates for junior workers, employees with a disability and workers subject to training arrangements
- casual loadings
- piece rates (where an employee is paid based on each ‘piece’ they have processed, e.g. for each piece of fruit picked).
Some workplaces are also covered by enterprise agreements. These agreements set the rates of pay for a particular workplace or enterprise. Rates covered by enterprise agreements are often higher than they would be if the workplace had no enterprise agreement in place. Enterprise agreements are usually negotiated by unionised employees.
Employees might, of course, also be covered by an employment contract, which also guarantees a higher rate of pay than the national minimum rate.
What is the current minimum wage for Australia?
The current Aussie minimum wage (as of 1 July 2021) for adult workers who are not covered by an award or agreement is $772.60 per full-time week or $20.33 per hour (before tax). Casual workers receive an additional loading of 25% on top of this base rate, or $25.41 per hour. Different minimum wages apply to:
- young employees under the age of 21
- employees under an award or enterprise agreement
- apprentices and trainees
- workers with a disability.
Minimum wage by age
Special national minimum wage 3 applies to junior employees under the age of 21, based on a percentage of the national minimum wage.
Junior workers get paid a percentage of the applicable adult pay rate unless their award, enterprise agreement or other employment contract doesn’t specify junior rates. The percentages that apply are based on the employee’s age and increase every year on their next birthday. These rates change on 1 July of every year. Usually, they go up.
According to the National Minimum Wage Order of 2021, junior workers are entitled to a base rate of pay that at least equals the following percentages of the national minimum wage: Under 16 years of age: 36.8% At 16 years of age: 47.3% At 17 years of age: 57.8% At 18 years of age: 68.3% At 19 years of age: 82.5% At 20 years of age: 97.7% Workers can calculate the exact rate of pay they are entitled to based on their age, award and industry by using the Fair Work Pay Calculator.
Minimum wage entitlements for disabled employees
Special regulations apply to disabled employees, depending on how their disability affects their productivity. According to the Fair Work Commission, these are as follows:
- Special national minimum wage 1 – for employees with a disability that does not affect their productivity: $772.60 per 38-hour week or $20.33 per hour for adults who are not junior employees, apprentices or employees under training arrangements.
- Special national minimum wage 2 – for employees with a disability who are unable to perform the range of duties to the competence level required of an employee within the employee’s class of work because of the effects of their disability on their productive capacity, and who meet the impairment criteria for receiving a Disability Support Pension, and who are not junior employees, apprentices or employees under training arrangements: a base rate of pay set in accordance with Schedule A to the National Minimum Wage Order.
Minimum wage entitlements for apprentices and trainees
What is the minimum wage in Australia for apprentices and trainees? Special rates apply to these two categories of workers:
- Special national minimum wage 4 – for apprentices: to be based on the provisions in the Miscellaneous Award 2020 (clause 15) for apprentices (some transitional provisions apply, see National Minimum Wage Order).
- Special national minimum wage 5 – for trainees: to be based on the provisions set out in the Miscellaneous Award 2020 (Schedule E) for employees to whom training arrangements apply.
Minimum wage entitlements for casual employees
Casual employees covered by the national minimum wage get at least a 25% casual loading in addition to the minimum base rate, amounting to $25.41 per hour. Casual employees are entitled to a higher rate of pay because they are not entitled to some benefits and perks enjoyed by permanent employees, such as paid sick and annual leave. Some awards or agreements may stipulate a casual loading of more than 25%.
Superannuation and minimum wage
The Australian minimum wage rates do not include superannuation. Employers are obliged to pay a minimum superannuation contribution of 10% to their workers based on their ordinary time earnings (OTE), although this is scheduled to gradually increase to 12% by 2025. Every employer must pay super contributions for employees who are:
- 18 years old or over, and earn $450 or more (before tax) in a calendar month, or
- under 18 years old, earn $450 or more (before tax) in a calendar month and work over 30 hours per week.
This applies to full-time, part-time and casual workers alike. If you are unsure about your superannuation obligations as an employer, it’s advisable that you contact the Australian Taxation Office directly for the latest information.
It’s important that you are aware of your obligations as an employer to avoid any inadvertent breaches of Australian minimum wage laws. Refer to this guide whenever you have a question about the minimum wage rates that apply to your different workers. If in doubt, consult the ATO or Fair Work directly for the latest government information.