Absorb it, raise prices, cut hours or reduce staff. Small business owners are weighing some uncomfortable options right now, with just weeks until the changes kick in.
The Fair Work Commission handed down its annual wage review decision, moving the national minimum from $24.95 to $26.44 an hour. In weekly terms that is a shift from $948 to $1,004.90, based on a standard 38-hour week. For workers covered by modern awards, the floor goes up by at least 4.75%. It all starts on 1 July.
About 21 per cent of all employees in Australia are paid at a minimum award rate. That is close to 2.8 million people, across industries ranging from hospitality and retail to aged care and disability support.
The real number
David Price, CEO of Peninsula Australia and New Zealand, said business owners who are only focused on the base rate are missing a bigger picture. “The impact extends well beyond base rates of pay,” he said. “Flow-on increases to penalty rates, overtime, allowances and loadings means that the total cost of a workforce will rise more sharply than the headline figure suggests.”
He singled out the sectors feeling it most directly. “For sectors like hospitality, retail and care, where award reliance is high, this creates immediate pressure on budgets and workforce planning,” Price said.
Beyond the cost, Price flagged that the administrative side of the change carries real risk. Getting pay classifications wrong, miscalculating updated rates, or failing to update payroll systems in time can lead to underpayments, and the consequences of those are getting harder to ignore.
“With around 2.8 million workers impacted by minimum rates of pay, even small errors in classifications, pay calculations or system updates can create significant compliance risks,” he said. “This is particularly important given the increasing focus on underpayments and the serious legal and reputational consequences that can follow.”
His advice is straightforward. Review your pay structures now, confirm your award coverage, and make sure your payroll system reflects the new rates before 1 July.
The decisions ahead
For many small business owners, the wage increase lands at a point when margins are already stretched. Price said the next few months will likely force some uncomfortable choices.
“Some may need to absorb the additional costs, while others may look at increasing prices, adjusting staffing levels or reducing operating hours to maintain profitability. Unlike larger organisations, small businesses have fewer levers available to offset rising costs, meaning changes of this scale can have a disproportionate impact,” he said.
The decisions are not easy, but Price said the starting point is the same for everyone. Get across the full scope of the increase first, then work out what it actually costs your business before deciding how to respond.
The changes take effect on 1 July.
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