What are the laws around minimum wage?

5 min read
Emma Fletcher

If you’re a startup or small business owner and you’re at the point of hiring staff, there can be a lot to get your head around. Most important of all is understanding your legal obligations as an employer, including paying your employees the minimum wage.

Good staff are a valuable asset to any business. You want to make sure you’re doing right by them.

Once you’ve determined the employment type (casual, part-time, full-time, etc) you can then determine the correct rate of pay and employment conditions you need to provide.

To help you get started, here’s a guide to understanding the minimum wage in Australia and your obligations as an employer. In this post, we cover:

  • The national minimum wage
  • The Fair Work Commission
  • Modern awards
  • Registered agreements
  • Employees not covered by an award
  • Working out how much to pay

Remember that each financial year, the minimum wage is reviewed and may increase. So your wage obligations may be subject to change.

What is the national minimum wage?

The national minimum wage is the mandatory base rate of pay for permanent employees aged 21 years or older. It’s essentially the least amount an employer can legally pay their workers. While there are different minimums for different types of jobs, each of these are based on the same core national minimum wage.

Minimum Wage Construction Worker

As of 1 July 2019, the minimum wage in Australia was $19.49 an hour or $740.80 per week (before tax).

The minimum wage for casual workers was $24.36, which includes a loading of 25% to offset the fact that they don’t receive full-time benefits.

These wages are a national standard set by the Fair Work Commission and are applicable across Australia.

Modern awards

Most employees are covered by a legal document known as a modern award. Modern awards have been in effect in Australia for about a decade and contain the minimum pay rates and conditions of employment for more than 100 industries and occupations. They cover most people who work in Australia, from aged care and construction to retail and finance.

As an employer, multiple awards may apply if you have different types of roles within your business. The only time awards don’t apply is when there is a registered agreement in place.

Registered agreements

If the role is not covered by an award, you have the option of setting out wages and employment conditions in a registered agreement or employment contract. This will protect both your business and your employee.

Registered agreements, such as enterprise agreements and Australian Workplace Agreements (AWA), must be approved by the Fair Work Commission.

Minimum Wage Two People Shaking Hands

These agreements typically set out conditions for a business or group of businesses, rather than individuals.

Although an agreement replaces the modern award, the base rate of pay cannot be less than the relevant award. National Employment Standards (NES) still apply and all employees are covered, regardless of whether or not they’ve signed an agreement or contract.

Employees not covered by an award

While most employees are covered by an award or registered agreement, there are a few jobs and industries that are not. These include:

  • Many managers
  • Professionals like accountants and finance, marketing, legal, human resources, public relations and information technology specialists
  • High-income employees

If you have an employee who is not covered by an award or agreement, they are considered to be award- and agreement-free. Such employees may still have an employment contract and are entitled to at least the national minimum wage and the National Employment Standards.

Trainees and apprentices typically have a formal training contract with their employers. These must be registered and recognised by a state or territory training authority; special conditions and pay rates apply.

There are also special minimum wages for workers who have a disability or who are under 21 years of age. You are not obligated to pay wages to a volunteer or independent contractor.

What is the Fair Work Commission?

The Fair Work Commission (FWC) is Australia's national workplace relations tribunal. Every year, an FWC panel reviews the minimum wage. At the end of this review, the National Minimum Wage Order is made, applicable from 1 July each year.

As an employer, it’s your responsibility to stay up to date with any changes.

If the minimum wage is increased, you have an obligation to pass that increase on to your workers. Ignorance is not a defence, so it’s vital to keep up with changes.

How to work out how much to pay

Minimum Wage Calculator
Use the government’s pay calculator to figure out how much to pay your staff.

To help you work out what to pay your employees, the Fair Work Ombudsman has developed a pay calculator. Paying your staff less than the minimum wage — even if they agree to be paid less — is a breach of the Fair Work Act 2009 and serious penalties apply.

There has been a crackdown in recent years on wage underpayments.The Fair Work Ombudsman has ordered employers to reimburse underpaid employees to the tune of tens of thousands of dollars.

Minimum wage recap

Hiring an employee is a big decision for your business and you want to get off on the right foot. Take the time to fully understand your legal obligations, particularly in relation to paying the minimum wage.

Check to see if your employees will be covered by an award or if you need to draw up a registered agreement or employment contract instead. Bear in mind that even if your employees are not covered by any awards or agreements, the national minimum wage and National Employment Standards still apply.

Information accurate at the time of publication. Check this website for updates.