Running a business is challenging enough without getting tangled up in wage regulations— but getting them wrong could cost you dearly. Whether you’re hiring your first employee or growing your team, understanding the difference between award wages and minimum wages in Australia isn’t just about compliance—it’s about protecting the business you’ve worked so hard to build.
In this article, we’ll share insights on how to pay your employees correctly.
Table of Contents
What is an award wage?
An award wage is a legally mandated minimum pay rate that applies to employees covered by a specific modern award, which is a type of industrial instrument. These wages are designed to ensure fairness in compensation by accounting for the nature of the work, required skills, and industry standards.
Award wages also help protect workers from exploitation by providing a clear benchmark for what employees should be paid in different sectors. They can vary depending on factors such as the level of responsibility, experience, or location of the work, ensuring that workers are compensated appropriately for their role.
Why are award wages important?
Award wages are important for a variety of reasons. These reasons include ensuring that compensation is fairly provided, the reduction of wage disparity, and to ensure that employment standards are met.
Providing Fair Compensation
A key reason why award wages exist is to ensure that workers are compensated fairly for the work they do. The different types of compensation that exist between different industries and occupations are inferred through the award wages that are set. By setting award wages, the prevention of certain industries from receiving disproportionately high pay compared to others that may not require as much effort or skill is established and, thus, provides fair compensation.
Consistency and currency
Award wages ensure that all people employed in a specific industry, performing the same tasks with the same skill levels, are compensated consistently. Alongside this, they are reviewed by the Fair Work Commission every few years in collaboration with other stakeholders to ensure that the award is a fair representation of the needs conditions within the industry and the labour market.
Supporting Minimum Employment Standards
Modern awards and award wages set out minimum employment standards, meaning that particular conditions for specific industries and occupations have a standard for the compensation that must be provided. In response, the award wages set out minimum employment standards which protect employees from being underpaid and to provide guidance for employers.
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How are award wages determined?
The Fair Work Commission is responsible for conducting periodic reviews of modern awards. Modern awards are industry or occupation-based, meaning that they are calculated using a wide range of factors that exist within specific industries, such as the skills, knowledge, and time required to complete certain tasks.
The Fair Work Ombudsman monitors and enforces businesses’ compliance with modern award rates, ensuring employees receive their proper wages under Australian law and has an official calculator for individuals to calculate their awards.
This calculator is called FindYourAward and requires individuals to answer questions that are specific to their industry, skill, and occupation, which the calculator accounts for when providing the set wage at the end of the questionnaire.
Award wages also take into account the economic circumstances and global issues in order to reflect fair modern wages.
What is the National Minimum Wage
The National Minimum Wage is applicable to any employees who are not covered by an award or a registered agreement. This national minimum wage is set out by the Fair Work Act 2009 (Cth) and is reviewed each year.
As of 1 July 202, the National Minimum Wage is $24.10 per hour or $915.90 per week.
Employees covered by an award or registered agreement are entitled to the minimum pay rates, including penalty rates and allowances in their award or agreement. These pay rates may be higher than the National Minimum Wage.
Modern Award types in Australia
As of 2024, there are 121 modern awards that apply to different industries and/or occupations.
The five most common modern awards are:
- General Retail Industry Award 2020
- Social, Community, Home Care and Disability Services Industry Award 2010
- Hospitality Industry Award 2020
- Fast Food Industry Award 2010
- Restaurant Industry Award 2020
Modern awards in Australia are regulated on a federal level, meaning that the award wages are usually consistent nationally across Australia regardless of state. Modern awards exist with the National Employment Standards (NES).
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Awards vs Enterprise Agreements
Awards and enterprise agreements are often confused with one another. Whilst they do overlap, there are key differences.
Awards provide employees with the terms and conditions of their employment and usually cover an industry or occupation. Terms in awards include leave, ordinary hours of work, overtime, shiftwork entitlements, and award wages.
Enterprise agreements cover specific businesses that are made on an enterprise level between employers and employees, alongside their union, about the terms and conditions of their employment.
Enterprise agreements, like awards, set out rates of pay, however, are more specific in practice, as enterprise agreements also state meal break timings, dispute resolution procedures and deductions from wages for any purpose authorised by an employee.
When an enterprise agreement is in operation, modern awards do not apply and are replaced by that existing enterprise agreement. However, the two work in unison as the rate set in an enterprise agreement is influenced by the minimum wage set out in an award.
FAQs
What is the difference between minimum wage and award wage?
While the national minimum wage is the absolute lowest amount you can legally pay any employee in Australia, award wages are typically higher rates that apply to specific industries and job types. Think of the minimum wage as the ground floor, while award wages are like different levels above it, designed for particular roles and sectors.
How are award wages reviewed and updated?
The Fair Work Commission conducts an annual wage review where they assess and adjust award wages, typically announcing changes every July 1st. They consider factors like economic conditions, cost of living, and industry feedback to ensure the rates stay fair and relevant – much like giving the entire system a yearly health check to keep up with Australia’s changing economic landscape.
Can employers pay less than award wages?
No, you can’t pay less than the applicable award wage — it’s not negotiable, even if an employee agrees to it. The only exception is if you have a registered enterprise agreement that passes the “better off overall test” compared to the award. Breaking this rule isn’t just a mistake and it could lead to serious penalties and backpay obligations for your business.
Conclusion
While understanding award and minimum wages is crucial for your business, navigating these regulations can be complex, and the stakes are high.
If you’re unsure about your obligations or need help setting up compliant wage systems, consider hiring an employment lawyer with Lawpath, who can help you avoid costly mistakes and ensure your business stays protected while taking care of your team the right way
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