The Annual Wage Review 2026 decision took effect from the first full pay period on or after 1 July 2026. By now most businesses have run at least two pay cycles under the new rates. The rate change itself is done.

This is exactly when underpayments start accruing quietly.

The pattern is consistent after every wage review. A business updates the base hourly rate in payroll, confirms the new figure against the Fair Work Commission decision, and considers the job finished. What it hasn't done is check the fifteen or so other numbers that are calculated from that base rate — and those are where the shortfalls sit. Individually they're small. Multiplied across a workforce and left to run for a quarter, they stop being small.

If you employ under a modern award, this is the check worth running in the next fortnight, before the error window widens.

What actually changed on 1 July

The Fair Work Commission handed down its Annual Wage Review 2026 decision on 2 June 2026 ([2026] FWCFB 3500). Two things happened:

A 4.75% general increase to all modern award minimum rates.

An additional 1.25% structural adjustment for C13 and C14 classifications, forming part of the phased adjustment of the C13 rate. For workers in those classifications, the total movement is 6.00%, not 4.75%.

The new C13 rate is $26.44 per hour. The new C14 rate is $25.74 per hour.

Around 2.8 million workers are covered, across more than 120 modern awards.

That second point is where the first error commonly appears. A single percentage applied uniformly across a rate table will underpay every worker on C13 and C14 rates by 1.25%. On a full-time equivalent, that's a shortfall that compounds across ordinary hours, overtime, leave accruals and superannuation — and it applies to the workers least able to absorb it, which is precisely the profile that attracts regulatory attention.

The cascade: what moves when the base rate moves

Modern awards are built as a structure of derived rates. Almost nothing in an award is a standalone number. Change the base and the following elements should change with it:

1. Ordinary hourly rate. The obvious one. Usually the only one that gets updated automatically.

2. Casual loading. Typically 25% under most awards, calculated on the new ordinary rate. If your payroll stores casual rates as fixed dollar values rather than as a calculation, they will not have moved.

3. Overtime rates. Time and a half, double time, and any award-specific variants — all calculated on the new base. Check whether overtime is computed dynamically or drawn from a stored rate table.

4. Penalty rates. Weekend, public holiday, evening and early-morning penalties. Same issue: dynamic calculation versus stored values.

5. Shift loadings. Afternoon, night, permanent night and rotating shift loadings, each with its own percentage under the relevant award.

6. Casual overtime and casual penalties. The compounding question — whether loading and penalty are calculated on the base or on the loaded rate — varies by award. If you got this wrong before 1 July, the increase has now magnified the error.

7. Annual leave loading. Usually 17.5% of the ordinary rate, so it moves with the base.

8. Percentage-based classifications. Junior rates, apprentice rates and trainee rates are expressed as a percentage of an adult classification rate. They move automatically only if your system holds them as percentages.

9. Higher duties and mixed-function rates. Where an employee performs work at a higher classification for part of a shift.

10. Superannuation. The superannuation guarantee is calculated on ordinary time earnings. A higher ordinary rate means a higher SG obligation. An underpaid wage produces an underpaid super contribution, which is a separate liability with its own consequences.

11. Notice, redundancy and termination payments. Calculated on the applicable rate at the time of termination.

12. Annualised wage arrangements and salary set-offs. Where an award permits an annualised salary in satisfaction of award entitlements, the arrangement must still leave the employee no worse off. A 4.75% movement in the underlying rates can push a previously compliant salary below the required outer limits. This one is routinely missed because the salary figure itself doesn't change — so nothing appears to have happened.

13. Enterprise agreement rates. An EA cannot pay less than the relevant award minimum. Where EA rates were set with a modest buffer above the award, an increase of this size can erode or eliminate that buffer.

The allowance trap

Allowances need separate handling, and this is where a well-intentioned bulk update creates a problem.

Awards contain two broad categories of allowance:

Wage-related allowances — leading hand, first aid, industry allowances, and similar — are typically expressed as a percentage of a standard rate and move with the wage increase.

Expense-related allowances — meal, travel, tool, vehicle and laundry allowances — are generally adjusted by reference to the relevant Consumer Price Index figures, not by the annual percentage increase.

Applying 4.75% across every allowance line is not a conservative safe harbour. It produces incorrect figures, breaks your reconciliation, and makes it harder to demonstrate that you calculated anything deliberately. Each allowance needs to be taken from the current award text.

Where the errors actually originate

In practice, post-review underpayments come from four places.

Payroll configuration. Systems that store derived rates as static values rather than calculating them from the base. The base updates; the derived rates don't. Nothing errors, nothing flags, and payslips look normal.

Rate spreadsheets. The parallel set of numbers that operations and account managers actually work from. Payroll gets updated on time; the spreadsheet in the shared drive doesn't, and it's the spreadsheet that drives quoting and client rate cards.

Client rate cards and contracts. For agencies, this is the commercial version of the same problem. The pay rate goes up on 1 July; the charge rate agreed with the host doesn't move until someone renegotiates it. That's a margin problem rather than a compliance problem — but it becomes a compliance problem when someone under pressure decides to hold the pay rate down to protect the margin.

Classification drift. A worker's duties change and the classification doesn't follow. The wage review makes this worse, because the gap between the classification you're paying and the classification you should be paying widens with every increase.

The check to run this fortnight

Work through this against a sample of at least five employees, chosen to cover casual, permanent, shift-working and overtime-working profiles:

• Confirm the base rate against the current award text — not a summary, not a secondary source. Fair Work's pay tools and the award itself are the source.
• Confirm C13 and C14 workers received 6.00%, not 4.75%.
• Recalculate one overtime shift, one weekend shift and one public holiday shift manually and compare against what was actually paid.
• Check casual loading is calculated on the new ordinary rate.
• Check every allowance line against the current award — separating wage-related from expense-related.
• Recalculate superannuation on the corrected ordinary time earnings.
• For anyone on an annualised salary, run the reconciliation against the new award rates rather than assuming last year's outcome still holds.
• Confirm any enterprise agreement rates still sit above the new award minimums.
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If any of those checks produces a variance, the important question isn't just how much — it's how far back, and whether the same error affects everyone in that classification.

If you find a shortfall

Move quickly and document what you do. Calculate the full amount owed, including superannuation. Back-pay it immediately. Keep a written record of what the error was, when it was identified, how it was calculated and when it was rectified.

That record matters more than employers tend to realise.

Since 1 January 2025, intentional underpayment of wages can be a criminal offence. Honest mistakes are not captured by that offence — but the distinction between an honest mistake and something else is drawn on evidence, and the evidence is your documentation and your process. An error found by your own review and fixed within a pay cycle looks materially different from the same error found by an inspector two years later with no record of anyone having looked.

The underlying issue

Most businesses aren't getting this wrong through carelessness. They're getting it wrong because award interpretation is genuinely difficult, the derived rates are numerous, and the tools most agencies use — payroll systems built for a single employer, and spreadsheets built by someone who has since left — were never designed to hold 120-plus awards and re-derive every dependent rate when the base moves.

That's the problem RatesCalc was built for. Award rates update automatically at the source, every derived rate recalculates from the current award text, and every rate decision carries a timestamped record of what was applied and when.

Run a post-1 July rate check.