The Fair Work Commission has ruled to abolish junior pay rates for workers aged 18-20 across the general retail, fast food and pharmaceutical industries. The ruling also includes a general increase to the current wages of 17-year-olds and under-16-year-olds.
This change has payroll and cash flow implications for small businesses within these industries. Hereโs what you need to know.
Junior rates abolished: What changes?
Before the change, workers under 21 in general retail, fast food, and the pharmaceutical industry generally received a percentage of the adult pay rates in their industry award as their average wage.
Pre-Fair Work Commission ruling pay rates:
| Age | General Retail Industry Award |
Fast Food Industry Award |
Pharmacy Industry Award |
|---|---|---|---|
| Under 16 | 45% | 40% | 45% |
| 16 | 50% | 50% | 50% |
| 17 | 60% | 60% | 60% |
| 18 | 70% | 70% | 70% |
| 19 | 80% | 80% | 80% |
| 20 | 90% | 90% | 90% |
The FWC’s rule change will phase out junior rates for workers aged 18-20 in these industries, and lift pay rates for under-16s to 50% and for 17-year-olds to 75% of their respective awards. There is no wage increase for workers aged 16.
The phase-out plan will increase junior rates by 5% for each age bracket โ 18, 19, and 20-year-olds โ until the pay rates reach 100% of adult pay on 1 July 2029.
Fair Work Commission Phase-out plan:
| First pay period after: | 18 year olds | 19 year olds | `20 year olds |
|---|---|---|---|
| Pre-phase-out rate | 70% | 80% | 90% |
| 1 Dec 2026 | 75% | 80% | 85% |
| 1 July 2027 | 80% | 85% | 90% |
| 1 Dec 2027 | 85% | 90% | 95% |
| 1 July 2028 | 90% | 95% | 100% |
| 1 Dec 2028 | 95% | 100% | – |
| 1 July 2029 | 100% | – | – |
Why have the junior rates been abolished?
The FWC began its deliberations on junior pay rates in 2024, following an application from the Shop, Distribution, and Allied Employeesโ Association (SDA) union. In the SDAโs application, the union asked the FWC to look into whether the pay rate variations were justified. After weighing evidence from laypersons and experts, the decision was made to abolish the junior rates and increase the underage rates.
The decision was based on a number of factors, including pay fairness, employment effects, employment costs, and broader economic effects.
For more information regarding the decision, read the Fair Work Commissionโs summary statement here.
What does this mean for small business?
For small businesses operating in these industries, the ruling will increase wages for anyone they employ under age 21. Especially those that employ a large number of junior and underage workers. The cash allocated to payroll will need to be adjusted, and payroll software will require some tweaks to accommodate the changes.
While this change will be a shock to businesses, the ruling doesnโt immediately abolish all junior rates. With the phase-out plan spread over several years, businesses will be able to prepare for the wage increase for their younger workers.
To make sure that your business is compliant with the changes, make sure to:
- Increase your under-21 workers’ pay rates in line with the phase-out.
- Adjust your payroll (this could require manual input to change the award rate)
- Increase salary and wage budgets to accommodate.
- Price in the pay rise into cash flow forecasts.
Junior rates phase-out and small business
The ruling from the Fair Work Commission may come as an unwelcome surprise for small businesses, especially those struggling with operational cash flow in these retail industries. By using the phase-out period provided in the ruling, businesses can prepare and ensure compliance with the changes.
