What Are Legal Pay Rates?
Legal pay rates refer to the minimum amounts Australian employers are legally required to pay their employees for the work they perform, based on the relevant employment laws, Modern Awards, enterprise agreements, or the National Minimum Wage. These rates are set and enforced under the Fair Work Act 2009 and are regularly reviewed and updated by the Fair Work Commission.
Failing to pay employees in accordance with legal pay rates can result in serious consequences, including back payments, fines, penalties, and even criminal charges under new wage theft laws.
Fair Work – Pay and Wages
What Determines Legal Pay Rates?
Legal pay rates depend on several factors, including:
- The employee’s job classification under a Modern Award or enterprise agreement
- Employment type (e.g. full-time, part-time, or casual)
- Age of the employee (junior employees may have different rates)
- Experience level or qualifications
- Industry (retail, hospitality, construction, etc.)
- Whether the employee is an apprentice or trainee
Employees must be classified correctly to ensure they are receiving the correct base pay, penalty rates, overtime, allowances, and leave loading where applicable.
Key Components of Legal Pay Rates
- Base Rate of Pay
The minimum hourly or weekly wage for ordinary hours worked. This forms the foundation of all other entitlements. - Penalty Rates
Higher pay rates that apply when employees work evenings, weekends, public holidays, or overtime. - Allowances
Extra payments to compensate for special conditions, such as working in remote locations, handling dangerous goods, or using personal tools. - Overtime Rates
Increased pay for work performed outside of ordinary hours. - Loadings
Casual employees are generally entitled to a casual loading (currently 25% under most awards) in lieu of leave entitlements.
National Minimum Wage vs Award Wages
As of 1 July 2024, the National Minimum Wage is $24.95 per hour or $948 per week for a full-time adult employee not covered by an award or agreement.
However, most employees are covered by a Modern Award or enterprise agreement, which outlines more specific wage rates. In these cases, the award rate takes precedence, and it's often higher than the national minimum.
Current Minimum Wage – Fair Work
Why Paying Legal Rates Matters
For employees:
- It ensures fair compensation and financial security
- It promotes trust and job satisfaction
- It provides access to the full range of entitlements, such as superannuation and leave
For employers:
- It reduces legal and compliance risks
- It protects the business from back-pay claims and audits
- It supports strong employee relations and reputation
Consequences of Underpayment
- Back pay orders: Employers must repay any underpaid wages.
- Penalties: The Fair Work Ombudsman can issue infringement notices or pursue legal action.
- Public exposure: Underpayment cases may be published, damaging business reputation.
- Criminal liability: From 1 January 2025, intentional wage theft may result in criminal charges under proposed federal laws.
How to Stay Compliant with Legal Pay Rates
- Identify the correct award or agreement
Make sure you know which award or enterprise agreement applies to your employees. - Classify employees accurately
Ensure job titles, responsibilities, and duties match the award classification. - Use compliant payroll software
Tools like Microkeeper automate award interpretation and help ensure that every employee is paid correctly. - Stay informed about rate changes
Pay rates are reviewed every financial year by the Fair Work Commission, with changes typically taking effect on 1 July. - Keep detailed records
Maintain payslips, timesheets, and pay records for at least 7 years as required by law.
How Microkeeper Can Help
Microkeeper’s award interpretation engine and payroll software ensure your staff are always paid in line with the latest legal pay rates. Benefits include:
- Real-time rate updates synced with awards
- Automatic application of overtime, penalty rates, and allowances
- Timesheet integration with payroll
- Payslip generation and STP compliance
FAQs About Legal Pay Rates
Can I pay above the award rate?
Yes, you can always pay employees more than the legal minimum. However, you cannot pay less than the applicable minimum.
What if I don’t know which award applies?
Use the Fair Work Award Finder or consult a professional for assistance.
What should I do if I’ve underpaid an employee?
Rectify the issue immediately, keep records of the correction, and contact the Fair Work Ombudsman for further advice if needed.
Final Thoughts
Understanding and complying with legal pay rates is a crucial part of running a fair, lawful, and sustainable business. With accurate classification, regular updates, and smart payroll tools like Microkeeper, you can ensure your team is paid correctly and your business stays protected.
Disclaimer: This content is for general informational purposes only. Please consult the Fair Work Ombudsman or a legal expert for specific guidance related to pay rates and employment law.
