When you have an enterprise agreement in place, it’s important to remember that the base rate of pay in that agreement can never be lower than the base rate in the relevant award.
If the award rate increases and your enterprise agreement sets a lower rate, you must pay the higher award rate from the date the change takes effect. The rest of your agreement – such as allowances, leave entitlements, or rostering arrangements – still applies exactly as written.
If no award covers your employees, then the base rate must be at least the rate set by the national minimum wage order. This ensures that all employees, regardless of industry or agreement, are paid a lawful minimum rate.
Why this matters for SMEs
For small and medium businesses, staying on top of these changes isn’t just about compliance – it’s about avoiding costly back pay claims, penalties, and damage to your reputation. Even if your enterprise agreement was negotiated in good faith, it can quickly become outdated when the Fair Work Commission adjusts award rates.
Example scenario
Imagine you employ someone under an enterprise agreement earning $28/hour. On 1 July 2025, the relevant award increases the base rate to $28.62/hour. From that date, you must pay the higher $28.62/hour rate, even though your agreement still lists $28/hour.
This same employee also receives a First Aid allowance of $16.12 per week, as set in your agreement. That allowance doesn’t change, because it’s based on the agreement’s terms – only the base hourly rate needs to be adjusted to match the award.
Action steps for SME owners
- Check award updates every July when the new minimum wages take effect.
- Compare your enterprise agreement base rates with the current award rates.
- Update payroll promptly to reflect any necessary changes.
- Document adjustments so you have a clear compliance record.
Bottom line
Even with an enterprise agreement in place, you can’t pay less than the relevant award or national minimum wage. A quick annual review of rates will help you stay compliant and protect your business from unexpected legal or financial headaches.
