In a landmark decision that will have significant implications for retailers, fast food operators and pharmacies across Australia, the Fair Work Commission (FWC) has ruled that junior pay rates for many adult workers should be phased out. The decision will ultimately result in thousands of employees aged 18 to 20 receiving the full adult rate of pay, even where they continue performing roles traditionally covered by junior wage provisions.
What Was the Issue?
Historically, many modern awards have allowed employers to pay workers under 21 a percentage of the applicable adult rate. Under the affected awards, an 18-year-old employee could receive as little as 70% of the adult rate, a 19-year-old 80%, and a 20-year-old 90%, despite performing the same duties as older colleagues.
The Shop, Distributive and Allied Employees’ Association (SDA) challenged these arrangements, arguing that once a worker reaches adulthood there is little justification for paying them less solely because of their age. Following extensive proceedings involving 87 witnesses and expert economic evidence, the Full Bench agreed.
What Did the Fair Work Commission Decide?
The FWC has determined that employees aged 18 to 20 working under the following awards should ultimately receive 100% of the applicable adult minimum wage:
- General Retail Industry Award 2020;
- Fast Food Industry Award 2020; and
- Pharmacy Industry Award 2020.
Importantly, the Commission did not abolish all junior rates. Employees under 18 will continue to be paid junior rates, with the Commission finding there remain strong policy reasons for maintaining discounted rates for younger workers who are often entering the workforce for the first time while balancing school and study commitments.
The decision also preserves lower rates for 18 to 20-year-old employees during their first six months with a particular employer. Once they have completed six months of service, however, they will become entitled to the full adult rate under the phased implementation model.
Why Did the Commission Make this Change?
A key finding of the Full Bench was that there was limited evidence to support the proposition that adult junior employees perform work of a lower value than older workers undertaking the same role. The Commission concluded that, from a work value perspective, employees aged 18 to 20 were generally undertaking the same duties, exercising the same skills and carrying the same responsibilities as adult employees receiving full award rates.
The Commission also considered the broader objectives of modern awards and minimum wage regulation, ultimately finding that maintaining discounted rates for adult employees was increasingly difficult to justify.
When Do the Changes Take Effect?
Employers do not need to immediately adjust payroll systems.
The Commission’s current proposal is for the changes to be introduced progressively over several years, with implementation expected to commence from 1 December 2026 and the final transition occurring by 1 July 2029. Further hearings have been scheduled to determine the exact transitional arrangements.
This means employers have some time to prepare, but organisations with a large cohort of young workers should begin considering the potential financial impact now.
What Does This Mean for Employers?
For many employers, particularly in the retail and hospitality sectors, labour costs are likely to increase over time.
Businesses that heavily rely on employees aged between 18 and 20 may see wage costs rise materially as junior rates are phased out. The impact will vary depending on workforce demographics, current roster arrangements and the number of employees approaching six months’ service.
Employers should consider:
- Reviewing workforce demographics to understand how many employees may be affected;
- Modelling future wage costs under the phased implementation timetable;
- Monitoring further announcements from the FWC regarding transitional arrangements;
- Reviewing payroll settings to ensure they can accommodate future rate changes; and
- Training managers on the upcoming changes to avoid inadvertent underpayments.
The Bigger Picture
While this decision currently applies only to the Retail, Fast Food and Pharmacy Awards, many employment law commentators regard it as one of the most significant changes to junior wage structures in decades. It also raises the question of whether similar challenges may emerge in other industries that continue to rely on age-based wage rates.
For now, employers should avoid assuming that junior rates are disappearing entirely. Rather, the decision represents a targeted shift away from discounted wages for adult employees performing the same work as other adults. Workers under 18 remain unaffected, and the changes will be implemented gradually over several years.
The message from the Fair Work Commission is nevertheless clear: where an employee is legally an adult and undertaking the same work as their older colleagues, age alone is becoming a less persuasive basis for discounted pay.
If you are unsure whether your employment contracts or policies adequately protect your business, we can assist with a targeted review and update.
Get in touch!
If you’ve got any burning questions about this information or you’re not sure how it impacts your business, reach out to our team by email hello@flawlesshr.com.au
