Can salary packaging reduce an employee's pay below the minimum wage?

No. Salary packaging arrangements cannot reduce an employee's base pay below the applicable minimum wage or award rate. The employee must still receive at least the minimum cash pay after any salary sacrifice.

How does salary packaging affect super guarantee contributions?

Super guarantee is calculated on ordinary time earnings (OTE). Salary sacrifice amounts that are part of OTE (e.g., salary sacrificed into super) are still subject to super. However, some salary sacrifice benefits may reduce OTE. Employers must ensure super is paid on the correct OTE amount.

Are award-covered employees eligible for salary packaging?

Yes, award-covered employees can enter salary packaging arrangements, but the arrangement must not contravene the award. The award's minimum rates and conditions still apply. Employers should check the specific award and any enterprise agreement.

Salary Packaging for Employers: Award Coverage vs Award-Free Rates

The national minimum wage is $26.44 per hour from 1 July 2026, but salary packaging does not change the minimum pay floor. A precise market rate for salary packaging is not available in this reference.

Salary Packaging for Employers: What You Need to Know

Salary packaging for employers is a way to offer employees certain benefits (such as a car, laptop, or additional super contributions) in exchange for a reduction in pre-tax salary. While salary packaging can be a useful tool for both parties, it does not change the fundamental pay floors set by the Fair Work Commission. This guide explains how salary packaging interacts with the national minimum wage, modern awards, and the super guarantee, and what employers must keep in mind when offering such arrangements.

The Legal Minimum Pay Floor

From the first full pay period on or after 1 July 2026, the adult national minimum wage is $26.44 per hour or $1,004.90 per week for a 38-hour ordinary week. Casual employees receive a loading of 25%, giving a casual minimum of $33.05 per hour. These rates apply to national-system employees who are award-free and agreement-free. However, not every worker must receive $26.44 per hour – juniors, apprentices, trainees, introductory award rates, and supported wages can be lower. For example, award-free juniors aged under 16 receive 36.8% of the adult rate ($9.73 per hour), while those aged 20 receive 97.7% ($25.84 per hour).

Award Coverage vs Award-Free

Most private-sector employees are covered by a modern award. Awards set minimum wages for specific industries and occupations, and these rates are often higher than the national minimum. For example, the lowest ongoing classification in a modern award cannot fall below $26.44 per hour, but many awards have rates above that. An introductory rate (first six months) is capped at $25.74 per hour or $978.10 per week. If an employee is covered by an award, salary packaging must not result in the employee receiving less than the award rate in cash. The Fair Work Ombudsman explains that salary sacrifice arrangements cannot reduce an employee’s base pay below the minimum award or agreement rate.

Salary Packaging and the Super Guarantee

Employers must pay super guarantee of 12% on top of ordinary time earnings (OTE). Salary packaging can affect OTE. For example, if an employee salary-sacrifices part of their salary into super, that amount is still considered OTE, so super is still payable on it. However, if the salary sacrifice is for a non-super benefit (like a car), the sacrificed amount may reduce OTE, and therefore reduce the super contribution. Employers must be careful to calculate super correctly. The Australian Taxation Office (ATO) provides guidance on what counts as OTE. The super guarantee is an employer payment on top of the employee’s salary, so it is not part of the minimum wage calculation.

Negotiated Salaries and Enterprise Agreements

Some employees are covered by an enterprise agreement rather than an award. An enterprise agreement can set higher rates than the award or national minimum, but it cannot undercut them. Salary packaging can be part of a negotiated salary package, but the base cash component must still meet the minimum. The Fair Work Commission sets the national minimum wage, but the Fair Work Ombudsman enforces compliance. Employers should check whether their employees are covered by an award or agreement before offering salary packaging.

Practical Considerations for Employers

Award-free employees: If an employee is not covered by any award or agreement, the national minimum wage applies. Salary packaging can reduce the taxable salary, but the cash pay after sacrifice must still be at least $26.44 per hour (or the relevant junior rate).
Record-keeping: Employers must keep accurate records of salary packaging agreements and ensure they do not breach minimum wage obligations.
Consult the experts: This site provides orientation only. For specific advice, consult a qualified accountant or the Fair Work Ombudsman.

For more details on which minimum wage applies, see Which minimum wage applies. For rate tables covering award and award-free rates, see Rate tables.

Summary

Salary packaging for employers is a legitimate way to offer benefits, but it does not override the legal minimum wage. The national minimum wage from 1 July 2026 is $26.44 per hour, and award rates may be higher. Super guarantee of 12% is paid on top. Employers must ensure that salary packaging does not reduce an employee’s cash pay below the applicable floor. Always check the relevant award or agreement, and remember that juniors, apprentices, and trainees may have different rates.

For the published floors, see the rate tables and how the figures work.