Salary Packaging Solutions and the Australian Minimum Wage: Understanding the Pay Floor

Salary packaging solutions and the legal pay floor

Salary packaging solutions are a common way for employees to structure their pay, often by sacrificing part of their salary for benefits like a car, laptop, or additional super contributions. However, it is important to understand that salary packaging does not change the legal minimum wage that applies to you. The national minimum wage, set by the Fair Work Commission and enforced by the Fair Work Ombudsman, remains the baseline. From 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%, making the casual minimum $33.05 per hour.

How salary packaging interacts with the minimum wage

Your employer must ensure that your total remuneration, including any salary packaged benefits, meets or exceeds the applicable minimum wage. However, the cash component of your pay cannot fall below the legal minimum. For example, if you salary sacrifice $200 per week for a car, your employer must still pay you at least $1,004.90 in cash or a combination of cash and benefits that the Australian Taxation Office (ATO) recognises as ordinary time earnings. The Fair Work Ombudsman advises that salary packaging arrangements must not reduce your base rate of pay below the minimum.

Award rates and enterprise agreements

If you are covered by a modern award or enterprise agreement, the minimum rates in that instrument apply. These rates are often higher than the national minimum wage. For instance, the lowest ongoing classification in a modern award cannot sit under the national minimum, but many awards have rates above it. Salary packaging solutions can be part of a total remuneration package, but the base rate of pay must still meet the award rate. An enterprise agreement can also set higher rates, and salary packaging cannot be used to circumvent those obligations.

Super guarantee on top

Employers must pay super guarantee of 12% on top of your ordinary time earnings. This is calculated on your gross salary before any salary sacrifice. Salary packaging does not reduce the super guarantee base. For example, if your ordinary time earnings are $1,004.90 per week, your employer must pay an additional $120.59 in super. The ATO provides guidance on salary sacrifice and super, but the legal obligation remains.

Comparing the minimum to average earnings

The Australian Bureau of Statistics (ABS) reports that in May 2026, full-time adult ordinary-time earnings averaged $2,083.70 per week. All employees, including part-time and casual, averaged $1,579.20 per week. The national minimum wage of $1,004.90 is well below these averages. Salary packaging solutions are more common among higher earners, but they do not change the fact that the minimum wage is the floor for all award-free and agreement-free employees.

Who must be paid the national minimum?

The national minimum wage applies to national-system employees who are not covered by a modern award or enterprise agreement. Most private-sector employees are in the national system. Some state public sector and local government employees, and some Western Australian sole traders and partnerships, are covered by state awards. If you are award-free and agreement-free, your employer must pay you at least the national minimum. However, junior employees, apprentices, trainees, and those on introductory rates may be paid less. For example, an award-free junior aged 16 receives 47.3% of the adult rate, or $12.51 per hour. Apprentice and trainee rates for award-free employees follow the Miscellaneous Award.

What salary packaging solutions cannot do

Salary packaging cannot be used to reduce your pay below the legal floor. It also cannot avoid award or agreement rates. If you are on an award, the base rate must be at least the award classification rate. Salary packaging can only be offered on top of that. The Fair Work Ombudsman provides resources on salary packaging and minimum wages. For more details on which minimum wage applies to you, see our Which minimum wage applies guide. For a full list of rates, see our Rate tables.

FAQs

We have included three common questions above. If you have further questions about salary packaging solutions and the minimum wage, consult the Fair Work Ombudsman or the ATO. Remember, this site provides orientation only and is not a pay determination or legal advice.

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