Junior Rates scrapped for some “Young Adults”

The Fair Work Commission (FWC) has handed down a significant decision to progressively phase out junior rates for employees aged 18 to 21 (young adult employees) covered by the General Retail Industry Award 2020, Fast Food Industry Award 2020 and the Pharmacy Industry Award 2020. The junior rates for employees aged under 18 years (minors) are, for now, unaffected.

Although this is a targeted reform with material implications for employers in the affected industries, we consider that the FWC’s reasoning may have broader implications for junior rates in other industries.

Background

The decision follows an application made by the Shop, Distributive and Allied Employees’ Association (SDA) to vary junior wage rates across the above-named awards.

Under the current framework, junior employees (under 21) are paid a percentage of the adult rate, increasing with age. While percentages vary slightly across awards, the general structure is:

Although the SDA sought increases to the junior rates for minors and to introduce adult rates from age 18, the FWC only partially accepted the claim, with no changes made to existing under 18 rates.

Reasons for the decision

The central issue was whether reduced pay for junior workers is justified by differences in their perceived ‘work value’.

In relation to young adult employees, the FWC concluded that it is not. It found that employees in the 18- to 21-year age group generally perform the same work as older employees, with similar levels of responsibility and supervision. Additionally, it found work is typically allocated based on experience and capability rather than age, and there is no material unproductivity to justify lower rates. The FWC also considered potential employment impacts. While it accepted there may be some initial reduction in employment opportunities for young adults, it found that any impact is likely to be limited and mitigated by the phased implementation.

By contrast, existing pay rates for minors were retained. The FWC accepted they are more likely to have limited experience, face legal restrictions on work, and require additional supervision, which justifies maintaining lower rates.

Key outcomes

The decision draws a clear distinction between minors and young adult employees.

What is changing

• Junior rates for young adult employees aged 18 to 21 will be progressively increased.
• While the exact timing arrangements are yet to be confirmed, it will likely be over a four-year period commencing 1 December 2026.

Exception (“inexperienced” young adults)

• Young adult employees with less than six months’ service (with their current employer only) may continue to be paid existing junior percentages (70–90% depending on age).
• This will effectively operate as a limited, employer-specific “probationary period” rate.
• For employers this will undoubtably create payroll complexity, as young adult employees will move between rates within short periods, requiring careful tracking to avoid underpayments.

What is not changing

• Junior rates for minors (under 18) will remain unchanged.

Timing and transitional arrangements

The FWC has indicated that further submissions will be heard before the implementation schedule is finalised. However, its provisional view is that:

• Employers will be provided with a lead-in period, with the first increase likely from 1 December 2026.
• Changes will be phased in over a period of up to four years.
• Increases are likely to occur in increments (for example, 5% every six months), aligned with standard adjustment dates such as 1 July and 1 December.

Looking ahead

Although implementation will be gradual, this decision introduces a clear compliance risk if not managed proactively. Employers in affected industries should begin preparing now to mitigate the risk of underpayments and ensure systems and practices are aligned with the forthcoming changes.

While the decision is currently confined to just three awards, we consider that the FWC’s reasoning may have broader implications for junior rates in other industries and we will continue to monitor this situation.

How we can help

HMB Law can assist employers to prepare for these changes and reduce compliance risk, including:

• Auditing junior wage arrangements and award coverage.
• Reviewing payroll systems and classification practices.
• Advising on transitional obligations and exceptions.
• Supporting responses to any underpayment exposure.

For tailored advice on how these changes impact your business, contact the HMB team at admin@hmblaw.com.au.