Do salary packaging companies set the pay rates for employees?

No. Salary packaging companies are service providers that help employers and employees structure remuneration to take advantage of tax concessions. They do not determine wages. The legal pay floor is set by the Fair Work Commission (national minimum wage) or by modern awards and enterprise agreements. An employer cannot rely on a salary packaging arrangement to pay below the legal minimum.

How does superannuation work with salary packaging and the minimum wage?

Superannuation guarantee contributions are calculated on your ordinary time earnings, which is the salary or wage before any salary sacrifice. Even if you salary package part of your pay, your employer must pay super on the full ordinary time earnings amount. The minimum super guarantee rate is 12% from 1 July 2026, and it is paid on top of your minimum wage entitlement.

Salary Packaging Companies and the Australian Minimum Wage: What You Need to Know

Q: Can salary packaging reduce my minimum wage entitlement?

No. Salary packaging can reduce your taxable income, but it cannot reduce the minimum wage you must be paid. The Fair Work Act requires that your base salary (before any packaging) meets or exceeds the applicable minimum wage, award rate, or enterprise agreement rate. Salary packaging companies arrange deductions for things like cars or laptops, but your employer must still pay you at least the legal minimum in ordinary time earnings.

The legal minimum wage for award-free adult employees is $26.44 per hour from 1 July 2026, but salary packaging companies do not set this rate.

What Are Salary Packaging Companies?

Salary packaging companies are third-party providers that assist employers and employees in arranging non-cash benefits as part of an employee’s total remuneration package. Common benefits include cars, laptops, or additional super contributions. These arrangements are legal under Australian tax law and can reduce an employee’s taxable income. However, salary packaging companies do not set wages or determine the minimum amount an employee must be paid.

How Salary Packaging Interacts with the Minimum Wage

The legal minimum wage in Australia is set by the Fair Work Commission. From 1 July 2026, the national minimum wage for an adult employee who is award-free and agreement-free is $26.44 per hour, or $1,004.90 per week for a 38-hour week. Casual employees receive a loading of 25%, bringing the casual minimum to $33.05 per hour. These rates apply to ordinary time earnings before any salary sacrifice arrangement.

Salary packaging reduces an employee’s taxable income, but it does not reduce the amount of gross wages the employer must pay. The Fair Work Ombudsman explains that an employer cannot use salary packaging to pay below the applicable minimum wage, award rate, or enterprise agreement rate. The base salary (the amount before packaging) must meet or exceed the legal floor.

Award and Agreement Rates Can Be Higher

Many employees are covered by a modern award or an enterprise agreement that sets a higher minimum wage than the national minimum. For example, from the first full pay period on or after 1 July 2026, modern award minimum wages rise by 4.75%, but the lowest ongoing classification cannot fall below the national minimum. Introductory rates for the first six months are capped at $25.74 per hour or $978.10 per week. Salary packaging companies do not affect these award or agreement rates; the employer must still pay at least the applicable rate.

Junior and Supported Wage Rates

Award-free junior employees have percentage-based minimums: under 16 years get 36.8% of the adult rate ($9.73 per hour), 16-year-olds get 47.3% ($12.51), 17-year-olds 57.8% ($15.29), 18-year-olds 68.3% ($18.06), 19-year-olds 82.5% ($21.82), and 20-year-olds 97.7% ($25.84). Casual loadings apply on top. Apprentices and trainees follow the Miscellaneous Award rates. Salary packaging can be offered to these employees, but the base wage must still meet the applicable junior or trainee minimum.

Superannuation Is Paid on Top

Employers must pay superannuation guarantee contributions on an employee’s ordinary time earnings. From 1 July 2026, the rate is 12%. This is paid on top of the minimum wage, not out of it. Salary packaging does not reduce the super obligation; the employer calculates super on the full ordinary time earnings amount before any sacrifice. For example, if an employee’s base salary is $1,004.90 per week, the employer must pay an additional $120.59 in super (12% of $1,004.90).

Salary Packaging Companies Do Not Set Pay

It is important to understand that salary packaging companies are not employers and do not set wage rates. They provide administrative services. The legal responsibility for paying at least the minimum wage rests with the employer. If you are considering salary packaging, check that your base salary meets the relevant minimum. The Fair Work Ombudsman enforces compliance, and the Fair Work Commission sets the rates. For more details, see Which minimum wage applies and Rate tables.

Tax and Medicare Considerations

Salary packaging can reduce your taxable income, which may lower your tax liability. For the 2026-27 tax year, resident rates with the full tax-free threshold apply. Medicare is estimated at 2% once annualised ordinary gross income reaches $30,000. The low-income offset and other offsets are not included in this model. Salary packaging companies can help you structure benefits, but they do not change your minimum wage entitlement.

Summary

The national minimum wage from 1 July 2026 is $26.44 per hour ($1,004.90 per week) for award-free adults.
Salary packaging companies arrange non-cash benefits but do not set wages.
Employers must pay at least the legal minimum before any salary sacrifice.
Superannuation is paid on top of ordinary time earnings at 12%.
Award, agreement, junior, and trainee rates may set higher minimums.

For further guidance, visit Guides or How the figures work.