Warning of 'dire' impact of push to change young workers’ pay

Hearings have begun at the Fair Work Commission on a case that could transform how hundreds of thousands of young Australians are paid.

The nation’s largest retail union, the Shop, Distributive and Allied Employees’ Association (SDA), has launched a formal bid to abolish “junior” pay rates for workers aged 18 and over in the retail, fast-food and pharmacy sectors — a move that could significantly raise wage costs for employers across some of Australia’s largest industries.

Under current award arrangements, employees under 21 can be paid a percentage of the adult rate — typically 70 per cent at age 18, 80 per cent at 19 and 90 per cent at 20.

The SDA’s application seeks to lift these rates to 100 per cent of the adult rate from age 18, while also increasing the pay scales for younger workers, such as 17-year-olds rising from roughly 60 per cent to 75 per cent and under-16s from about 45 per cent to 50 per cent.

The case targets three modern awards — the General Retail Industry Award, the Fast Food Industry Award and the Pharmacy Industry Award — and hearings are scheduled to run into early November 2025.

The union argues once a person turns 18, they are legally an adult and should be paid as one. The SDA has framed its campaign under the banner “Adult age = Adult wage,” contending that young adults often perform the same duties as older colleagues, yet earn substantially less purely because of their age.

The Australian Council of Trade Unions has thrown its weight behind the claim, describing age-based pay scales as “discriminatory and outdated” and arguing they fail to reflect the rising cost of living faced by young workers.

“Most 18-year-olds in these sectors aren’t new to their jobs. They often started at 15 or 16," said ACTU President Michele O’Neil.

"By 18, they know the systems, the customers, the weekend rush. Many can run a close. They often supervise older workers. Paying them less just because they’re younger doesn’t reward work. It unfairly discounts it."

Employer groups warn of impact on youth unemployment

Employer groups, however, have sounded the alarm about the potential financial shock such a change could bring.

The Australian Retailers Association and others argue that junior rates serve a vital role in helping young people find their first jobs and gain experience, particularly in industries with tight margins and high turnover.

“Retail is the single largest employer of young Australians, employing more than 500,000 workers under the age of 24 years,” said Australian Retailers Association CEO Chris Rodwell in a statement.

“If junior rates are tampered with, the impact on already high youth employment could be dire – particularly in regional areas."

One industry submission to the FWC warned: “This could have a catastrophic effect on entry-level employment,” suggesting that fewer training opportunities and higher automation risks could follow if labour costs spike overnight.

For HR leaders, the implications reach far beyond compliance. If the application is approved, the cost of employing younger workers could rise sharply.

Using a conservative example, if an 18-year-old currently earns 70 per cent of an adult rate of $27.17 an hour — about $19.02 — moving to the full adult rate would mean a 43 per cent pay increase. In a medium-sized retail business employing 200 staff aged between 18 and 20, working an average of 30 hours a week, that uplift alone could add more than $40,000 a week, or roughly $2 million a year, to payroll costs. Across large chains with thousands of staff, the national impact could easily stretch into the hundreds of millions.

Those cost increases would come at a time when many employers are already grappling with rising rents, energy bills and insurance premiums, and where wages across the sector have been lifted  through recent national wage reviews.

Beyond the immediate budgetary concerns, HR teams will need to prepare for potential ripple effects through enterprise agreements, classification structures and payroll systems.

 If the FWC opts to phase in higher rates or extend changes beyond the three targeted awards, businesses will need to manage transition periods, communicate with staff and recalibrate recruitment strategies. Compliance teams will also face pressure to ensure every worker is classified correctly once the new rates take effect, avoiding costly back-payments or breaches.

Australia’s system stands out internationally for the depth and duration of its junior pay discounts. While other developed economies have largely narrowed or abolished age-based wage differentials, Australia still allows workers under 21 to earn as little as 45 to 90 per cent of the adult rate under major awards.

In the United Kingdom and New Zealand, younger workers typically receive around 80 per cent of the adult minimum, with the full rate reached by age 21. In Canada and South Korea, the principle of “equal pay for equal work” has effectively prevailed, with all workers—regardless of age—entitled to the same minimum wage.

For Australian employers and HR professionals, these international comparisons highlight how distinctive the local system remains and how significant the Fair Work Commission’s forthcoming decision could be in aligning Australia with global wage norms.

How does Australia compare internationally?