If you’re an approved early childhood education and care provider, 1 July 2026 marks one of the biggest payroll updates of the year.
Rather than a single change, employers are navigating three separate workforce reforms that all impact employee wages and payroll compliance.
The next stage of the Fair Work Commission’s Gender Undervaluation Decision is increasing minimum rates under the Children’s Services Award. The Australian Government has also announced an increase and extension to the Worker Retention Payment to help fund higher wages. On top of this, the Fair Work Commission’s Annual Wage Review has delivered a further 4.75% increase to modern award minimum wages across Australia.
While each change serves a different purpose, together they represent a significant shift for childcare providers. Understanding how they interact is essential to ensuring your employees are paid correctly and your service remains compliant.
Children’s Services Award Rates Changes
The first major change affecting childcare providers is the next scheduled increase to the Children’s Services Award as part of the Fair Work Commission’s Gender Undervaluation Decision.
Following a lengthy review, the Commission concluded that work performed in early childhood education and care had been historically undervalued. Because the sector is predominantly female, minimum award wages did not adequately reflect the skill, responsibility and value of the work performed by educators, room leaders, educational leaders and other early childhood professionals.
Rather than introducing one large wage increase, the Commission determined that increases would be phased in over several years.
The first increase commenced earlier this year, with the next scheduled adjustment taking effect from the first full pay period on or after 1 July 2026. This means minimum award rates under the Children’s Services Award will increase again, regardless of any annual wage review.
For employers, this isn’t simply another yearly award update. It forms part of a long-term structural reform that will continue to influence wage costs across the sector for several years.
Childcare Award Rate Increase
Alongside the childcare-specific reforms, all employers across Australia are affected by the Fair Work Commission’s 2026 Annual Wage Review.
The Commission announced a 4.75% increase to minimum award wages, effective from the first full pay period commencing on or after 1 July 2026.
This annual increase applies across modern awards, including the Children’s Services Award.
For childcare providers, this means the Annual Wage Review sits alongside the sector-specific Gender Undervaluation increases. While they arise from separate decisions, both influence the minimum rates employers must pay from July onwards.
Many providers assume the Worker Retention Payment or Gender Undervaluation increases replace the annual award review. They do not. Each change has a different legislative basis and should be considered when reviewing payroll and employment costs.
The Worker Retention Payment Has Increased and Been Extended
Recognising the financial impact of higher wages on providers, the Australian Government has also expanded the Early Childhood Education and Care Worker Retention Payment.
The program was introduced to help services fund the increased wages flowing from the Gender Undervaluation Decision while supporting workforce attraction and retention across the sector.
From July 2026, the Worker Retention Payment has been increased and extended, providing ongoing funding support for eligible providers that meet the scheme’s requirements.
Importantly, the Worker Retention Payment is funding provided to employers—it does not replace your obligations under the Children’s Services Award.
Employers must still ensure employees are paid the correct minimum award rates, regardless of the funding received. The payment simply assists providers in meeting those higher labour costs while improving workforce stability across early childhood education.
Providers participating in the scheme should also ensure they continue to meet any eligibility, reporting and workplace obligations attached to the funding.
What This Means for Childcare Providers
For many providers, payroll updates this year will be more complex than simply applying a new award percentage.
Employment contracts, payroll systems, budgeting and workforce planning may all need reviewing to ensure the new minimum rates are reflected correctly. Services paying above-award wages should also review whether current remuneration continues to satisfy the new minimum award obligations.
With labour representing one of the largest operating costs for early childhood providers, understanding these reforms is critical for maintaining compliance while managing financial sustainability.
Although the Worker Retention Payment provides welcome funding support, it remains the employer’s responsibility to ensure staff receive the correct minimum entitlements under the Fair Work Act and the Children’s Services Award.
How Firefly HR Can Help
Changes to award wages, government funding and workforce conditions don’t just affect payroll. They influence recruitment, retention and employee expectations across the sector.
At Firefly HR, we specialise exclusively in recruitment for the early childhood education and care sector. We work with providers across Australia to attract exceptional educators, centre leaders and executive talent, helping services build strong, stable teams in an increasingly competitive market.
Whether you’re planning for growth, replacing key leaders or strengthening your workforce for the future, our specialist recruiters understand the unique challenges facing ECEC providers and connect you with candidates who are the right fit for your service, culture and long-term goals.
If you’re looking to build a stronger childcare workforce, Firefly HR is here to help.
