Employment law changes in Australia
Recent years have seen significant shifts in Australia's employment laws, driven by a focus on fairness, transparency, and worker protections. These changes impact various aspects of the employer-employee relationship, from wage theft and casual employment to the right to disconnect and flexible working arrangements.
Some of the most significant changes include:
🔵 Criminalising wage theft where intentional underpayment of employees is now a criminal offense, with severe penalties for non-compliant employers.
🔵 Introducing the right to disconnect where employees have the right to refuse work-related communications outside of work hours.
🔵 Redefining casual employment with a new objective test determining casual employment based on the nature of the work rather than just the employment contract.
🔵 Increasing protections for independent contractors as the Fair Work Commission can now intervene in contracts deemed unfair to contractors earning below a certain threshold.
🔵 Expanding the definition of "small business" to include more businesses, potentially reducing red tape and encouraging growth.
These changes aim to create a fairer and more balanced workplace environment for all. It's important for business owners to understand these changes and ensure their practices are compliant.
Understanding wage theft
Wage theft is when an employer intentionally underpays an employee their full entitlements, such as minimum wage, penalty rates, or leave entitlements. This can be done through various means, including:
❌ Paying below the legal minimum wage
❌ Not paying penalty rates for overtime or weekend work
❌ Withholding superannuation contributions
❌ Not paying for all hours worked
❌ Denying leave entitlements
From 1 January 2025, intentional wage underpayment became a criminal offence in Australia. This means that employers who deliberately underpay their employees can face severe penalties, including hefty fines and even imprisonment.
Penalties for wage theft
The penalties for wage theft vary depending on the severity of the offense. For companies, the maximum penalty can be the greater of:
- $8.25 million, or
- Three times the amount of the underpayment
For individuals, the maximum penalty can be:
- Up to 10 years imprisonment, and/or
- The greater of $1.65 million or three times the amount of the underpayment
The right to disconnect
The line between work and personal time can become blurred. To address this, Australia introduced the "right to disconnect" law. This law gives employees the right to refuse to engage in work-related communications outside of their agreed work hours, such as responding to emails or attending calls.
The right to disconnect came into effect on 26 August 2024 for employers with 15 or more employees. For small businesses with fewer than 15 employees, this law will apply from 26 August 2025.
Preparing for the right to disconnect
Even if your business is not yet covered by the right to disconnect law, it's essential to start preparing now. Here are some steps you can take:
🔵 Communicate with employees and managers, and discuss the new law and what it means for them practically.
🔵 Train managers and provide guidance on how to comply with the law, identify when an employee's refusal to work outside of business hours is within their rights, and manage such situations.
🔵 Implement a "Right to Disconnect" policy by outlining expectations for after-hours communication and provide clear guidelines for employees and managers.
🔵 Update employment agreements and ensure your employment agreements comply with the new law and consider including an availability allowance for employees who may need to work outside of standard hours .
Respecting employees' boundaries and promoting work-life balance can lead to improved employee morale, reduced burnout, and increased productivity .
Changes to casual employment
The definition of casual employment in Australia has undergone significant changes. Previously, casual employment was primarily determined by the terms of the employment contract. However, the new definition focuses on the nature of the work performed.
The new definition uses an objective test to determine whether an employee is genuinely casual, considering factors such as the nature of the work, the pattern of hours worked, and whether there is a firm advance commitment to ongoing work.
Casual employees who have been employed on a regular and systematic basis for at least 12 months and have a reasonable expectation ofwork can now request to convert to permanent employment.
Unfair contract terms for independent contractors
From 26 August 2024, independent contractors in Australia gained increased protection against unfair contract terms. The Fair Work Commission can now intervene in contracts for contractors earning below $175,000 per year, vary terms, or set aside contracts altogether if they are deemed unfair.
Determining unfair contract terms
Superannuation changes
From 1 July 2025, the minimum superannuation guarantee rate will increase to 12%. This is the last of the legislated incremental increases to the superannuation guarantee rate. Payday Super is also expected to commence from 1 July 2026. This means employers will be required to make employees' superannuation guarantee contributions at the same time as paying their salary or wages.
Definition of "Small Business"
The Council of Small Business Organisations Australia (COSBOA) is advocating for an expansion of the definition of "small business" from 15 to 50 full-time employees, excluding casuals . This change could potentially:
✅ Reduce red tape for more businesses
✅ Encourage growth and job creation
✅ Bring Australia in line with international standards
The Fair Work Ombudsman is currently accepting feedback on this proposal.
Small business redundancy exemptions
Small businesses, defined as those with fewer than 15 employees, have specific exemptions related to redundancy pay and unfair dismissal claims. These include:
🔵 Redundancy pay as small businesses are generally exempt from paying redundancy pay to employees.
🔵 Unfair dismissal where an employee can only make an unfair dismissal claim if they have worked for the small business employer for 12 months or more.
🔵 Small Business Fair Dismissal Code provides protection to business employers are exempt from unfair dismissal claims if they follow the Small Business Fair Dismissal Code.
New discrimination protections
The Sex Discrimination Act has been amended to prohibit hostile workplace environments based on sex and introduce a positive duty for employers to eliminate sexual harassment, discrimination, and victimisation.
These changes aim to create safer and more inclusive workplaces for all employees.
Definition of employee and employer
A new "ordinary meaning" definition of employee and employer was introduced in February 2024.
This new definition primarily relates to determining the status of an employee versus an independent contractor and aims to provide greater clarity and prevent sham contracting arrangements.
Case studies
Several recent cases highlight the impact of these employment law changes.
Non-compliance with employment laws can have serious consequences for businesses, including reputational damage, legal challenges, and financial penalties.
Final thoughts
Managing employment law can be a daunting task for business owners. By staying informed and proactive, you can ensure compliance, minimise risks, and create a positive and productive work environment. Remember that prioritising employee rights and wellbeing is not just a legal obligation but also a key driver of business success.
If you need further assistance with employment law changes or other HR matters, our 24/7 Advice Line is available to all Australian business owners. Contact us on 1300 144 002 today for expert advice and support tailored to your business needs.