Riding the New Wave of Australian Employment Law - Are you Compliant?

As we pass the mid-point of 2025, it's a critical time for Australian businesses to review their employment practices. While many of the "Closing Loopholes" reforms have now been in effect for almost a year, July 2025 marks the full commencement of some key provisions for small businesses, alongside the annual adjustments to wages and thresholds.

Staying across these changes isn't just about compliance; it's about safeguarding your business, fostering fair workplaces, and attracting and retaining talent. Let's break down the most recent updates and their practical implications.

1. The Annual Wage Review (Effective 1st July 2025)

• National Minimum Wage & Award Increases: National Minimum Wage and award minimum wages have increased by 3.5%. This means:

  • The National Minimum Wage (for non-award/agreement employees) is now $24.95 per hour ($948.00 per week for a 38-hour week).

  • Casual employees under the National Minimum Wage will see their rate increase to $31.19 per hour (including 25% casual loading).

  • All modern award rates have similarly increased.

• What this means for you:

  • Review Payroll Immediately: Ensure your payroll systems are updated to reflect these new rates for all employees, especially those on award minimums or the National Minimum Wage.

  • Annualised Salaries: If you pay employees on annualised salaries, conduct a reconciliation to ensure their overall remuneration still meets or exceeds what they would earn under the applicable award, including the new minimum rates, penalties, and allowances.

  • Fair Work Information Statement (FWIS): The FWIS has been updated. You must provide a copy of the latest FWIS to all new employees.

2. Superannuation Guarantee (SG) Hits 12% (Effective 1st July 2025)

The staggered increase to the Superannuation Guarantee has reached its final step.

• The New Rate: From July 1st, 2025, the Superannuation Guarantee rate has increased to 12%. This is the final planned increase in the current schedule.

• Superannuation on Paid Parental Leave (PPL): Significantly, from 1st July 2025, superannuation contributions will also be paid on government-funded Paid Parental Leave (PPL).

  • Important distinction: The Australian Government (via Services Australia) will pay this 12% super contribution directly into the employee's nominated fund based on their PPL payments. This largely removes the administrative burden from employers for the government-funded portion of PPL.

  • Employer-funded PPL: If your business offers additional paid parental leave through its own policies or enterprise agreements, your usual super obligations for that employer-funded leave continue as normal.

• What this means for you:

  • Update Payroll: Adjust your payroll systems to calculate super at the new 12% rate for all eligible employees for pay periods commencing on or after 1st July 2025.

  • Understand PPL Super: Be aware of how super is now treated for government PPL. While the government handles the super for their portion, you still need to manage super on any PPL you provide directly.

3. Key Thresholds Indexed Upwards (Effective 1st July 2025)

Several important thresholds impacting unfair dismissal, contractor protections, and genuine redundancy have also been adjusted.

• Unfair Dismissal High Income Threshold: This has increased to $183,100. Employees earning above this threshold (and not covered by an award or enterprise agreement) are generally unable to bring an unfair dismissal claim.

• Unfair Dismissal Compensation Cap: The maximum compensation for an unfair dismissal claim has also increased to $91,550.

• Contractor High Income Threshold: This threshold has also risen to $183,100. This is relevant for new protections for "employee-like workers" and unfair contract term claims by contractors.

• Genuine Redundancy Tax-Free Limit: This limit has also increased, impacting the tax-free component of redundancy payments.

• What this means for you:

  • Dismissal Planning: Be aware of the updated unfair dismissal thresholds when managing employee performance and potential terminations.

  • Contractor Reviews: For businesses engaging independent contractors, understand how the updated threshold impacts their eligibility for "employee-like" protections and unfair contract claims.

4. Right to Disconnect: Now Fully in Effect for All Businesses (Small Businesses from 26 August 2025)

While most businesses have been navigating the "Right to Disconnect" since August 2024, it fully extends to small businesses this coming August 26th, 2025.

• Full Commencement: All Australian employers, regardless of size, must now adhere to the "Right to Disconnect," empowering employees to refuse out-of-hours work contact unless unreasonable.

• Lessons Learned So Far:

  • Dispute Resolution: The Fair Work Commission has been dealing with disputes, providing early insights into what constitutes "reasonable" contact and "unreasonable" refusal.

  • Policy is Key: Businesses that proactively developed and communicated clear Right to Disconnect policies have generally experienced smoother transitions.

  • Culture Shift: This right encourages a cultural shift towards respecting work-life boundaries, which can improve employee wellbeing and retention.

• What this means for you:

  • Small Businesses: If you are a small business (fewer than 15 employees), this is your final call to ensure your policies and practices are ready for 26 August 2025.

  • All Businesses: Revisit your policies. Are they clear? Are your managers trained on how to apply them, especially regarding urgent vs. non-urgent contact and employee circumstances? Consider adding disclaimers to emails regarding response expectations.

5. New Bill to Protect Penalty and Overtime Rates (Introduced July 2025)

While not yet law, a new Fair Work Amendment (Protecting Penalty and Overtime Rates) Bill 2025 was introduced to Parliament on 24 July. This signals the government's ongoing focus on worker protections.

• The Aim: This Bill seeks to prevent variations to modern awards that would reduce or remove an employee's penalty rates or overtime rates, or substitute them with "rolled up" rates if employees would be worse off.

• What this means for you (for now):

  • Stay Informed: While this isn't in effect yet, it indicates a strong legislative intent to protect these entitlements.

  • Award Compliance: It's a timely reminder to meticulously review your compliance with modern awards, especially if you utilise complex pay structures that incorporate penalty or overtime rates. The Fair Work Ombudsman continues to be active in pursuing underpayment claims.

Proactive Compliance is Your Best Defence

The past year has brought significant reforms, and July 2025 continues that trend with crucial annual updates and the full rollout of existing rights. To ensure your business is fully compliant and prepared:

• Review and Update: Conduct a comprehensive review of your employment contracts, workplace policies, and payroll systems.

• Train Your Team: Equip your HR team, managers, and even employees with a clear understanding of these new obligations and rights.

• Seek Expert Advice: If you have any doubts about your specific circumstances or complex arrangements, consult with an employment law professional.

By proactively addressing these changes, you not only meet your legal obligations but also build a more resilient and fair workplace for everyone.