What SMEs need to know about new employment law changes

In August this year, the federal government made changes to Australian workplace legislation. These recent employment law changes will impact many businesses around the country, including small and medium businesses.

For SMEs in Australia, these new law changes bring both opportunity and challenges. If you’re a business owner, then you should ensure you’re aware of these changes and how they may impact you and your business.

What are the new employment law changes?

The latest changes to the Fair Work Act 2009 (Fair Work Act) came into effect on 26 August 2024. Some of these changes to the Fair Work Act affect:

• The way that casual employees are defined.
• How casual employees can transition to permanent full-time or part-time employment.
• Deceptive sham contracting.
• The right to disconnect outside work hours.

The right to disconnect

In a bid to help reduce burnout and improve mental health, the Fair Work Commission added ‘right to disconnect’ terms to all awards on 26 August 2024.

Eligible employees have the right ‘switch off’ and refuse contact with their employer or a third-party contact outside of standard working hours in certain circumstances. This includes communication channels like emails, phone calls, text messages and social media.

This provision currently affects larger business, but the provisions apply from 26 August 2025 for small businesses. According to the government, a small business is defined as a business with less than 15 people. This can include people who are employed to work part-time hours, full-time hours and casual shifts.

Unfair terms in contracts

From 26 August 2024, contractors can apply to the Fair Work Commission if they believe their services contract has an unfair contract term.

In turn, the Fair Work Commission will be able to:

• Determine whether a term of a services contract is an unfair contract term, considering various factors.
• Make an order to set aside, amend or vary all or part of the contract if that services contract contains unfair contract terms.

New contract term: Regulated workers

The term ‘regulated worker’ refers to a new category of contractor that has now been created. Regulated workers are independent contractors in the gig economy and road transport industry who have additional rights and protections. Generally, a regulated worker is an independent contractor who shares similarities with permanent employees – such as working regular, ongoing hours.

This new definition aims to reduce sham contracting by ensuring that contractors who function like employees receive adequate benefits and protections. Sham contracting happens when an employer purposefully misclassifies an employee as an independent contractor to avoid providing them with the same entitlements and protections as permanent employees – such as paid leave, superannuation and protections from unfair dismissal.

A few examples of regulated workers include:

• Food delivery driver and couriers: If they primarily work for just one business and their schedule is dictated by the company, then food delivery drivers or couriers could be reclassified as regular workers.
• Healthcare and aged care workers: If employed by a single healthcare provider, and perform daily tasks and complete regular hours that are dictated by that employer, then they may be considered regulated workers.
• IT consultants: Many IT professionals work as independent contractors, providing services like software development or cybersecurity management. However, if they are working for a single company over a long period and are closely managed, they may be reclassified as regulated workers.
• Tradespeople and construction workers: Independent contractors in construction (such as electricians, plumbers, or carpenters) who regularly work under the direction of a single company, may be considered regulated contractors.

These new laws will affect businesses that engage regulated workers (referred to as ‘regulated businesses’). If you’re a small business owner who employs independent contractors, then you may need to revise the definitions of these contractors in case they need to be reclassified as regulated workers.

Alternatively, if you currently work as an independent contractor, you may want to confirm that you still fit this designation. Under the new regulations, you may need to be reclassified, depending on the conditions of your contract.

Redefining casual employment

The new definition of ‘casual employee’ means that a person is classified as such if, when they start employment:

• The employment relationship has no firm advance commitment to ongoing work or indefinite work, taking into account a number of factors.
• They’re entitled to a casual loading or specific casual pay rate under an award, registered agreement, or employment contract.

In other words, if an employer does not commit to providing regular work hours or continuity of employment, the worker is considered casual.

New laws around casual employment rights

Here is a brief breakdown of some of the new laws around casual employment rights that may affect small businesses.

Pathway from casual to permanent worker

Regulations around employees who want to convert from casual to permanent are now more consistent and clearer.

Under these new rules, eligible casual workers can request to become a permanent employee if they meet the criteria and notify their employer in writing of their intention. An employer can only refuse the casual employee’s request for certain reasons.

Entitlement changes for casual employees

These new changes are important for both employees and employers. It gives casual workers more job security and access to the same benefits that permanent workers receive – such as paid leave and superannuation. For employers, it provides a clear and structured way to transition casual staff into permanent roles.

How do these casual employment laws impact SMEs?

It’s important for small business owners to be aware of these new rules and regulations around casual employees. The new updates to casual employment laws could lead to the reclassification of employees and affect entitlements such as leave and superannuation. SMEs might need to review their insurance and ensure they are accurately classifying their workforce to avoid underinsurance or disputes over coverage.

Of course, if you are unclear on these new changes, what your obligations as an employer are, or how these laws may impact your business, then it’s always best to seek professional legal and financial advice.

Understand your employment obligations and protect your business

The recent changes in workplace rights and protections mean that employers may wish to consider reviewing and updating their insurance policies to ensure they have adequate cover.

Statutory  Liability insurance

Statutory Liability insurance covers the company, senior management and employees for allegations of wrongful breaches of key legislation in the course of the insured’s business. The policy meets fines and penalties payable in specified circumstances and related legal expenses.

Employment Practices Liability insurance

This type of cover is designed to help employers minimise the risk and potential cost of claims taken against them by employees. Employment Practices Liability insurance covers claims that may relate to allegations of discrimination, unfair dismissal and sexual or workplace harassment.

Management Liability insurance

Management liability insurance protects directors and officers and the insured company itself from exposures relating to the management of a company. This may be beneficial for owners and those responsible for the management of a company, as they have specific responsibilities which can result in personal liability for alleged or actual wrongdoing.

Business Insurance Pack

Statutory Liability insurance, Employment Practices Liability insurance and Management Liability insurance can be purchased as part of a Business Insurance Pack – also referred to as a BizPack. This insurance package is designed to provide cover for your business when an insured event occurs. Aside from these types of cover, there are other types of insurance that are there to help protect your business from things such as theft, physical damage, cyber threats and more.

To compare small business insurance quotes online, make sure you visit BizCover online or call us on 1300 805 821. For on the go cover, go BizCover.