The submission goes a step further than prior years’. Previously, Labor (filing submissions as the federal government) had recommended that real wages of low-paid workers simply not go backward. Now – in a sign that the election campaign is heating up – the party is pushing for a real wage increase.

Labor says the change would help around three million workers across the country and be “both economically responsible and fair”. 

An increase in minimum and awards wages would have an tangible impact on small-business owners – who have already seen median wages grow 5.3 per cent over the past year. Though the proposed measure would be great for workers – and potentially lead to increased spending at small businesses – some small-business owners who are already cash-strapped may be looking on with concern.

“When wages rise faster than productivity, it puts employers in a bind – especially those without the scale or pricing power to absorb higher payroll costs,” said Ben Thompson, CEO and Co-Founder of Employment Hero. “Many small businesses may be forced to reduce hours, pause hiring, or in some cases, reassess their viability altogether.”

But higher wages can also lead to increased productivity, pointed out Chris Wright, Professor of Work and Labour Market Policy at the University of Sydney. In an essay penned for The Conversation, the labour market expert suggested that workers who feel they are paid fairly may be more likely to work harder – and less likely to leave their employer and necessitate a costly rehiring process.

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1. Intentionally underpaying employees will become a federal crime

From 1 January 2025, intentional underpayment of wages or entitlements can be a criminal offense. Small-business employers will be subject to this legislative change.

ISB has previously reported on small businesses accidentally underpaying workers due to misunderstandings. We heard from small businesses and experts alike that the complex IR system can lead to mistaken underpayments. 

In response to these concerns from the community, the Fair Work Ombudsman has introduced a Voluntary Small Business Wage Compliance Code to help small businesses avoid criminal prosecution. The Code includes steps like “working out correct pay rates” and “seeking information from a reliable source about paying employee entitlement correctly”. If these steps are satisfied, then it’s unlikely that the employer will be found to have intentionally underpaid employees.

2. Tax and BAS agents will be under stricter ethical and operational requirements

Tax and BAS agents will have new obligations next year. These will apply from 1 July 2025 for tax practitioners with 100 or less employees, and 1 January 2025 for all other tax practitioners.

For small businesses, this will mean that your tax agents will be under stricter ethical and operational requirements. According to the Tax Practitioners Board, these include keeping proper client records, having quality management systems in place, and keeping clients informed.

3. “Introductory” classifications can only apply to employees for a limited time, under some awards

Some awards will have new rules for introductory classifications early next year. These classifications can now only apply for a limited time.

If you’re unfamiliar with introductory classifications, these refer to the first stage of a job, i.e. in an induction or training period. They often allow an employer to pay an employee below minimum wage, under the assumption that they are still gaining the basic skills and experience required for the job. The new laws will mean that employees can only be in this introductory stage, with below-minimum-wage entitlements allowed, for a limited period. 

The new time limit on introductory classifications varies between affected awards, but it will be applicable for a maximum of six months. 

A list of affected awards is available here. For all affected awards bar the Horticulture Award, the changes will take effect on 1 January 2025.

4. The ‘right to disconnect’ will apply to small businesses

From 26 August 2025, small-business employees will have the right to refuse work-related contact outside of regular business hours.

The laws already apply to businesses with over 15 employees, but are reportedly not having much of an impact. According to a survey by Indeed, 79 per cent of employees are still fearful of disconnecting from work-related messages after hours.

Additionally, many small businesses say they rely on flexible hours and integrated work schedules – meaning they have no set working hours. The legislation may therefore not be relevant to their working lives either.

Recent changes to know

A couple of key pieces of legislation have been passed in these last few weeks of 2024. These include a crackdown on unfair trading practices, a new banking code of practice, and new legislation making the reporting of cybersecurity incidents mandatory.

The post The 2025 legislative changes that small businesses should know appeared first on Inside Small Business.

Last week, the Fair Work Ombudsman (FWO) announced it had recovered $473 million in underpaid wages for nearly 160,000 workers in 2023-24, securing its largest penalties yet in its 15-year history.

In a recent statement, the FWO shared that $330 million of this amount came from large corporate sector businesses, which it named as a “priority area” for payment recovery.

Regarding the remaining $100+ million from non large-businesses, the regulator reaffirmed its commitment to assisting small-business employers and employees. Notably, it said that small business requests for advice on pay and entitlements rose by eight per cent in the 2023-34 period, underscoring the confusion many face around compliance.

Small-business employers seeking advice on pay obligations

According to the FWO’s annual report, half (50%) of requests to the Employer Advisory Service (EAS) came from businesses with five or fewer employees. The report also highlighted that “many” of these businesses were first-time employers.

“Most new employers have low levels of workplace relations knowledge and do not understand the basic principles of employing staff under an award,” the report stated.

The figures suggest that start-up founders and small-business owners, especially those new to the landscape or with limited resources, may struggle in particular with compliance.

ISB spoke to small-business owners and financial experts to explore the issue of complex regulations.

“Running an e-commerce business myself, I’ve seen how easy it is to get tangled in the complexity of pay rates,” said Chris Bajda, founder of Groomsday. “We had a situation in the early days where a contractor was accidentally underpaid because we misclassified their role. It wasn’t intentional, but it was still wrong. As soon as we realised what had happened, we corrected it by paying them the difference and making sure it didn’t happen again.”

Do employers underpay workers on purpose?

While there are exceptions, underpayment by SME employers is often unintentional, stemming from a lack of understanding of obligations.

Fred Van der Tang, who heads up payroll compliance system PaidRight, attributed some of the problem to the complexity of Australia’s awards system.

“The system’s complexity is compounded by the fact that a single business might have employees covered by multiple awards, each with different entitlements,” he said.

For small-business owners, this can make tracking entitlements like base wages, penalties, overtime, and leave allowances challenging.

“Navigating award compliance requires time, attention, and often external expertise, which many small businesses find hard to afford or access, leading to unintentional errors in worker payments,” Van der Tang added.

Luke Chapman of Simpro, which works with many small trades businesses, noted that small businesses often rely on outdated payroll methods like spreadsheets, paper timesheets, and emails, which can lead to inaccuracies. “This can lead to all kinds of inaccuracies or missing data, often resulting in workers being paid incorrectly.”

On the other hand, overreliance on digital solutions can also create issues. Stacey Price, a small-business owner and accountant, warned that accounting software can sometimes give employers a false sense of security.

“Accounting software makes people think you click three buttons and payroll is done, but that is far from the truth,” Price said. “Innocent mistakes happen because people think the software will tell them if things are wrong. That is usually not the case unless you are using a specific payroll program linked to awards to find the correct pay rates.”

What to do if you’re confused

If you’re struggling to understand your payroll obligations, you can contact the FWO’s Employer Advisory Service (EAS), which provides small-business employers with tailored written advice on payments, entitlements, awards, and record-keeping.

Checking out the FWO’s small-business showcase centre, or seeking professional advice, can also help keep your business compliant.

“Being an e-commerce entrepreneur has taught me that you can’t just rely on your own understanding when it comes to things like payroll,” said Bajda. “We’ve had to bring in outside help to stay on top of it all. At the end of the day, it’s about respecting the people who keep your business running.”

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The Xero Small Business Index itself averaged 115 points in the December quarter, down 10 points from the September quarter. It also noted a significant shift in December when the Index fell 37 points to 89 points, its lowest level since September 2020 and the first time in a year the Index has dropped below the 100 level. This is also the largest single-month decline since April 2020, when the economy was essentially closed down by the pandemic.

“Multiple interest rate rises and higher-than-usual inflation are impacting household budgets and we can see a shift in the December data, particularly in the retail sector,” Louise Southall, Xero Economist, commented. “It’s important to acknowledge that the soft December result happened when retailers and hospitality businesses, in particular, expect to be busy with heightened consumer activity. Looking ahead, conditions are likely to remain challenging as interest rates stay high and inflation is still above the central bank’s target.”

Sales growth also slowed down in the December quarter, averaging 1.7 percentage points less than the September result (6.8 per cent y/y). Sales only rose 0.9 per cent y/y in December, but it was the smallest rise in sales since January 2021. Across the industries, retail (+1.2 per cent y/y), wholesale trade, (-0.1 per cent y/y) and agriculture (-4.0 per cent y/y) recorded weak sales during the December quarter, while health care (+13.0 per cent y/y) and education and training (+11.1 per cent y/y) had strong sales growth.

The Index also reported that while wage growth remained fairly steady in the December quarter, up slightly from the September quarter result (2.8 per cent y/y), there was a distinct slowdown in December, with wages rising just 2.5 per cent y/y. This result contrasts the upward trend seen at a national level, with the wage price index (WPI) rising 0.9 per cent in the December quarter and 4.2 per cent in the 12 months to December, which is being interpreted as the inability of small-business owners to compete with larger businesses on pay increases.

Despite the slowdown in sales and wages, the report noted that these were partially offset by a modest pick-up in jobs growth in the final few months of the year. Jobs growth (3.5 per cent y/y for the December quarter) was above the pre-COVID average for this series (3.0 per cent y/y), and showed a moderate increase when compared to the September quarter (2.7 per cent y/y). The hospitality workforce experienced a fall in jobs in the December quarter (-1.2 per cent y/y), while health care (9.5 per cent y/y) and education and training (6.6 per cent y/y) had the fastest growing staff levels

Meanwhile, the report found little change in payment times as the December quarter findings showed the same result as the September quarter. On average, payments were made 6.3 days late in both the December and September quarters and only slightly longer (6.6 days) in the first half of 2023.

“In the face of headwinds, small businesses are needing to get creative when it comes to key issues such as finding new customers, staying productive, and addressing staff shortages,” Theo Konstantas, Interim Country Manager at Xero Australia, said. “This might involve adopting new technologies to streamline processes and unlock opportunities. It’s important that small businesses leverage their support networks, particularly their advisors, during challenging periods to determine some of the actionable steps they can take.”

The post Small businesses experiencing their largest decline since the pandemic appeared first on Inside Small Business.

Smaller enterprises (one-19 employees) were the first to show signs of a decrease in employee size of -0.5 per cent since June 2022, while medium enterprises (20-199 employees) and larger enterprises (200+ employees) experienced only modest employee growth in the past month, at 0.1 per cent and 0.5 per cent respectively. Similarly, SMEs in all Australian states and territories experienced growth in employment numbers compared to a year ago but in a uniform trend, employee growth since June 2022 marginally declined across all states and territories.

Year-on-year median wages increased overall by 7.5 per cent in July 2022, and by 0.5 per cent over the last month. In July, the median hourly rate for employees working in Australian SMEs was $33.75. While wages of employees in smaller enterprises grew by four per cent since July 2021, the biggest growth was seen among employees in medium enterprises and larger enterprises (+6.3 per cent and +6.7 per cent respectively). The median hourly rate for employees in small, medium and large enterprises was $30.00, $36.57 and $35.14 respectively in July 2022.

“Small businesses play a vital part in the Australian landscape, they are the backbone of many economies,” Ben Thompson, Founder and CEO of Employment Hero, said. “It is a challenging environment but our July Employment Hero SME Index is encouraging and shows the resiliency of the small and medium-sized employment sector.

“Our latest data shows that while employment growth has been strong among SMEs over the past year, the pace of growth is slowing,” Thompson added. “This is most evident among smaller enterprises that have experienced a contraction in employee size over the past month. Wages growth has been strong overall, however, there has been some divergence between states and territories, as well as between SME sizes.

“It is positive to see the average employee size increase and growth of the median wage since last year given that the JobKeeper program has ended and the intense economic pressures at play,” he continued. “I commend the small-business community for their efforts in keeping millions of Australian workers in jobs and keeping wages growing, despite these challenges.”

Thompson pointed out that amongst the backdrop of rising costs of living, 72.2 per cent of business leaders stated they support recent wage increases in Employment Hero’s July SME Economic Sentiment Survey. He said that these figures on wage growth demonstrate SMEs’ commitment to their employees and to their community.

“There’s also a second story here. We know that the last few years have made it tougher to find and keep skilled talent, so SMEs are also more likely to pay more for top performers to compete with the skills shortage,” Thompson said. “With tough economic conditions still on the horizon, I urge businesses to keep an eye on their talent management. Are you staying on top of wages and your employer brand? Are you exploring all options of employment, including remote hiring? Can new technology or processes help drive better efficiencies and returns for your business? Through upheaval, businesses who stay agile and continue to optimise will be best placed to make it through.”

The post Employment and wages growth among SMEs still strong despite slowing pace appeared first on Inside Small Business.

The cost of living eats away at the middle class’s savings, earnings and, eventually, dreams. If I was to earn 100k this year and qualify for a 3% pay rise next year, I may initially be happy about 3k more pay. However the cost of rent, bread, milk and medicine have all risen by an average of 2% to 3% as well.

As entrepreneurs and business leaders, paying in line with inflation doesn’t make us evil, bloodsucking owners, as generally we can only increase the cost of our goods and services by around the same amount. If a business increased everyone’s pay by 10% or 20% each year it would be a sure way to have no businesses left!

Employees tend to wonder why some people tend to have all the luck. Or why people who are not necessarily smarter or more talented than them win promotions and do well in business?

As small-business owners, we know a secret: it’s nothing to do with luck. Successful people have been taught how to behave in professional settings, how to make opportunities and how to improve themselves so they leave their peers in their wake.

Successful people know how to behave in professional settings, how to make opportunities and how to improve themselves so they leave their peers in their wake.

Working with, training and managing successful professionals all over the world, I’ve found that success leaves clues. Successful people form and share habits that they stick to and follow.

When I started in my career I enlisted a mentor who asked me a question: If you are not investing in yourself, does that mean YOU are a bad investment?

I realised I wasn’t investing in myself at all. I started reading books. I now found that I couldn’t put some titles down. Especially once I realised that people who worked with me could feed off information that I had digested late the night before.

I learnt how to set goals and when I found out that the average millionaire is 57 years old, I realised that I still had time!

If we work from 20 to 70 years of age, we have a career that spans 50 years. If you’re 30 years old, you have only worked 20% of your working life and have a whopping 80% to go. If you’re 45 years old, you still have 50% of your working career ahead of you.

Most employees feel self-development is their employer’s responsibility. That’s fine if they’re happy for their employer being responsible for their destination in life. Most people miss out on opportunities to earn more money because the opportunity is disguised as hard work. Too many people sit around and wait for an opportunity to climb the ladder.

Every promotion I’ve ever given was actually the employee promoting themselves.

When I take leave I always encourage my team to show me what they’re really made of. When I am away it’s no surprise that most of my team’s performance falls off. They start later and finish earlier.

I see too many people doing social activities at work and being only 80% effective, and then when they’re at home with family or friends they are dipping in and out of emails, or worse, stressing about work. If those people were more focused at work they’d perform better and would have less to worry about when they finished for the day.

Self-discipline is the ability to make yourself do what you should do, when you should do it, whether you feel like it or not – the ability to force yourself to do what you should do!

Christopher Dean, CEO and Entrepreneur, www.orangewhistle.com

The post Why your staff should do more if they want more pay appeared first on Inside Small Business.