Australia's workplace revolution: What Labor's reforms mean for your business

Updated October 2026: This post was first published in 2025. We have updated it to show where things stand now: the right to disconnect and the casual employment changes apply to small businesses too (since 26 August 2025), wage theft penalty figures reflect the amounts for conduct on or after 1 July 2026, and the proposed ban on non-compete clauses is still an exposure draft, not law.

The Australian Labor government has made the biggest changes to workplace laws in over a decade, with major impacts for small and medium businesses. After winning the 2025 election, the Albanese government is implementing reforms through three main packages: the Secure Jobs, Better Pay Act (2022), and the two Closing Loopholes Acts (2023-2024). While these aim to boost job security and wages, they also create new rules businesses must follow.

Labor's reform agenda: Building on three years of change

The Australian Labor Party won a second term in May 2025, with Prime Minister Anthony Albanese's government continuing its workplace reform plans. Instead of creating brand new employment policies, Labor is focusing on putting in place and fine-tuning the big changes already passed through three main packages:

1. Secure Jobs, Better Pay Act (2022): Put limits on fixed-term contracts, changed the bargaining system, and added gender equity measures.
2. Closing Loopholes Act (2023): Created "same job, same pay" rules for labour hire workers, made intentional wage theft a crime, and strengthened discrimination protections.
3. Closing Loopholes No. 2 Act (2024): Introduced the "right to disconnect," redefined casual employment, improved protections for gig economy workers, and set standards for the road transport industry.

The biggest upcoming change is a proposed ban on non-compete clauses for employees earning below the high income threshold (currently $190,100). The Government released an exposure draft Bill in September 2026 and has said it intends the ban to apply from 2027, but it is not yet law. Until then, restraint clauses remain enforceable only if they are reasonably necessary to protect a legitimate business interest. Treasury research shows this change alone could increase affected workers' wages by up to 4% and add $5 billion to Australia's economy each year.

These reforms were rolled out gradually through 2024 and 2025. Small businesses (fewer than 15 employees) had an extra year for the right to disconnect, which has applied to them since 26 August 2025. Under the employee choice pathway, a casual employee can notify their employer that they want to become permanent after 6 months of employment, or 12 months with a small business employer. Casuals already working for a small business before 26 August 2024 could first do this from 26 August 2025.

Redefining employment relationships

The biggest change is how employment relationships are now defined, moving away from written contracts to assessing the real nature of working arrangements.

For casual employment, since 26 August 2024 a person is a casual employee only if there is no firm advance commitment to continuing and indefinite work and they are paid a casual loading or casual rate. Signs of a firm advance commitment include:

• Whether the employer can really choose whether to offer work (and the employee whether to accept it)
• Whether continuing work of that kind is reasonably likely
• Whether permanent employees do similar work
• A regular pattern of work (although a regular pattern alone does not stop someone being casual)

The same approach now applies to contractors: whether a worker is an employee or an independent contractor depends on the real substance of the whole relationship, not just the written contract. Our guide to employee versus independent contractor explains the test.

This creates uncertainty for businesses using casual workers or contractors, with risks of misclassification leading to backpay claims and penalties. Small businesses especially need to review their workforce arrangements.

Potential benefits for businesses

Despite compliance challenges, these reforms could bring benefits:

Enhanced workforce stability: More secure employment arrangements could reduce turnover costs (typically 50-200% of annual salary). Businesses may see better retention rates and lower recruitment costs.

Competitive level playing field: "Same job, same pay" rules aim to prevent businesses from gaining advantages through lower labour costs for equivalent work, potentially benefiting those who already provide fair pay.

Improved worker engagement: European experiences with right to disconnect policies show benefits for wellbeing and engagement, with businesses reporting higher productivity (31%), lower absenteeism (37%), and better retention (21%).

Compliance challenges

The reforms create several challenges for small and medium businesses:

Uneven regulatory burden: Small businesses face higher per-employee compliance costs - around $3,000 per employee for businesses with fewer than 10 staff, compared to under $1,000 for larger businesses.

New rights and tougher enforcement: Wage theft becoming a crime creates significant risks, with fines for companies of up to $9.1 million or 3 times the underpayment, whichever is higher (for conduct on or after 1 July 2026). The right to disconnect provisions create challenges for businesses with global operations or after-hours needs.

Reduced workforce flexibility: Businesses that rely on casual employees or contractors to manage demand fluctuations may struggle under the redefined employment tests.

Adaptation strategies

Here are recommended approaches to navigate these changes:

Proactive compliance planning:

• Review employment arrangements, particularly casual employees and contractors (an HR compliance audit is a good starting point)
• Update contracts, HR policies and procedures, and handbooks
• Invest in good recordkeeping systems
• Consider legal advice for complex situations

Strategic workforce redesign:

• Reduce dependence on after-hours communication
• Consider converting reliable casuals to permanent part-time positions
• Develop cross-training to increase workforce versatility
• Establish clear protocols for when after-hours contact is necessary‍

Leveraging technology:

• Use digital recordkeeping systems that automate compliance
• Implement work scheduling tools that respect new regulations
• Adopt communication platforms with after-hours boundaries

Looking ahead

The reforms will have long-term effects on Australian workplaces:

Shifting power dynamics: Labor's reforms represent a significant rebalancing toward employees and unions, likely influencing wage growth patterns and bargaining outcomes.

Technological and demographic shifts: The reforms intersect with broader trends, including digitalisation affecting 1.3 million Australian workers by 2030, the rise of remote work (37% of Australians work from home at least once weekly), and an ageing workforce.

International competitiveness: While Australia's international competitiveness ranking improved from 19th to 13th in 2024, challenges remain in entrepreneurship and productivity. The long-term economic implications will depend on whether these reforms successfully balance job security with business adaptability.

Conclusion

The Australian Labor government's employment law reforms represent a significant shift in the regulatory environment for small and medium-sized businesses.

For more in-depth insights on employment laws and HR practices, see our employment law guides. Employment Compass is also here to help with personalised advice and support. Whether you are an employer navigating changes in employment laws or an HR professional looking to stay up to date, our HR advice line is ready to help. Call us on 1300 144 002 today.