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 offence, with severe penalties for non-compliant employers.
🔵 Introducing the right to disconnect where employees have the right to refuse work-related contact outside of work hours unless the refusal is unreasonable.
🔵 Redefining casual employment with a new definition based on how the job actually works rather than just the employment contract, and a new employee choice pathway to permanent work.
🔵 Increasing protections for independent contractors as the Fair Work Commission can now intervene in contracts deemed unfair to contractors earning below a certain threshold.
🔵 Proposals to expand the definition of "small business" to include more businesses. This is an industry proposal, not law: the threshold is still fewer than 15 employees.
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 offence. For conduct on or after 1 July 2026, the maximum penalty for companies can be the greater of:
- $9.1 million (25,000 penalty units; $8.25 million for conduct from 1 January 2025 to 30 June 2026), 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 $1.82 million (5,000 penalty units; $1.65 million for conduct from 1 January 2025 to 30 June 2026) or three times the amount of the underpayment
The offence requires intention. Genuine mistakes are dealt with as civil matters. If you are a small business and you comply with the Voluntary Small Business Wage Compliance Code, the Fair Work Ombudsman will not refer an underpayment for criminal prosecution. You still have to fix the underpayment, and civil penalties can still apply. If you're unsure whether you're paying correctly, an HR compliance audit can help.
Need advice on this?
Talk it through with an Employment Compass HR adviser before you act.
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 monitor, read or respond to work-related contact outside of their working hours, such as emails or calls, unless the refusal is unreasonable.
Since 26 August 2025 the right to disconnect applies to all employers, including small businesses (it started for larger employers on 26 August 2024).
Preparing for the right to disconnect
All employers are now covered by the right to disconnect, so make sure your business is prepared. Here are some steps you can take:
🔵 Communicate with employees and managers, and discuss the 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.
🔵 Set out an after-hours contact policy as part of your HR policies. There is no legal requirement to have a right to disconnect policy, but clear guidelines for employees and managers, and documented on-call arrangements, are the best way to show any contact is reasonable.
🔵 Review employment contracts. You don't have to change contracts, but consider whether roles that need after-hours availability should include an on-call or availability allowance.
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. Since 26 August 2024, the definition focuses on the real substance and practical reality of the relationship.
The new definition uses an objective test to determine whether an employee is genuinely casual: 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. Indicators of a firm advance commitment include whether the employer can really choose whether to offer work, whether continuing work is reasonably likely, and whether permanent staff do the same kind of work. A regular pattern of hours does not on its own make someone permanent.
Under the employee choice pathway, a casual employee who has worked for at least 6 months (12 months with a small business employer) and believes they no longer meet the casual definition can notify their employer in writing that they want to convert to permanent employment. The employer must consult them and respond in writing within 21 days, and can refuse only on the grounds set out in the Act. Employers no longer have to offer conversion.
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 the contractor high income threshold (indexed each 1 July; see fwc.gov.au), vary terms, or set aside contracts altogether if they are deemed unfair.
Determining unfair contract terms
| Factor | Description |
|---|---|
| Relative bargaining power | The relative bargaining power of the parties involved in the contract. |
| Harsh, unjust, or unreasonable requirement | Whether the term imposes a harsh, unjust, or unreasonable requirement on the contractor. |
| Remuneration comparison | The contractor's remuneration compared to employees or regulated workers doing similar work. |
Superannuation changes
Since 1 July 2025 the super guarantee rate has been 12%, and since 1 July 2026 it is calculated on an employee's qualifying earnings. No further increases are legislated. Payday Super started on 1 July 2026. You must now pay super with every pay run: the 12% contribution must reach the employee's super fund within 7 business days of payday (20 business days for a new employee's first contribution or a new fund). Late or short payments attract the super guarantee charge, which includes notional earnings and an administrative uplift of up to 60%; the charge is tax deductible for paydays from 1 July 2026.
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
This is an industry proposal, not law: the Fair Work Act still defines a small business employer as one with fewer than 15 employees (counting regular casuals and associated entities).
Small business redundancy exemptions
Small businesses, defined as those with fewer than 15 employees (counting regular casuals and associated entities), 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 where small business employers that follow the Small Business Fair Dismissal Code have a dismissal treated as fair if a claim is made.
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 take reasonable and proportionate measures to eliminate sex discrimination, sexual harassment, sex-based harassment, hostile workplace environments and victimisation (from 12 December 2022). The Australian Human Rights Commission has been able to enforce the duty since 12 December 2023.
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 started on 26 August 2024.
This new definition primarily relates to determining the status of an employee versus 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.
Sushi Bay Pty Ltd
Sushi chain underpaid 163 employees, resulting in a record $15.3 million in penalties.
In this case, a sushi chain was found to have deliberately underpaid 163 employees, many of whom were young migrants on temporary visas. The underpayments involved failing to pay minimum Award rates, casual loadings, penalty rates, and annual leave entitlements, as well as implementing an illegal cash-back scheme.
The Federal Court imposed a record $15.3 million in penalties, with $13.7 million against the company and $1.6 million against the director and CEO personally. This case demonstrates the seriousness with which the Fair Work Ombudsman is pursuing wage theft cases and the potential for significant penalties, including personal liability for directors.
FedEx
Employee's request for flexible work arrangements was refused. FWC found the refusal unjustified.
This case involved an employee's request for flexible working arrangements to care for his family. While the Fair Work Commission (FWC) acknowledged the employer's genuine reasons for wanting some in-person work, it found that FedEx had not adequately justified its refusal of the employee's request.
The FWC emphasised the importance of following proper procedures when responding to flexible work requests, providing specific and substantiated reasons for any rejections, and genuinely engaging with employees to explore alternatives. This case highlights the need for clear communication and a balanced approach when considering flexible work arrangements, taking into account both business needs and employee circumstances.
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, call our 24/7 HR advice line on 1300 144 002 for expert advice and support tailored to your business needs.
Need advice on this?
Talk it through with an Employment Compass HR adviser before you act.
Frequently asked questions
General information only
This content is general information about Australian employment law, current at the date it was last reviewed. It does not take your circumstances into account and is not legal advice. For advice about your situation, call Employment Compass on 1300 144 002.
Last reviewed: October 2026