The key FY25 employment regulations: Comply and capitalise

As we close another financial year, businesses across Australia are facing a transforming landscape governed by critical updates in employment regulations under the Fair Work Act and the national workplace relations system. For businesses with two or more employees, understanding these changes goes beyond compliance. Capitalising on new rules and avoiding potential pitfalls is a strategic imperative.

As we transition into FY25, several significant updates are taking effect, including superannuation adjustments, parental leave enhancements and important changes in wage theft legislation and the right to disconnect. This article aims to guide and prepare your business for these upcoming changes, providing practical tips on how to navigate these changes and exploring how technology can help streamline your compliance efforts.

Whether you're a founder, CEO, or part of the HR and payroll spectrum, staying informed is your first step towards ensuring compliance and leveraging these regulations to your advantage.

Closing EOFY obligations

As the financial year draws to a close, finalising all payroll and financial reporting accurately and on time is essential. This section highlights key tasks to ensure compliance and readiness for the new fiscal year:

1. Finalising payroll reports: Ensure your STP reporting is complete by the due date, 14 July. This includes all wages, taxes, and other payroll elements up to 30 June. Accuracy here prevents discrepancies and issues with the Australian Taxation Office (ATO).
2. Superannuation contributions: Confirm that superannuation contributions for the April to June quarter are submitted by 28 July. By making payments before 30 June, you can benefit from tax deductions in the current fiscal year.
3. Review and update payroll records: Conduct a thorough review of your payroll records for accuracy. This includes cross-verifying employee details, total earnings, deductions, and tax withheld to ensure compliance with reporting requirements.

Key legislative changes in FY25

FY25 introduces critical legislative updates that will affect how businesses manage employment relationships, communication, and payroll integrity. These legislative changes are designed to improve employment standards, enhance worker protections, and ensure fair treatment across all employment levels.

Understanding these employment regulation changes is key to ensuring compliance and adapting business practices accordingly. Businesses must review their HR and payroll processes to align with these new laws and implement necessary changes to policies and practices to ensure compliance and protect their workforce.

Casual conversion obligations and definitions

The new financial year brings refined definitions and obligations regarding casual employment under the Australian government's recent updates:

• New definition of casual employment: The new definition will clarify that casual employees lack a firm advance commitment to continuing and indefinite work and will also require employers to assess the real substance, practical reality, and true nature of the employment relationship. This adjustment aims to better reflect the true nature of casual employment.
• Casual conversion pathways: Changes will simplify the process, shifting the onus from employers to employees. Employees will now need to request conversion to permanent positions after 6 months (12 months for small business employers), provided they meet certain criteria. This new pathway reduces administrative burdens on employers and empowers employees to initiate conversion based on their work situation and preference.

Right to disconnect

This new legislation addresses the growing concern over work-life balance and the encroachment of work into personal time:

• Establishing boundaries: Employees will have the unequivocal right to disconnect from work-related communications outside of work hours. This right is designed to ensure that employees can truly rest and disconnect without the expectation of being 'always on.'
• Reasonable exceptions: Employers can still require communication outside of normal hours under reasonable circumstances, such as emergencies or critical business needs, as long as they clearly define and communicate these exceptions in employment policies.

Wage theft legislation

Amendments to the Closing Loopholes Bill introduce stringent measures to combat wage theft, reflecting a more severe stance on underpayments and dishonest payroll practices:

• Criminalisation of wage theft: Under the new legislation, authorities will treat intentional underpayment of employees as a criminal offence and impose substantial penalties, including potential imprisonment for egregious offences.
• Enhanced employer accountability: Employers will need to exercise greater diligence in meeting wage and compensation obligations. The legislation aims to ensure that employees receive their rightful earnings for their work, placing a higher burden on employers to maintain accurate and compliant payroll practices.

Key updates from the FY25 fiscal budget

Following the announcement of the fiscal budget on 12 May 2024, officials have outlined several significant changes that will impact businesses across Australia. These updates represent substantial shifts aimed at supporting workers and businesses alike. 

By taking proactive steps to adapt to these changes, your business can comply with new regulations and seize opportunities for enhanced efficiency and growth. Here are the major updates and how they're expected to influence business operations in FY25:

Confirmed budget updates

1. Superannuation on parental leave: Beginning July 2025, the government will start paying superannuation contributions on paid parental leave. This initiative aims to support parents in maintaining their superannuation growth during parental leave periods. Importantly, the ATO will manage this, ensuring there are no additional administrative burdens on employers.
2. PAYG adjustments: Reflecting the earlier announcements, the stage 3 tax cuts will begin from 1 July 2024. The updated PAYG withholding tables will incorporate these tax cuts, meaning many employees will see a reduction in the amount of tax withheld, thereby increasing their take-home pay.
3. Support for small and medium businesses: The budget introduces new measures to support the cash flow and growth of small and medium enterprises (SMEs), including tax relief and increased funding for digital transformation and training programs.

Preparing for changes

• Adjust payroll systems: Update your payroll software to reflect the new PAYG withholding rates due to the tax cuts starting on 1 July 2024. Although the ATO will manage the superannuation contributions for paid parental leave beginning in July 2025, it's essential to stay informed about any additional guidance or reporting requirements the ATO may release related to these contributions.
• Communicate with employees: Proactively communicate with your employees about the upcoming tax cuts and how they'll see an increase in their take-home pay because of reduced tax withholdings. Similarly, inform them about the new superannuation contributions for parental leave that the ATO will handle, clarifying that they'll be required to take no additional actions but potentially receive more benefits.
• Leverage new SME support: Carefully review any new measures introduced in the fiscal budget aimed at supporting the cash flow and growth of SMEs and assess how you can integrate these into your business operations to optimise efficiency, reduce costs, and enhance capabilities. Consider consulting with a financial advisor or attending government-sponsored workshops or webinars to fully understand how to use these opportunities effectively.

How technology can help

Australian companies should consider adopting advanced technology in their HR and payroll systems to assist with navigating FY25's regulatory changes. These solutions can automate updates and compliance checks, freeing HR teams from routine tasks to focus on strategic initiatives. Integrated technology platforms, ensure seamless data synchronisation across departments, reducing errors and establishing a reliable single source of truth.

Despite the clear benefits, many businesses haven't fully embraced comprehensive systems that manage both payroll and HR. This oversight increases the risk of costly non-compliance issues, such as accidental wage theft. By implementing robust, integrated systems, businesses can proactively detect and address potential discrepancies swiftly, thereby protecting their reputation and maintaining employee trust.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions. The Australian Payroll Association and NB Employment Law are not expressly recommending or referring Rippling in this article.