When Miners & Bankers Cut & Run, SMEs Better Pay Attention.
- Tim Dive
- Sep 18
- 5 min read
Author: Tim Dive, Founder & Director.
Annualised Salaries, Industrial Relations Changes, and the Future of SME Compliance
Australia’s industrial relations (IR) environment is changing at speed, and the impact on small and medium-sized enterprises (SMEs) is becoming increasingly severe.
We are now firmly in a 'compliance state'. That means more and more employers are entering 'defence mode', focusing on protecting themselves from compliance issues and employee claims, rather than innovating and taking risks.
That's the indicator of how strangled we've all become by a Union-led government.
For business owners and HR leaders, the challenge is not simply to keep up with change, but to anticipate it, understand its implications, and act early enough to protect cash flow, people, and long-term viability.
This update examines the key developments currently reshaping the landscape, why they matter to small and medium sized businesses, and practical steps that can be taken to prepare.
The End of “Fixed” Annualised Salaries
One of the most significant recent developments is a court ruling that fundamentally changes how annualised salaries operate for employees covered by modern awards, which is the majority of Australian employees.
Traditionally, employers could rely on annualised salaries to simplify payroll and predict headcount costs. Overpayments in one period were believed to satisfy or offset underpayments in another, provided the annual amount exceeded award requirements overall.
This made annualised salaries a practical solution for both business owners and employees.
The recent decision disrupts this approach. Employers must now reconcile compliance within each pay cycle.
If an employee works above the hours covered in their salary agreement during a single pay period, additional payments must be made for that period, even if the employee worked fewer hours previously.
Overpayments in past cycles can no longer be used to offset current obligations.
Implications for SMEs:
Headcount costs (previously believed to be fixed by an annual salary) are now variable and can spike unpredictably.
Annualised salaries may expose businesses to higher costs than hourly arrangements.
Failure to adjust payroll practices exposes businesses to backpay claims and potential wage theft penalties, which now carry significant financial and criminal risk.
The practical outcome is that many businesses will need to reconsider whether annualised salaries remain viable, and those that continue to offer them will need robust systems to track hours worked accurately.
Government-Driven Cost Pressures
Policy decisions made over the last several years are now starting to take effect, with direct financial consequences for employers.
For example, gender-based pay adjustments to certain modern awards, in some cases as high as 60 percent, are driving substantial increases in staffing costs across sectors like disability services.
Even the government is seeking to delay implementation because of the blowout in NDIS costs, but private sector employers do not have the option to defer.
This is one of hundreds of legislative and regulatory changes that have been introduced in recent years, including psychosocial risk management obligations, sexual harassment laws, and gender pay gap reporting requirements.
The cumulative effect is an administrative and financial burden that many SMEs are struggling to carry.
Market Signals: Mining and Banking
When major employers begin shedding jobs, it is an early warning sign of broader economic impacts. The mining industry is a clear example.
BHP recently announced 750 redundancies in Queensland and placed an entire mine into care and maintenance. While this is partly a response to market conditions, it is also the result of increased operating costs driven by industrial relations reform, including same-job-same-pay legislation.
The consequences ripple beyond mining. Redundancies affect regional economies, training programs are paused, and small businesses in the supply chain lose work. Similar patterns are emerging in the banking sector, with thousands of roles cut across major banks and call centres closing nationwide.
For SMEs, these are critical indicators. They suggest that demand may slow, competition may intensify, and the downstream effects could arrive with little warning.
The Rise of General Protections Claims Against Employers
Another key development is the surge in general protections claims. Since mid-2024, these claims have risen by 45 percent. Most of the claims are being used as a substitute for unfair dismissal claims, particularly by employees who are ineligible to lodge an unfair dismissal due to length of service or other jurisdictional barriers.
This has two key implications:
Employers must still defend claims, suffering the cost and administrative burden, even when the claims lack merit. The onus of proof sits with the employer – we’re the Respondent – we can’t simply opt-out.
There is increased application-stage burden, as the Fair Work Commission is now requiring more detailed information at earlier stages of proceedings.
Businesses without clear documentation of time records, contracts, and processes are highly exposed.
Where employees lodge general protections claims, other windows can open. Opportunistic employees, unions and law firms will use applications to explore theoretical claims, simply because they can.
Look at the Qantas case; the Maurice Blackburn law firm pursued a GP claim process without even knowing if what they alleged was true. It was essentially an educated hunch, which resulted in Qantas paying the price, perhaps deservedly so, but for many smaller employers, this type of approach could spell their end.
Preparing for the Next Phase
SMEs cannot afford to wait for further change before acting.
The following steps are recommended as a matter of urgency:
Implement time recording systems.
Manual or automated, this is now a non-negotiable requirement for any employer paying under modern awards.
Review and update employment contracts.
Include properly drafted offsetting clauses and ensure that contracts and rates of pay are aligned with the correct modern awards and classifications.
Document HR processes.
From rostering to termination, clear procedures are essential for defending claims and demonstrating compliance. We are now firmly in a “compliance state”.
Monitor industry trends.
Pay attention to large-scale layoffs, particularly in sectors you supply to. These are often early indicators of reduced demand that may affect your business.
Seek expert guidance early.
Don’t wait until you receive a claim or a Fair Work audit notice. Early intervention and proactive compliance are far less costly than reactive remediation.
The pace of industrial relations change in Australia shows no sign of slowing.
For SMEs, the combination of rising employment costs, increased compliance obligations, and a tightening economic environment creates a complex operating landscape.
However, with timely action, accurate time recording, updated contracts, documented processes, and close monitoring of industry signals, businesses can not only survive but remain competitive.
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