SMEs often work with tight budgets, making it costly to hire employment lawyers for compliance guidance. Yet, without this expertise, they risk making unintentional errors with significant consequences.
Simon Obee, Head of HR Advisory and Principal Lawyer at Employment Hero
The recent introduction of new Industrial Relations laws, including the ‘right to disconnect,’ has significant implications for Australian businesses, particularly small and medium-sized enterprises (SMEs).
Employers are now required to respect their employees’ personal time outside of working hours, or face hefty fines of up to $18,000.
This development comes at a critical time for SMEs, as recent data shows that half of all Aussie SMEs considered closing their doors in the past year. The added financial burden of non-compliance could further exacerbate this trend,contributing to a rising rate of insolvencies.
Beyond the financial implications, the right to disconnect is essential for employee mental health. For young people in particular, this new law could have a profound impact. Employment Hero’s latest Wellness at Work report reveals that only a small percentage of Gen Z and millennial workers feel they have enough downtime to relax and pursue their interests, leading to increased stress and burnout.
What do business owners need to know?
- Scope: The new laws apply to businesses with 15 or more employees. Smaller businesses will have until August 2025 to comply.
- Right to Refuse Contact: While employers can still contact employees outside of working hours, employees have the right to not respond to these communications unless it is unreasonable to do so.
- Dispute Resolution: If disputes arise over the right to disconnect, either party can seek a “Stop Order” from the Fair Work Commission.
- What to do now: Companies must review and update their communication practices, employment contracts, and policies to comply with the new rules. This may involve training for managers and clear guidelines for when after-hours contact is appropriate.
The introduction of the right to disconnect marks a significant step towards protecting employee well-being and promoting a healthier work-life balance. Businesses that fail to comply with these new laws risk facing both financial penalties and damage to their reputation. Simon Obee, Head of HR Advisory and Principal Lawyer at Employment Hero and EI Legal says these changes will be costly to SMEs already dealing with the increasing burden of red tape and legal compliance:
“It’s important that there are enough tools and resources out there to ensure SMEs, which are the backbone of our economy, are educated and supported, as these laws add to the already overflowing pool of regulations they need to comply with. “This is not a case of hand holding, but rather about providing clear, accessible information and resources to support our SMEs, as well as a balanced dialogue that considers the impact overregulation can have on small businesses and the wider Australian economy.
“SMEs often work with tight budgets, making it costly to hire employment lawyers for compliance guidance. Yet, without this expertise, they risk making unintentional errors with significant consequences. The ongoing implementation of IR changes and the introduction of new wage theft laws, carrying potential jail time, further heightens the compliance burden on business owners, and with fines reaching millions of dollars, even minor breaches could spell disaster for businesses, particularly family-run establishments that might misinterpret the law.”
Yet while this law is well-intended, Employment Hero CEO says these new IR laws highlight how compliance is crippling Aussie SMEs and risks stifling innovation: “It’s time to spotlight the trials and tribulations facing Australian SMEs. We need a balanced dialogue that considers the impact of overregulation on the entrepreneurial spirit and seeks solutions that encourage innovation, enhance global competitiveness, and support the growth of the Australian economy. Our SMEs, entrepreneurs, and local businesses deserve a fighting chance to thrive in a challenging world,” Ben says.
“This situation raises critical questions about the viability of starting and running a business in Australia. Beyond the debates and political maneuvers, the real impact on employers and Australia’s position in the global employment market seems to be an afterthought. The “Right to Disconnect” law, for instance, adds to the compliance burdens, despite its intentions, contributing to a landscape that seems increasingly hostile to business owners. Far from fostering an environment conducive to growth and innovation, the introduction of the “Closing Loopholes” legislation appears to tighten the noose around the necks of SME owners, introducing penalties so severe they could easily dismantle the dreams of many Australian entrepreneurs. With fines reaching millions of dollars, even minor breaches could spell disaster for businesses, particularly family-run establishments that might misinterpret the law.”
“But whether you agree or disagree with these new regulations, and how strict they may remain, they don’t come without a heavy price to pay for SMEs. The complexity of ever-changing industrial laws in Australia, long recognised as some of the most intricate worldwide, has reached a new height, confusing SMEs and putting their spirit of entrepreneurship and innovation at significant risk.”
Matt Loop, VP and Head of Asia of Rippling, on this: “The introduction of the right to disconnect stems from the need to prioritise the mental well-being and work-life balance of employees. It is a well-meaning piece of legislation, but if implemented ineffectively, poses an immense threat to the flexibility that so many workers currently enjoy.
We have made significant strides in the past few years of affording people greater licence to dictate how they work. But as a hard and fast rule, the right to disconnect could be incredibly detrimental to those who prefer operating outside of a traditional 9-5. Take people with caregiving responsibilities as an example, they would no longer be able to pick the kids up from school and then finish their work later in the evenings.
The key to a happy balance will be a fundamental level of trust and transparency between employers and their employees. In the face of these changes, it has become increasingly essential to nurture business environments that set realistic expectations for communication outside of standard work times from the outset, provide flexibility with work hours, and create an open dialogue with employees about balancing work-life needs with specific performance expectations.”
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