In 2024, industrial relations (IR) reforms in Australia ushered in significant changes to employee rights and a new level of scrutiny for Australian organisations. As part of the latest proposed changes, the Australian Council of Trade Unions is nearing an agreement with employers to introduce reforms allowing workers to double their holiday entitlements at half the pay. While this new policy would allow employees greater flexibility with their work schedule, it could lead to a compliance nightmare for many SMEs.
Recent research from Rippling shows that two-fifths of Australian SMEs have admitted payroll errors in the past two years, and these new policy changes will add greater complexity. Even for large enterprises, keeping pace can be a laborious and confusing process. But for SMEs, where business owners are often in charge of managing HR and payroll, staying up to date with regulatory changes can prove immensely time-intensive and can distract from the tasks needed to run a business.
It’s therefore no surprise that 53 per cent of SMEs believe IR reforms will add more complexity and stress to the payroll function, further exposing companies to the already significant risk of hefty fines and legal repercussions. In this new regulatory environment, accurate record-keeping and compliance checks have never been more critical.
The challenge for SMEs
Managing these new changes will require modification to how holiday pay is accrued, calculated, and reported. Small businesses would need to track split rates of pay within the same pay period, ensuring that all entitlements are correctly calculated so that employees receive the correct remuneration.
Non-compliance with these new holiday pay rules carries serious consequences.. Under the “Closing Loopholes” bill, the Australian government is intensifying its crackdown on wage theft, imposing substantial penalties for violations.
Errors in payroll not only pose financial risks, such as penalties and sanctions but also jeopardise reputation and culture. Inaccurate holiday pay calculations can erode employee trust, leading to higher turnover rates. Furthermore, businesses may face costly retroactive corrections and legal challenges from employees, straining finances and reputation further.
Ensuring SMEs don’t fall short
Organisations must ensure their operations are robust enough to handle these changes swiftly and efficiently to ensure compliance. 48 per cent of Australian small businesses still rely on manually inputting employee data, opening the door to human error. Automating payroll processes can significantly reduce this risk and alleviate the burden of staying current with new regulations. Furthermore, centralising employee data in one system further reduces the need for redundant entries across multiple platforms.
Ongoing training and education are also essential; SMEs must remain well-informed about all regulatory changes and understand their implications for payroll operations. Conducting regular audits of payroll processes helps identify discrepancies early, mitigating compliance issues.
Navigating economic challenges and technological solutions
In the face of a tough economic climate, SMEs are often among the first to feel the pinch and seek ways to enhance efficiency and productivity. However, the increasing complexity of employment laws makes this a challenging task. The stakes are high; mistakes in payroll can lead to severe financial, reputational and cultural damage.
Integrating traditional HR, IT, and finance tools – such as payroll systems and device management – into a single cohesive system can streamline operations and unlock valuable insights that are otherwise difficult to access when employee data is scattered across various applications. This integration not only saves time but also cuts costs by reducing the need for multiple subscriptions and the overhead associated with maintaining several systems. Ultimately, this leads to a more efficient work environment, enhancing productivity and job satisfaction for everyone involved.
