As the new financial year begins, employers across Australia face a fast-changing legal landscape. The growing use of contractors and offshore labour brings increased compliance risks, plus the latest updates to employee entitlements can easily catch employers off guard. Here’s what you need to know for this year.
New National Minimum Wage rate
The Fair Work Commission has announced that the National Minimum Wage and all modern award minimum wage rates will increase by 3.75% from 1 July 2025.
While the review directly impacts the wage rates in all modern awards, there is a flow-on impact for all employment instruments. From 1 July 2025, employers will need to ensure that all modern award covered employees are paid the revised minimum wage, even where an enterprise agreement applies.
Employers should review their records to ensure that employees are paid correctly once the increase is applied, particularly ensuring that annualised wage arrangements are still sufficient to compensate for these increased minimum rates. By taking a proactive approach, employers will be well-positioned to minimise the risk of underpayments from this increase.
New rules for contractor arrangements
In 2024, changes to the Fair Work Act 2009 (Cth) altered how courts assess whether a worker is an employee or an independent contractor. Courts must now consider the true nature of the relationship, not just what the parties agreed to in writing.
Even if both parties initially agree to a contractor arrangement, a worker can later claim employee entitlements if the actual working relationship suggests employment. The initial intention of the parties is now of limited importance.
To reduce legal risk, businesses should ensure contractor arrangements are genuinely independent, limit control over contractors, and regularly review contracts and practices to stay compliant. Otherwise, they risk liabilities like superannuation, leave entitlements, and unfair dismissal claims.
Key employment changes as of 1 July 2025
Now is a good time to review all employment contracts and payroll systems to ensure consistency with the following changes that came into effect on 1 July 2025:
- The minimum weekly wage has increased to $948
- The minimum hourly rate has increased to $24.95 for permanent employees and $31.19 (inclusive of the 25% casual loading) for casual employees
- The superannuation guarantee rate has increased from 11.5% to 12%
- The maximum super contributions base has decreased to $62,500 from $65,070 per quarter
- The employee high-income threshold has increased from $175,000 to $183,100
- The independent contractor high-income threshold has increased from $175,000 to $183,100
- The compensation cap for unfair dismissal claims is set at $91,550.
Next steps
Employers and HR teams should remain vigilant and take a proactive approach to managing their employment practices. Now is the ideal time to reassess existing employment contracts, upgrade payroll systems, and confirm compliance with the latest regulations.
For further guidance and support in navigating these changes, please reach out to James Simpson or Timothy Zahara.
