Business HR trends, challenges and opportunities
The next 12 months are shaping up to be full of challenges and opportunities in small to medium business workplaces, following two significant rounds of workplace reforms in the last 14 months (the ‘Secure Jobs, Better Pay’ and ‘Closing Loopholes’ legislation).
Understanding these workplace reforms is incredibly important for business owners, who will need to ensure strict compliance with the new legislation. In this week’s Akyra blog, we unpack the details of these reforms what they mean for employers.
1. Greater Complexity and Compliance Burden
One of the biggest challenges that employers face is an increasingly complex industrial landscape and a heightened compliance burden.
Prior to the reforms, employers were able to rely on well-drafted agreements to negate any credible suggestion that a worker was anything more than a casual employee or independent contractor nor was there a blanket restrictions on how and when fixed-term employees were engaged.
Fast forward to 2024, and changes relating to the definition of ‘employee’ and ‘casual employee’, as well as the new concept of ‘employee-like worker’, will now require employers to be cognisant of multiple factors that extend beyond the terms of engagement to how the contract is performed in practice.
Similarly, the new restrictions on fixed-term contracts limit the extended use of these contracts unless the employer can avail itself of an exception.
The risk profile associated with the use of non-direct, non-permanent labour is enhanced by substantially increased civil penalties for employers who misjudge the application of opaque legislative tests.
To avoid the very real risk of misclassifying a casual employee or independent contractor, or breaching the restrictions on fixed-term labour, employers who wish to engage these categories of worker will need to substantially broaden existing compliance measures.
2. Tighter Constraints on Flexibility
For employers who are found to have engaged in sham contracting, the risks can be severe.
With the introduction of the reforms, employers will likely encounter some difficulty in balancing the need to retain a degree of flexibility in the composition of their workforce while minimising compliance risk. Historically, several sources of flexible labour for employers have been casual employees, fixed-term employees and labour hire.
In addition to the changes instituted by the reforms regarding casual and fixed-term employees discussed above, the introduction of the ‘same job, same pay’ regime will pose challenges to employers’ ability to utilise labour hire for more than a short period of time in a cost-effective manner.
Broad anti-avoidance provisions (which apply retrospectively) add a further layer of complexity so businesses will have a diminished capacity to compliantly maintain productivity by ‘right-sizing’ their workforce through expansions and reductions in line with supply and demand.
Employers will be forced to rethink existing labour models and workforce organisation strategies, and be willing to find new and innovative ways of ensuring a degree of flexibility is embedded within the workforce without falling foul of the new reforms.
3. Businesses Will Likely Spend More Time With the FWC
For employers who are found to have engaged in sham contracting, the risks can be severe.
With the introduction of the reforms, employers will likely encounter some difficulty in balancing the need to retain a degree of flexibility in the composition of their workforce while minimising compliance risk. Historically, several sources of flexible labour for employers have been casual employees, fixed-term employees and labour hire.
4. Remote Working Debate Enters New Phase
Consistent with experiences internationally, the aftermath of the COVID-19 pandemic in Australia has been characterised by tension between management calls for a return to the office and staff pushback.
In 2023 there was some stabilisation in hybrid working arrangements: according to ABS data, approximately 37% of workers are working regularly from home (as of August 2023), down from the height of the pandemic (40%) but well above pre-pandemic levels (32%).
However, as businesses have grown accustomed to remote working practices and enforceable minimum attendance requirements, the FWC’s new jurisdiction to arbitrate flexible working arrangement disputes — in conjunction with the Commission’s modern award review — means the debate is set to enter a new phase.
This enhanced scope for the tribunal’s intervention poses a threat to managerial prerogatives and expectations around hybrid work. The FWC’s consideration of ‘the right to working from home’ as part of its modern award review (on the topic of work and care) likewise presents a potential challenge, as unions seek to standardise WFH rights.
However, the tribunal’s new powers may also result in greater clarity on the policies employers can introduce and enforce. Several decisions handed down in the second half of last year provided much-needed guidance and reassurance for business on the parameters of employees’ remote working rights.
In addition, the WFH landscape may be further complicated by the government’s consideration of ‘enhanced privacy protections’ for workers, following the Attorney-General’s recommendation to introduce such protections in its review of the Privacy Act.
Business should stay tuned and be prepared to modify expectations of staff and update policies for compliance.
5. Challenges Associated With AI Revolution
Given the rapid pace of the development of AI, the impacts of the technology will be ongoing, and will continue to influence government policy. While employers should embrace the opportunities presented by such technological advancements, they will need to actively manage expectations, as well as the various industrial risks associated with implementation.
6. Regulatory Spotlight Shines on Respect@Work Positive Duty
With the Australian Human Rights Commission’s (AHRC) enforcement powers under the Respect@Work legislation taking effect in December 2023, we expect to see plenty of enforcement activity on the positive duty front in 2024.
The AHRC’s new functions and powers include:
- inquiring into compliance with the positive duty under section 47C of the federal Sex Discrimination Act (to take reasonable and proportionate measures to eliminate, as far as possible, sex discrimination and harassment);
- issuing enforceable compliance notices if it finds a person is not complying;
- requiring persons to give information or produce documents; and
- accepting and enforcing undertakings relating to compliance with the positive duty.
The AHRC is expected to take a robust approach to enforcement and use the full array of its powers in appropriate circumstances. As a result, organisational responses to sexual harassment and sex discrimination are set to face a stern test. Prudent employers will remain abreast of developments and update compliance measures as regulatory expectations and trends emerge.
7. Creative Solutions Take On New Importance In War For Talent
Competition for the best and brightest may be intensified by the spectre of regulation of non-compete clauses, which the government will consider with a view to facilitating the free movement of workers between enterprises.
In this environment, finding creative, cost-efficient and effective solutions to attract and retain staff takes on greater importance. While offsite events, staff discounts and other benefits may continue to be valued and appreciated, factors such as a sense of autonomy and connection to colleagues, career progression, personal development and health and wellbeing continue to be key drivers of staff satisfaction and retention.
However, employers should not lose sight of core issues such as pay, working hours and hybrid work, those that harness a holistic approach are likely to enjoy an edge in the war for talent this year.
8. HR and IR Spotlight on Directors and Officers
Against a backdrop of growing complexity and a more active regulatory paradigm, the risk management burdens on directors and officers in the workplace space are greater than ever.
Late last year, Fair Work Ombudsman (FWO) Anna Booth called on boards to elevate the importance of HR and IR compliance “…compliance with workplace laws also needs to be there and needs to be elevated from the people and ‘nomination’s committee to the audit and risk committee and then ultimately to the board.”
The FWO’s comments reflect a broader trend in which the expectations of company officers to promote compliance and effective governance have been heightened. A failure to meet these raised expectations exposes directors to various avenues of personal liability. Accessorial liability under the Fair Work Act remains a key risk, with courts in 2023 reinforcing the potential for directors to face personal liability even in circumstances where they are not aware that they are overseeing a breach of workplace laws.
Additionally, another (less-tested) personal liability exposure for officers is the statutory duty to exercise reasonable care and diligence, where a breach may arise indirectly on a ‘stepping stone’ basis. A common feature of regulatory proceedings in financial services, ‘stepping stone’ claims seek to establish a breach of the officer’s duty of care as a result of some separate breach by the company of its own obligations. Notably, such claims may arise not only in the context of breaches of corporations legislation, but of any law that the company is subject to (including the Fair Work Act, anti-discrimination statutes and WHS legislation).
Given these exposures and the increasing risk profile in the workplace context, boards should ensure that appropriate governance arrangements are in place to properly manage workplace risks.
Source: Corrs Chambers Westgarth
Key Takeaways
The introduction of two major rounds of workplace reform over the past 14 months presents a number of challenges and opportunities for business owners and employers. A thorough understanding of the nature and scope of these reforms is crucial in ensuring you are taking advantage of these new opportunities – and mitigating the risks of non-compliance with the legislation.
Some of the most significant changes relate to:
- Changes to the definitions of terms like “employee” and “casual employee”, as well as a narrowed defence for ‘sham contracting’ (incorrectly classifying an employee as an independent contract). This means that employers must be particularly careful when it comes to correctly classifying their workers in order to avoid possible penalties.
- With expanded jurisdiction for the Fair Work Commission (including arbitrating flexible working arrangement disputes), businesses can expect to spend more time with the FWC. While this may prove challenging for some, this broader jurisdiction may also provide clarity on the types of policies which businesses can introduce and enforce.
- The recently implemented Respect@Work legislation has placed upon employers a positive duty to prevent sexual harassment in the workplace. Employers can expect plenty of enforcement activity from the AHRC on this front.
- The possibility of regulation of non-compete clauses means that employers may need to get creative when it comes to ensuring they can attract and retain staff in the war for talent.
Akyra can advise employers on recent changes to workplace legislation and assist in ensuring compliance with these reforms. Contact the team at Akyra today for an obligation-free discussion.
Disclaimer – Reliance on Content
The material distributed is general information only. The information supplied is not intended to be legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.
