If you run an SME in Australia, you can’t treat industrial-relations change as a “legal team problem” any more. The next 12–24 months will bring targeted reforms — from limits on non-compete clauses to award reclassifications — that affect payroll, recruiting and day-to-day people decisions. Being ready stops surprises, prevents compliance risk and protects productivity.

Why this matters for SMEs (and larger employers)

Two trends make this urgent. First, federal changes and Fair Work updates mean the scope of obligations is widening across employers of every size — not just big corporations. Second, low engagement and stressed managers make the cost of getting people-practices wrong much higher than a single underpayment or HR claim. Gallup found global employee engagement fell to 21% in 2024, with manager engagement dropping sharply — and lost productivity from disengagement cost the world economy billions. For leaders that means legal risk and performance risk at the same time.

The four IR changes you’ll see and what to do about each

1. Limits on non-compete / post-employment restraints

What’s changing: a proposed ban on non-compete clauses for employees earning under the high-income threshold (FY26 threshold cited at $183,100) and possible civil penalties for contraventions. This will take effect prospectively if passed.

Practical actions:

• Run a contract audit now: tag all employees who fall below the threshold and flag existing NCCs for amendment.
  
• Standard-ise contract templates by cohort (casuals, salaried, managers) and distribute via your HRIS so changes are enforceable and tracked.
  
• If you rely on restraints for commercial reasons, document business-critical reasons and review compensation/benefit design for roles that remain restrained.
  

2. Fixed-term contract limits and expiring exceptions

What’s changing: fixed-term arrangements face stricter limits following the Closing Loophole reforms; some sector exceptions are phasing out. HR must plan for conversions, renewals and potential redundancies.

Practical actions:

• Map all fixed-term roles and their contract end dates; prioritise roles in funding-sensitive sectors (education, NFP).
  
• Build a conversion budget and timeline so payroll and headcount forecasts reflect likely moves to ongoing employment.
  
• Update workforce plans and consult legal on redundancy processes where necessary.
  

3. Leave entitlements and new leave considerations

What’s changing: the government is pursuing amendments on stillbirth parental leave and debate continues around reproductive-health leave; separately, employers are already being pushed to broaden leave in practice.

Practical actions:

• Review parental and bereavement leave policies and align manager guidance so conversations are compassionate and consistent.
  
• Consider a modest, policy-light reproductive-health leave offering now (pilot it) — it’s often a low-cost cultural win that reduces attrition.
  
• Train managers to handle sensitive leave conversations; clarity and consistency reduce legal risk.
  

4. Award changes and reclassifications (the slow-burn payroll risk)

What’s changing: the Fair Work Commission is updating awards and reclassifying work in several female-dominated industries, with phased pay increases and reclassification risk that can expose employers to underpayment claims.

Practical actions:

• Run a pay-and-classification health check: identify cohorts under affected awards and model the financial impact (base pay, loadings, allowances).
  
• Update position descriptions and pay grids and communicate expected timing to managers and finance.
  
• Ensure payroll and rostering systems can absorb phased increases — get your vendor involved early.
  

People-side essentials that limit business shock

Legal change alone doesn’t break businesses — poor manager practice does. Gallup highlights managers as the single biggest lever on team engagement: when managers are supported, teams perform better. Invest in manager capability now: coaching, clearer accountabilities and small, measurable performance routines (one-page 1:1 agendas, weekly priorities) deliver outsized returns.

Deloitte’s research also reinforces that younger cohorts expect meaningful work, flexibility and employer support for skill-building — so IR compliance must pair with a clear people proposition or you risk losing talent even if you’re legally compliant.

Quick checklist for leadership (high-impact, low-friction)

• Audit contracts for non-compete exposure.
  
• Map fixed-term expiry dates and build conversion budgets.
  
• Model the cost of award changes for impacted teams.
  
• Train and support managers: focus on engagement, not just process.
  

Change is coming in predictable pockets. The organisations that navigate it best combine simple legal hygiene with investment in manager capability and workforce planning. If you’d like practical help, see our HR consulting services and guide to capability building.

References

AHRI / HRM Online — “4 key industrial relations reforms every HR practitioner should prepare for”.

Gallup — State of the Global Workplace (employee engagement 21% in 2024; manager role in team engagement).

Deloitte — Gen Z & Millennial Survey / Human Capital Trends (workforce expectations; people-organisation relationship).