Did you know that recent changes in legislation could significantly impact how you manage your business? The Closing Loopholes Bill aims to tighten regulations and close gaps that many businesses have taken advantage of for years.
In this article, you’ll learn what the Closing Loopholes Bill entails, why it was introduced, how it specifically impacts business owners, and how to adapt to these changes to ensure compliance and keep your business running smoothly.
What is it?
The Closing Loopholes Bill is meant to fix the gaps in the current laws that some businesses use to bend the rules. These loopholes can give them an unfair edge over others and put worker rights at risk.
Why was it introduced?
Regulatory bodies and advocacy groups pushed for the Closing Loopholes Bill after numerous instances of businesses leveraging gaps to avoid compliance with employment laws, tax regulations, and safety standards. The goal is to create a fairer business environment and protect employees' interests.
What are the key changes?
1️⃣ Changes to casual employment (from 26 August 2024)
Focus on employment nature
From 26 August 2024, there will be a shift in focus regarding casual employment contracts. Employers must emphasise the "real substance, practical reality, and true nature" of the employment rather than solely relying on the contract type.
Casual conversion rights
Starting 26 August 2024, employees have the right to request casual conversion after 6 months of continuous employment with a business (or 12 months for small business employers).
Employers can only reject these requests based on fair and reasonable grounds, such as substantial changes in operational requirements.
No longer at the employer's initiative
Starting on August 26, 2024, employees will have the responsibility to begin the conversion process by stating that their casual employment has ended and requesting to start the conversion process.
Casual Employment Information Statement (CEIS)
Employers must continue to provide the Casual Employment Information Statement (CEIS) to all casual employees at the start of their employment, and also;
Starting 26 August 2024:
Non-small businesses must provide the CEIS after 6 months, 12 months, and every subsequent 12 months of employment.
Small businesses must provide the CEIS after 12 months of employment.
2️⃣ Changes to contractors (from 26 August 2024)
New Definition of Employment
There's a new definition of employment starting from 26 August 2024, which undoes what the High Court decided back in 2022 with Jamsek vs Personnel Contracting. The idea now is to focus more on the actual dynamics and nature of the relationship between employers and employees, rather than just focusing on the content of the written contract.
Multi-Factorial Test Reinstated
So, the new rule says that courts need to look at the whole picture and see how things actually work in real life when deciding if someone is an employee or a contractor. They use a range of different factors (that's the multi-factorial test) to figure out if it's more like an employer/employee situation or a principal/contractor setup:
Control over work methods and conditions
Ability to refuse work
Provision of tools and equipment
Uniform requirements
Delegation or subcontracting rights
Payment structure and liability for defects
Building of goodwill
Entitlements to benefits like paid leave and allowances
Opt-Out Regime for Independent Contractors
An opt-out regime allows principals and contractors to agree that the new definition of employment does not apply to their relationship.
Here are some key points to keep in mind:
Principals can send opt-out notices to contractors if their earnings go above a certain high income threshold (yet to be announced).
Contractors have the option to opt out within specific timeframes or cancel their opt-out notices.
The Fair Work Commission (FWC) can step in to deal with unfair contract terms if contractors earning less than the high income threshold make a request.
Practical Steps for Businesses
Review and amend contracts to remove unfair terms by August 2024.
Issue opt-out notices to contractors where applicable.
Plan for potential transitions of contractors to employment status if deemed necessary.
Prepare to respond promptly if contractors revoke their opt-out notices.
These amendments aim to clarify employment relationships, ensure fairness, and provide a framework for resolving disputes over contract terms within the new regulatory landscape.
3️⃣ Right to disconnect
The right to disconnect basically means that employees can switch off and not have to answer work calls or emails after they've clocked out for the day, unless it's urgent. This rule starts on 26 August 2024 (but small businesses get a pass until 26 August 2025) and is intended to make sure work doesn't creep into personal time.
What Constitutes Reasonable Contact?
Determining what qualifies as reasonable or unreasonable contact involves several factors outlined in the legislation:
Reason for Contact: The purpose and necessity of the communication.
Method of Contact: How the communication was initiated and its impact on the employee.
Compensation: Whether the employee is compensated for being available after hours.
Role and Responsibilities: The nature of the employee's job and the expectations associated with it.
Personal Circumstances: Considerations such as family responsibilities that may affect availability.
4️⃣ Intentional Wage Theft becomes a criminal offence (01 January 2025)
Starting from 1 January 2025, intentional wage and superannuation theft will be criminalised. This means that if you get caught, the crime will attract a potential prison sentence up to a maximum of 10 years along with hefty fines:
For companies, you might have to pay up to three times the amount you underpaid, or a massive $7.825 million.
Individuals won't get off easy either, with fines of up to three times the underpayment, or $1.565 million.
The new laws are encouraging employers to adhere to auditing practices by conducting thorough payroll checks and taking responsibility for any errors proactively to avoid potential repercussions from the Fair Work Ombudsman.
Preparing for Compliance
1️⃣ Casual employment changes:
Make sure your employment relationship with your casual employees reflect the true nature of the employment relationship beyond what their contracts say.
Prepare to handle requests for conversion after the specified periods, considering operational needs for fair and reasonable grounds.
Update your practices to provide the CEIS at the required intervals based on the size of your business.
2️⃣ Changes to contractors:
Review and amend contracts to remove unfair terms by August 2024.
Issue opt-out notices to contractors where applicable.
Plan for potential transitions of contractors to employment status if deemed necessary.
Prepare to respond promptly if contractors revoke their opt-out notices.
3️⃣ Right to disconnect:
Ensure compliance with the right to disconnect provisions by the implementation date.
Think about how these changes might affect your relationships with clients and how smoothly your business runs, especially in client-facing industries.
4️⃣ Intentional Wage Theft:
Conduct a thorough audit of your payroll processes to ensure accuracy and compliance with wage and superannuation obligations
Keep records of all employee wages, superannuation contributions, and any adjustments made to ensure transparency and accountability.
Train your payroll staff and managers on the updated laws and their responsibilities regarding wage and superannuation payments.
The Closing Loopholes Bill represents a pivotal shift when it comes to making sure businesses play fair. It's all about fixing long standing gaps in legislation (hence closing loopholes). From redefining employment relationships to protecting the right to disconnect, each amendment is designed to enhance transparency and accountability in business operations.
Prepare your business for these changes. Review your policies, educate your team, and update your practices to align with the Closing Loopholes Bill. For personalised guidance on navigating these reforms, feel free to reach out.
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