HR compliance can be a daunting subject for a small business to broach alone. Employment law in Australia is complex and broad and getting it wrong can result in significant consequences; both from a financial and, almost equally important, a reputational perspective.

The regular auditing that Employment Innovations carries out of clients’ policies, contracts and HR practices gives us first row seats into what HR compliance looks like for a small business.


What Does an HR Compliance Audit Reveal?

Normally what we see in a small business, is that HR is one of the last functions that gets set up. Understandably, at the top of the list of priorities for small businesses is managing services or products to ensure clients are receiving value and that money is coming in.

In addition to this, accounts and invoices need to be processed and it’s sometimes not until employee relations matters begin to impact day-to-day operations that clients are prompted to sign up to our services – without having thought much about HR Compliance previously.

Some of the important questions small businesses need to think about are:

  • What are the minimum entitlements your employees are eligible to receive?
  • What information are you lawfully required to tell employees when they start employment?
  • Can you really just walk into any meeting with an employee and fire them on the spot for underperforming?


HR compliance is all about managing risk effectively and strategically, so that a business can focus on the day-to-day operations with minimal hiccups and road blocks. Getting it wrong can mean businesses face legal claims, Fair Work investigations or employees being able to damage the business irreparably.


Contracts and Policies

Some of the interesting statistics we’ve been able to identify from an analysis of all the compliance audits we carried in 2020 include that 87.5% of businesses did not have adequate employment contracts in place and 84% of businesses did not have adequate workplace policies in place.

Many businesses had some form of contracts or policies in place – but we found that many did not understand what they had contracted themselves into or that certain things were unlawful to include in a contract. We also found that there was a lack of understanding about why workplace policies were needed at all and that many businesses had not had their HR documents reviewed or updated for a considerable amount of time.

Where complications or disputes arise within the workplace, a business really needs to be able to rely on clearly drafted contracts and policies to ensure that they can point to the entitlements employees are eligible to receive and the processes and behaviour they are expected to follow and display.

At a minimum an employment contract should contain clauses dealing with:

  • The employment type (full-time, part-time or casual)
  • The wage or salary that is payable and what it is intended to cover (e.g. does this include provision for extra hours worked, or will overtime be paid separately?)
  • The notice period required to terminate employment
  • Post-employment restraints such as rules about contacting clients or poaching staff


We provide further details about the workplace policies employers should have in place in this article.


Compliance with Employment Laws

Being HR Compliant means being able to comply with the several sources of employment law in Australia, including the Fair Work Act, the National Employment Standards, modern awards, as well as legislation dealing with work health and safety and superannuation – that’s a lot for a small business to think about!

The main piece of a workplace of law is the Fair Work Act, and whilst it is certainly not a light read, the eleven National Employment Standards (NES) contained within it break down the eleven most basic entitlements in workplace law. These apply to all employees – although they sometimes operate differently between full-time, part-time, and casual employees.

The eleven NES are:

  • Maximum weekly hours – these are generally 38 hours per week, and employees can only work more hours than this where the requirement is reasonable. What is reasonable will depend on the nature of the role (e.g. how senior they are) and the employee’s personal circumstances (such as if they have any caring responsibilities)
  • Requests for flexible working arrangements – employees with at least 12 months of service can request flexible working arrangements such as working from home or working part-time. Employers can only refuse these requests where it is reasonable to do so
  • Offers and requests to convert from casual to permanent employment – Casual employees have a right to convert to permanent employment if they have been employed for 12 months and in the last 6 months they have worked a regular pattern of hours
  • Parental leave and related entitlements – all employees are entitled to 12 months unpaid parental leave if they have been employed for at least 12 months. They can ask for a further 12-month extension and this can only be refused on reasonable grounds
  • Annual leave – Full-time and part-time employees are entitled to four weeks paid annual leave per year, for part-time employees this is pro-rata based on their number of hours.
  • Personal/carer’s leave, compassionate leave, and unpaid family and domestic violence leave – the most important of these is personal/carer’s leave, which allows full-time and part-time employees 10 paid days off per year if they are sick or if they need to care for a family member. The entitlement is pro-rata for part-time employees
  • Community service leave is unpaid except for jury service
  • Long service leave is a form of paid leave for long-serving employees (generally those with between 7 and 10 years of service), the entitlement varies from State to State.
  • Public holidays – all employees are entitled to be absent from work on public holidays unless it is reasonable to require them to work.
  • Notice of termination and redundancy pay – full-time and part-time employees are entitled to between one week to five weeks’ notice of termination based on their age and length of service. They can only be dismissed without notice for serious misconduct. Some employees are entitled to redundancy pay if their employment is terminated because their job is no longer required, but small businesses generally don’t have to pay this if they have less than 15 employees.
  • Fair Work Information Statement and Casual Employment Information Statement – these are documents that set out employees’ basic entitlements that need to be provided to new employees.


Modern Awards

Modern awards are a set of minimum terms and conditions that apply to employers and employees on top of the National Employment Standards, based on the industry which the business operates in or the occupation of the individual employee.

These will set out several important factors which the business will need to comply with including minimum wages based on the employee’s classification level, hours of work, rostering requirements and even provisions relating to leave.

Modern awards usually have rules that employees have to be paid higher rates of pay where they work long hours or at unsociable times such as in the evenings or at the weekends.

Assessing award coverage is a key part of every compliance audit we undertake. Without understanding the modern award(s) that apply to your business you will never be able to be certain that employees are being paid sufficiently and are being provided with all the entitlements they are required to receive by law.

There are two types of awards under the National Employment System – an industry award and an occupational award. An industry award can apply to an employer if the business as a whole falls within a particular industry. For example, the Building and Construction Award which covers employers in the on-site construction industry.

An industry award will cover all employees who are covered within the classifications which are usually quite broad. However, where there is no coverage for a particular role under an industry award or this award doesn’t even apply to the business, you would then look to see whether there would be coverage under an occupational award, which covers specific roles. For example, the Clerks Award will often cover employees who are performing duties which are largely clerical or administrative in nature.


HR Compliance Across the Employee Life Cycle

Commencement and onboarding

One way to think about HR compliance is to consider how it impacts every step of the employee life cycle.

On commencement of employment you have to provide employees with the Fair Work Information Statement and (if appropriate) the Casual Information Statement. You have to make sure that the employees are correctly classified under a Modern Award and receive at least the minimum rate of pay and other applicable allowances/penalties.

You have to make sure that a contract of employment is signed, has clear employment terms, and that the contract doesn’t provide for less favourable provision than the NES or Award or provide more powers to the employer than is permitted by law.

You have to make sure there are policies in place to set expectations of conduct and processes and that these are accessible to employees. There are also policies that you need to have by law. For example, all public companies and “large proprietary companies” are required to have a Whistleblower Policy in place, and in NSW and ACT you need to have a workplace surveillance policy by law if you wish to monitor computer or internet use or otherwise a significant penalty applies.


Pay and entitlements

As an employee progresses through their work journey you need to make sure that you’re applying entitlements correctly – modern awards routinely provide that allowances, loadings and penalties have to paid on top of ordinary wages, for example when an employee works extra hours or at unsociable times (e.g. at evenings or weekends). Common allowances include allowances paid for work-related travel or where an employee is required to wash their own uniform.

Employees will be entitled to certain forms of leave and it is important that you understand the rules regarding how much leave they get, whether the leave is paid or unpaid and what happens to the leave at the end of employment (e.g. is it “paid out”?).

Given the introduction of many new types of leave in recent years (family and domestic violence leave, leave to cover miscarriages, “flexible” parental leave, etc) we often find as part of our compliance audits that employers have not kept up to date with their obligations in these areas.


Poor performance and misconduct

Sometimes employees’ conduct or performance will not be at the required standard. It is vital that formal disciplinary processes are carried out to deal with these matters. Any such processes must be “procedurally fair” and in-line with the current policies and contracts in place.

Whether the issues are performance or conduct related, disciplinary proceedings can be some of the more risky areas of HR compliance, as they carry a weight of potential claims being made against the business if not carried out correctly.


Termination of employment

Termination of employment carries huge consequences if not managed carefully – some of the things that must be considered are:

  • What is the notice period the employee is entitled to?
  • What are the obligations regarding final pay – When does this have to be paid? Does any accrued leave have to be paid out? Is the employee entitled to a redundancy payment? Am I allowed to make any deductions?
  • Is there a fair reason to dismiss the employee, and has a procedurally fair process been followed leading up to the dismissal? (E.g. if the dismissal is for poor performance or misconduct have they previously been given formal written warnings explaining their employment is at risk if they don’t improve? Has there been a final disciplinary meeting where an employee is accompanied by a support person and allowed to explain why they think they should not be dismissed?)


Why is HR Compliance Important?

Having adequate contracts and policies in place provides clarity in employment terms and conditions and sets the parameters and expectations regarding conduct and procedures to be followed. In more serious cases, this is important for enforceability of such terms where there may be disputes, or where legal action may need to be taken against employees or has been instigated by employees.

Complying with workplace law is essential to avoid legal claims from employees and to try to prevent any involvement from the Fair Work Ombudsman (the regulatory body responsible for overseeing workplace matters). Fair Work can investigate your business at any stage – even if an employee only contacts them to make an enquiry and not a complaint, the Fair Work Ombudsman does not need a formal claim or complaint to start to investigate a business.

For a small business, having Fair Work knocking at their door can really throw off day-to-day operations and is quite stressful – gathering requested documents, formulating responses, carrying out the directions in any compliance order can take time and resources.

Getting compliance right means a small business hopefully never has to deal with Fair Work – or if a claim against the business is ever made – the company can have confidence that it will be able to successfully defend the action.


What are the Consequences of Getting HR Compliance Wrong?

Case law is one of the most convenient places to identify and learn from the mistakes of getting compliance wrong. As an example of where compliance resulted in significant consequences for a business, in the case of Richardson v Oracle Corporation Australia Pty Ltd [2014] FCAFC 82, an employee was subjected to sexual harassment in the form of persistent individual remarks and suggestions from a male colleague. Whilst the company had a bullying and harassment policy in place, there was training on the policy and the employee who engaged in the harassment misconduct was subject to disciplinary action – the company was still found to be vicariously liable for not having taken enough steps to prevent the conduct from occurring.

The policy failed to mention that sexual harassment is against the law and that both the employer and employee could be liable for acts of sexual harassment. The former employee, Mrs Richardson, was awarded approximately $100,000.00 in damages, including a significant amount for pain and suffering.

Another example of the consequences of dismissing compliance can be identified in compliance orders issued by the Fair Work Ombudsman. Earlier this year, the Ombudsman secured a $30,000 penalty in court against a Brisbane Electrical sole trader for underpaying a young employee and breaching a Fair Work Commission order. The employee was entitled to around $17,000 plus superannuation – which goes to show how significant the build up of small payment can be over time. Aside from ordinary wages, is the employee getting their annual leave loading, have they been paid overtime correctly, have they received allowances relevant to the work being performed?


What is an HR Compliance Audit?

To summarise a previous article we’ve published on the compliance audit process, one of the services we offer is conducting a compliance audit for newly signed up clients. The purpose of this audit is to assess which modern awards may apply to the business and whether contracts and policies are compliant with the National Employment Standards set out in the Fair Work Act 2009. After the report has been finalised, we work with businesses on how they can begin to implement the suggestions and improvements, offering our best practice templates for the business to consider either adapting into their documents or using to replace their documents entirely.


Compliance Isn’t a Quick Fix

We wouldn’t expect clients to be compliance experts as soon as we issue our findings within the compliance report, although it is certainly designed to allow clients insight into the many faces that compliance wears. We typically encourage a meeting with our Advisors to discuss the contents of the report, in order to hash out some of the more complex topics and to ensure the high risk areas are understood. If there is one take away from the importance of the compliance audit, it’s that compliance is an ongoing process, consisting of navigating the interrelationship of ever-changing workplaces and complex employment laws.


About HR Connect

HR Connect is one of Australia’s leading providers of HR and workplace safety advice service, designed to help small business owners make confident and compliant business decisions.



The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact HR Connect for advice.

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