Industrial relations reforms causing small business headaches

Australian businesses are feeling the squeeze from ongoing industrial relations (IR) changes, with new research revealing that nearly two-thirds of business owners believe the reforms have made running their business harder.

The survey by Small Business Loans Australia, found that a large number of businesses have been negatively impacted by the government’s IR reforms. Wage increases, limits on fixed-term contracts, multi-employer bargaining, and changes designed to improve worker protections are damaging small businesses

Wage increases and contract rules = business headaches

The most common pain point was the 2022 increase to the minimum wage, which saw pay packets rise by 5.2 per cent. More than a quarter (28 per cent) of business owners identified this change as a major burden.

Another challenge is the restriction on fixed-term contracts, which 25 per cent of businesses say has impacted them. Since December 2023, employers have been unable to hire staff on fixed-term contracts for longer than two years, a shift designed to encourage permanent employment but one that businesses say reduces flexibility.

Multi-employer bargaining, introduced in late 2022, has also been flagged as a problem by one in five businesses (21 per cent). This law allows multiple businesses with shared interests to bargain together, a move that has proven particularly challenging for larger organisations, with half (50 per cent) of big businesses saying it has had a negative impact.

IR changes make it harder to grow and adapt

Beyond these headline reforms, businesses report a range of flow-on effects from the changes. A quarter (24 per cent) of business owners say the reforms have made it harder for them to grow, while a similar number (23 per cent) believe they make it tougher to remove toxic or underperforming employees.

One in five business owners say they are struggling to downsize when needed (21 per cent) or adapt to market changes (20 per cent). Another 20 per cent report difficulty affording staff altogether, while 17 per cent say the rules make it harder to let go of employees when money is tight.

Alon Rajic, Founder and Managing Director of Small Business Loans Australia, says these findings highlight the pressure businesses are under.

“People are the lifeblood of any business, yet at a broad level these responses show companies are struggling to afford new staff or indeed be able to let go of workers who are hampering productivity and profitability,” Rajic says.

NSW businesses feeling the pinch from reforms

While larger businesses (those with over 200 employees) are feeling the brunt of these changes—92% say at least one IR reform has made running their business harder—smaller businesses are also struggling.

Across different states, the impact varies. In New South Wales, 69 per cent of businesses say they’ve been negatively affected by the changes, while in Western Australia, that figure jumps to 75 per cent. In South Australia, business owners are twice as likely as the national average to say they are struggling to adapt to market changes (42 per cent compared to 20 per cent).

With a federal election looming, Rajic believes these concerns should be a wake-up call for policymakers.

“With the next Federal election not far away, our data shows businesses around the country are feeling burdened with the pace and scale of industrial relations reform,” he says. “No matter who has a seat in the next parliament, we want to see more opportunities for businesses to take stock of the regulatory landscape.”

Read the full report

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