MSME Day 2025: Fixing compliance to power productivity

Every year on June 27, World Micro, Small and Medium-sized Enterprises (MSME) Day presents an opportunity to celebrate the businesses who are the backbone of Australia's economy. MSMEs like the family-owned shops, local manufacturers, tradespeople and digital entrepreneurs, are the lifeblood of our communities, and their success is critical to the country's economic health. They employ nearly half of Australia's workforce, inject vitality into communities, and foster innovation across industries.

But while the day serves to celebrate their contribution, the reality for many small business owners right now is far from festive. From new and revised workplace laws including minimum wages standards, the right to disconnect and restraint clauses, these changes may come from a place of good intention - like protecting workers' rights and creating a fairer system - but the practical effect on MSMEs is red tape, confusion and rising costs that makes it difficult for them to keep up and stay productive. 

New research from the Australian Securities and Investments Commission revealed almost 7,000 businesses in New South Wales collapsed from July 2024 to May 2025. That's more than just a statistic. It represents thousands of jobs lost, families affected, and communities disrupted.

Small business owners are facing an increasingly difficult and resource-intensive challenge: staying compliant while managing the day-to-day demands of running a business. And while there's no silver bullet to fix these system issues overnight, there are some key steps MSMEs can take to make the road ahead more smooth.

Red tape is strangling Australia's MSMEs

In 2025, getting payroll and compliance right isn't just important - it's more difficult. With industrial relations (IR) reforms and rising penalties for errors, MSMEs are under more pressure than ever to get things right.

According to our research, 53% of SMEs believe these IR reforms will increase stress and complexity, with compliance (40%), processing time (34%), and cost per employee (24%) their top concerns.

The findings are somewhat unsurprising, considering the Right to Disconnect, which gives employees the ability to refuse contact outside working hours, will soon apply to small businesses (those with fewer than 15 employees) from August 26 this year. This follows earlier changes to wage standards, restraint clauses, and contractor definitions. 

Unlike bigger businesses that have the teams equipped to navigate these reforms, MSMEs typically don't have in-house legal or HR teams to manage this kind of change, and are forced to grapple with these complex changes on their own.

Payroll mistakes a productivity killer

One of the most visible consequences of this pressure is the growing number of payroll mistakes. Despite wage theft becoming a criminal offence in January 2025, our research found that 43% of Australian employees say they've been underpaid in the past year, whether due to administrative oversight or misinterpretation of entitlements. 

Payroll errors don't just inconvenience employees, they damage trust and can drive away top talent. In fact, 48% of workers say they would reconsider joining a company that doesn't pay its people on time. With the cost of staff turnover estimated to be between 50-150% of the staff member's remuneration, every hire and every resignation comes at a significant cost for cash-strapped SMBs.

Australia's Award system is notoriously complex to navigate, and one of the most common questions from MSMEs is whether they're paying their employees correctly under the applicable Award or Agreement. Minimum wage, penalty rates, allowances, and classification of roles aren't easy to get right, especially for small businesses without specialised teams and expert help.

How MSMEs can cope with these new changes

The good news is that these challenges aren't insurmountable, and the right tools make navigating them much easier. For example, modern workforce platforms are designed to adapt as workplace laws change, tracking new regulations in real time, automatically interpreting Awards, and simplifying obligations that would otherwise take hours to manage manually. 

Instead of scrambling to understand what and how things are changing whenever workplace laws change, MSMEs can rely on scalable, compliant systems that handle the complexity for them, ultimately freeing up precious time to focus on actually running and growing their business. Some of these platforms even fully automate payroll itself –  with hours worked, leave balances, and tax deductions all automatically calculated and applied. In many cases, all that's left to do is click "Run."

Our research shows that 63% of SMEs still rely on three or more disconnected HR or payroll systems, which not only increases admin but opens the door to costly mistakes. Consolidating these processes into a single, unified platform, one that automates payroll, onboarding, compliance, and Award interpretation, can dramatically reduce risk and regain control. 

While hiring a whole HR or legal team just isn't feasible for some MSMEs, these solutions don't have to break the bank. Many platforms now offer pricing models based on employee headcount, meaning you only pay for what you need, making them accessible even for the smallest teams. By eliminating manual work and embracing automation, MSMEs can lift a major operational burden and redirect their energy into driving productivity, growth, and impact.

Ultimately, investing in the right tools can kill two birds with one stone: reducing the risk of costly compliance-related mistakes and unlocking time to focus on the work that truly moves the business forward.

A smarter way forward for Australia's MSMEs

As regulatory pressure increases, MSMEs need to rely on the appropriate tools to prevent compliance from being a burden. By embracing automation and consolidating fragmented systems, small businesses can reduce risk, save time, and free up their teams to focus on what matters most: growing their business, serving their customers, and creating lasting impact in their communities.

At the end of the day, small businesses shouldn't have to choose between running lean and running smart. With the right systems in place, they can do both, and continue to be the economic backbone of Australia.