Non-Exempt Employee: 2025 Rules & Rights in Australia

Australian workplaces are evolving, and so are the rules that govern employee rights and employer obligations. While the term ‘non-exempt employee’ is more commonly associated with US labour law, the concept has increasing relevance in Australia as businesses strive to keep up with global best practices and local legislative changes. Whether you’re an employer, HR professional, or an employee wanting to better understand your status, here’s what you need to know for 2025.

What Does ‘Non-Exempt Employee’ Mean in Australia?

In the US, a non-exempt employee is entitled to overtime pay and other protections under the Fair Labor Standards Act. In Australia, while the Fair Work Act 2009 doesn’t use the exact term, the distinction translates to employees who are covered by Modern Awards, Enterprise Agreements, or the National Employment Standards (NES), and who are not specifically exempt from certain entitlements.

Key characteristics of non-exempt employees in Australia include:

• Eligibility for minimum wage and penalty rates

• Access to overtime pay when working beyond standard hours

• Protection under the NES, including leave entitlements and notice of termination

• Coverage by anti-discrimination and workplace safety laws

2025 Updates: What’s Changed for Non-Exempt Employees?

This year has seen several important policy updates impacting non-exempt employees. Here are some of the most significant changes:

• Minimum Wage Increase: The Fair Work Commission’s Annual Wage Review has raised the national minimum wage by 4.1% effective 1 July 2025, bringing it to $24.20 per hour. All non-exempt employees must be paid at least this rate, unless a higher rate applies under an Award or Agreement.

• Superannuation Guarantee Uplift: As of 1 July 2025, the superannuation guarantee rate has increased to 12%. Employers must ensure all eligible non-exempt employees receive this higher contribution.

• Flexible Work Arrangements: Amendments to the Fair Work Act now broaden the right to request flexible work arrangements for non-exempt employees, including those with caring responsibilities and victims of domestic violence.

• Stricter Enforcement: The Fair Work Ombudsman has ramped up compliance checks, particularly in retail, hospitality, and gig sectors, to ensure that non-exempt employees are paid all owed entitlements.

Real-world example: In March 2025, a Melbourne café chain was fined over $100,000 after failing to pay overtime and penalty rates to non-exempt staff, underscoring the importance of understanding these legal obligations.

Key Rights and Responsibilities of Non-Exempt Employees

Non-exempt employees in Australia enjoy a range of protections. But with those rights come responsibilities—both for employees and employers. Here’s what’s critical to keep in mind:

• Entitlements: Paid annual leave, sick leave, public holiday pay, and parental leave are all guaranteed for non-exempt employees under the NES.

• Overtime and Penalty Rates: Working outside of ordinary hours (typically more than 38 hours per week) usually attracts overtime pay. Weekend and public holiday work is also subject to penalty rates under most Awards.

• Record Keeping: Employers must maintain accurate records of hours worked and pay received. Employees should review payslips and raise any discrepancies promptly.

• Workplace Safety: Non-exempt employees are protected by WHS laws, but must also follow safety protocols and report hazards.

Employers who misclassify staff as ‘exempt’ (e.g., under a salary arrangement that ignores award entitlements) risk significant penalties, back-pay orders, and reputational damage.

Ensuring Compliance in 2025 and Beyond

With regulatory scrutiny at an all-time high, it’s vital for Australian employers to review their classification of employees and payroll practices. Here are steps to stay compliant:

• Regularly audit wage and hour records against current Award rates

• Update employment contracts to reflect 2025 policy changes

• Train HR and payroll staff on NES and Award obligations

• Encourage employees to understand their rights and raise concerns early

For employees, knowing your classification and entitlements is the first step to ensuring fair treatment at work.