At Total HRM, we partner with small and medium-sized businesses throughout North East Victoria, Southern NSW and the Riverina, and are seeing a number of key issues emerging in the current HR landscape. In 2025, the environment for SMEs is more complex than ever, as economic uncertainty, regulatory reform and shifting workforce expectations intersect – creating significant challenges for business owners and leaders.
Here’s a deeper dive into the six most pressing HR pain points for Australian SMEs right now, with practical insights for getting ahead:
1. Labour Laws Are Changing Fast – And So Are Employer Responsibilities
Regulatory Update:
The introduction of the positive duty under the Sex Discrimination Act (amendments effective December 2023) has fundamentally changed the compliance landscape. Employers are now legally required to take ‘reasonable and proportionate’ measures to prevent sexual harassment, bullying, and discrimination – before any incident occurs. This shift from reactive to proactive compliance is being closely monitored by the Australian Human Rights Commission, with new enforcement powers and penalties for non-compliance.
Technical Challenge:
For SMEs, this means developing and documenting risk assessments, implementing robust policies, and delivering regular, evidence-based training – even without a dedicated HR team. The ‘reasonable and proportionate’ test is contextual: what’s expected of a 10-person retail shop differs from a 200-person manufacturer.
Key Actions for 2025:
- Conduct a gap analysis of your current policies and practices.
- Engage a trusted third-party provider – such as Total HRM – to deliver staff training and manage compliance activities for you, ensuring your business remains up-to-date and fully compliant without the need for in-house resources.
- Schedule regular leadership briefings to ensure management is aware of their new responsibilities.
- Document all preventive actions for audit-readiness.
2. Hiring Is Harder Than Ever
Market Data:
The 2025 Hays Salary Guide reports that 78% of Australian SMEs are experiencing skill shortages, particularly in regional locations and technical roles (e.g., trades, IT, healthcare). The national unemployment rate remains below 4%, and many candidates are receiving multiple offers or ‘ghosting’ employers mid-process.
Technical Challenge:
Traditional recruitment methods are no longer sufficient. SMEs must leverage data-driven recruitment tools, employer branding and proactive talent pipelines to compete with larger organisations.
Key Actions for 2025:
- Use AI-powered recruitment platforms to screen and match candidates more efficiently.
- Build talent pools and nurture relationships with passive candidates via LinkedIn and industry networks.
- Offer flexible work arrangements – remote, hybrid, or compressed weeks – to broaden your talent pool.
- Develop a clear Employee Value Proposition (EVP) and showcase it across all digital touchpoints.
3. Managing Underperformance Without Legal Risk
Legal Context:
The Fair Work Commission (FWC) has seen a 12% increase in unfair dismissal claims since 2023, many linked to inadequate performance management processes. The bar for procedural fairness and documentation is higher than ever.
Technical Challenge:
Managers need to be skilled in both the legal and human aspects of performance management. This means structured feedback, clear goal-setting, and robust record-keeping – supported by digital HR systems where possible.
Key Actions for 2025:
- Implement a digital performance management system for easy documentation and tracking.
- Train managers in best-practice performance conversations, with a focus on early intervention.
- Review your termination procedures to ensure compliance with the Fair Work Act and Modern Awards.
- Use objective, measurable KPIs to reduce subjectivity and bias in performance reviews.
4. Mental Health in the Workplace: What Can Employers Do?
Legal & Social Context:
Under the updated Work Health and Safety (WHS) Regulations (2024), managing psychosocial risks is now a statutory obligation. Safe Work Australia has issued detailed guidance on identifying, assessing, and controlling risks related to stress, burnout, bullying and vicarious trauma.
Technical Challenge:
SMEs must move beyond ‘tick-box’ compliance and adopt a risk management approach to mental health. This includes regular psychosocial risk assessments, tailored interventions and ongoing monitoring.
Key Actions for 2025:
- Conduct annual psychosocial risk audits.
- Provide mental health first aid training for managers and key staff.
- Establish confidential reporting channels and promote access to Employee Assistance Programs (EAPs).
- Integrate mental health metrics into regular WHS reporting.
5. Workers Compensation and Return to Work – A Growing Pain Point
Industry Data:
The median cost of a workers compensation claim in Australia rose 9% in 2024, with psychological injury claims up 18% (Safe Work Australia).
Technical Challenge:
Navigating the complex web of insurers, medical providers and regulatory requirements can overwhelm SMEs. Proactive, tech-enabled case management is now essential.
Key Actions for 2025:
- Use digital case management platforms to track claims, communications and RTW plans.
- Develop template RTW plans and ‘suitable duties’ registers to speed up the process.
- Maintain regular, supportive contact with injured workers and involve them in planning their return.
- Monitor legislative changes in your state – requirements can vary significantly.
6. Leadership, People Skills & Scaling Up
Growth Challenge:
As SMEs scale, the need for skilled, emotionally intelligent leaders becomes acute. Many founders and managers are technical specialists, not trained people leaders.
Technical Challenge:
Modern leadership requires proficiency in conflict resolution, change management, delegation and coaching – plus the ability to foster inclusive, high-performing teams.
Key Actions for 2025:
- Invest in leadership development programs tailored for SMEs. Total HRM’s ‘Leading Others’ is a five part workshop series designed for existing and emerging leaders to equip them to navigate these challenges.
- Build scalable onboarding, training and performance frameworks using cloud-based HR systems.
- Document and communicate clear policies, role descriptions and values as your team grows.
- Regularly review your culture and engagement metrics to spot issues before they impact performance.
At Total HRM, we know the HR landscape can be complex for SMEs. By working alongside businesses across North East Victoria, Southern NSW and the Riverina, we provide practical support to help navigate compliance, people challenges and growth. Our focus is on giving leaders the clarity and confidence they need to create safe, engaged and sustainable workplaces.