Budget 2025: What HR needs to know

On Tuesday 25 March 2025, Treasurer Jim Chalmers handed down Labour’s pre-election federal budget. 

And it kicked off with a bang for the Australian workplace, with the Albanese government banning non-compete clauses for employees earning below $175,000 annually.

It’s a move that has shocked many HR professionals. While some see it as a step toward freeing up the job market, others worry about potential risks to intellectual property and brand reputation. 

In other news for HR, this year’s budget promises significant changes for both employers and employees, highlighting pressing issues like mobility, wage growth, and cost-of-living relief. 

In this blog, we’ll break down the budget’s major updates and their impact on HR.

What is a non-compete clause?

Good question.

Non-compete clauses operate to prevent workers from seeking or accepting new employment within an industry following the termination of their employment. The details can vary, but they impose a legal restriction on what an employee can do after they leave an organisation. The proposed ban on non-compete clauses will affect most employees under $175,000, coming as a real shock to HR professionals and the broader corporate sphere. 

For example, an employee might be prohibited from working in the same industry for six months after they leave an organisation. So if non-compete clauses are banned, if an employee leaves your organisation, there is no way to protect your organisation if the employee shares trade secrets or gives away important information to a competitor. Organisations will have to hardwire the clause into their contracts, which will be expensive. 

If they’re banned, it will lead to the difficult renegotiation of employment contracts and litigation where employers will seek to protect their intellectual property and customer base.

Interestingly, Treasurer Chalmers cited ABS figures indicating that only 1 per cent of employees turn down job offers because of non-compete clauses. Still, many employers and organisations use the clause to protect themselves from the potential fallout if a former employee chooses to share the information.

Implications and risk

The main worry is that employees might carry valuable know-how into their next role. 

For example, in consulting or tech a former employee could replicate product features or strategies for a competing firm. Critics of the ban suggest education, not regulation, is the better path, pointing to a sizeable body of existing case law. But the government sees it differently, aiming to boost wages and mobility, especially given that an estimated one in five workers is not tied to the clause. 

HR teams should consult legal and work through the following issues up front:

• Employment contracts—these will need an overhaul. HR teams will likely need to renegotiate employment contracts, removing or adjusting these clauses for relevant employees.
• Intellectual property concern—knowledge is power, but when it’s not protected by contract law, employers can be left vulnerable when skilled employees move on.
• Retention—you may need to amplify retention efforts so employees feel valued and less tempted to leverage insider knowledge elsewhere

Money. Money. Money (and wages)

By limiting non-compete clauses, the government hopes to boost wages and movement in the workforce, especially for the employees not covered by the non-compete clause.

Students also catch a break. The income threshold for repaying student loans increases from $54,435 in 2024–25 to $67,000 in 2025–26. This change aims to ease the financial pressure on recent Gen Z graduates, who are already feeling the cost-of-living pinch.

In line with the non-compete ban, the government will also “close loopholes” that let businesses fix wages or conditions without workers’ explicit knowledge or agreement.

HR teams can expect employees across different sectors to compare pay rates, potentially driving internal wage reviews. So it’s a good idea to get on top of your performance reviews before the next election rolls out because staying ahead of these changes could be crucial for maintaining a fair, competitive pay structure.

Tax cuts

Another big ticket item in this budget was tax, with the Treasurer announcing $17 billion in tax cuts, the largest piece of the budget’s cost-of-living package. 

Every Australian taxpayer receives a tax cut next year and the year after, boosting the Stage 3 tax cuts that began last July. This will reduce the 16 per cent tax rate to 15 per cent from 1 July 2026 (for income between $18,201 and $45,000), then down to 14 per cent from 1 July 2027.

HR teams should consider how they communicate payroll information with employees currently, as you may need to update systems and guide employees through these tax changes, ensuring smooth transitions in pay packets.

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