Most business owners don’t realise this until it’s too late; you can be following the “right” HR advice, and still be non-compliant. We see it all the time. A business comes to us confident they’re operating under the national system, only to discover they actually fall under the state system. And yes, that difference matters more than you think.

Federal vs State employment systems and why this trips businesses up

In Australia, most employers assume they’re covered by the national system under the Fair Work Act 2009. To be fair, many are. But in Western Australia, things are a little different. If you’re a

  • Sole trader
  • Partnership
  • Unincorporated business

There’s a good chance you’re actually covered by the WA state system, governed by the WA Industrial Relations Commission.

That means different rules, different awards, and different risks.

A quick story (this might sound familiar)

We recently worked with a small Perth-based business owner, we’ll call him Mark. Mark runs a successful trade business. He employs 8 staff, uses a standard employment contract he found online, and pays above award wages. From his perspective, everything was “fine.”

Until an employee raised a question about entitlements. Mark had been following national award conditions, assuming the Fair Work Ombudsman guidelines applied to him. They didn’t. Because Mark operates as a sole trader, his business falls under the WA state system.

The issue? His pay structure didn’t align with state award requirements, particularly around loadings and entitlements. It wasn’t intentional, but it was a risk. So, what’s actually different?

Where it catches people out

Loadings and pay structures

In the WA state system

  • Awards often include different loading structures
  • Casual loadings, overtime, and penalty rates can vary significantly
  • Some roles don’t align neatly with national award assumptions

We often see businesses underpaying or overpaying without realising it.

Different awards

State system awards are not the same as national awards. That means

  • Job classifications differ
  • Pay rates differ
  • Entitlements differ

Using the wrong award creates compliance risk.

Different rules for termination and disputes

Processes around

  • Termination
  • Redundancy
  • Employee disputes

Can differ depending on whether you’re under the state or federal system.

Different governing bodies

State-based employers deal with bodies like the WA Industrial Relations Commission rather than relying solely on the Fair Work Ombudsman.

How do you know which system you’re under?

This is the key question, and where most confusion happens. Here’s a simple starting point. You’re likely in the national (federal) system if you are

  • A Pty Ltd company (incorporated)

You may be in the WA state system if you are

  • A sole trader
  • A partnership
  • A trust with individual trustees

There are exceptions, which is why assumptions can be risky.

Why this matters (more than most realise)

Getting this wrong can impact

  • Pay rates and employee entitlements
  • Leave accruals
  • Contracts and policies
  • Risk of underpayment claims

Often, businesses don’t find out until

  • An employee questions something
  • There’s a complaint
  • Or a situation escalates

How we help

This is where we typically step in. We work with many WA businesses to

  • Confirm which system they’re actually under
  • Review pay structures and loadings
  • Align contracts and policies properly
  • Fix issues before they become costly problems

In Mark’s case, we

  • Identified the correct state award
  • Adjusted his pay structure (including loadings)
  • Updated his contracts
  • Gave him clarity and confidence moving forward

No panic, just practical fixes.

Final thought

If you’re running a business in WA and you’ve never double-checked which system you fall under, it’s worth doing. Because the difference between state and federal isn’t just technical, it directly impacts your people, your risk, and your bottom line.

Not sure where you sit?

If you’re unsure whether you’re in the state or federal system, or you’d like confidence that your contracts, pay rates and processes are set up correctly, get in touch. We can quickly review your business structure and give you clear, practical advice on where you stand and what (if anything) needs to change. Reach out for a no-obligation chat, and make sure you’re set up the right way before it becomes an issue.