Legislation that supports small businesses – What is a small business and how is legislation different for small businesses?
The Fair Work Act says you are a small business if you employ fewer than 15 people. This is the total number of individuals, not the full-time equivalent number. This can include people who are:
- part time
- full time
- casual (if they are ‘regular and systematic’).
It is important to understand that if you are a small business there are different rules that apply in some situations. These include the:
- minimum employment period
- processes to follow when dismissing an employee
- redundancy pay
- Minimum Employment Period
The minimum employment period, or probationary period as it is often known, is 6 months for medium to large businesses, but this is increased to 12 months for small businesses.
That means that an employee can only make an unfair dismissal claim if they have worked for the small business employer for 12 months or more. The exception to this, is if the employee is covered by General Protections laws.
- Ending Employment
Outside of the minimum employment/probationary period, small business employers are exempt from unfair dismissal claims, where they follow the Small Business Fair Dismissal Code.
The Small Business Fair Dismissal Code states:
- the small business employer must give the employee a reason why they are at risk of being dismissed
- the reason must be a valid reason based on the employee’s conduct or capacity to do the job
- the employee must be warned verbally or preferably in writing, that he or she risks being dismissed if there is no improvement
- the small business employer must provide the employee with an opportunity to respond to the warning and give the employee a reasonable chance to rectify the problem, having regard to the employee’s response
- rectifying the problem might involve the employer providing additional training and ensuring the employee knows the employer’s job expectations.
- Redundancy Pay
In most cases, small business employers are not required to pay redundancy pay.
Some awards have industry-specific redundancy clauses, which need to be considered.
All employers should know which Award or Agreement they are covered by and understand the National Employment Standards (NES), which set out the minimum entitlements/working conditions for all employees.
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Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors, such as government legislation changes, may not be up to date at the time of reading. It is not legal advice and should not be treated as such.
