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Small businesses beware: New definition increases vulnerability to unfair dismissals!

Better HR – Australia’s leading online employment relations service for employers

With all the focus on the new Paid Parental Leave scheme that came into effect at the start of the year, many smaller businesses may have failed to note the important change to the definition of ‘small business’ that occurred at the same time.

But if you own or manage a small business, the new rules could very well affect you.

As of 1 January 2011, only businesses that employ fewer than 15 employees – by simple headcount – qualify as a small business when an employee makes an unfair dismissal claim.

Before the adjustment, a small business was one that employed fewer than 15 full-time equivalent employees.

This is a very important distinction, especially if you employ a number of part-time staff and encourage job sharing and provide flexible working arrangements.  Your employees may do the work of fewer than 15 full-time equivalent staff, but in themselves add up to more than 15 people.  If this situation applies to your business, you will find that you’re no longer eligible for the special unfair dismissal arrangements that apply to small businesses.

These special arrangements include a minimum employment period of 12 months before employees can make an unfair dismissal claim, and a simple Fair Dismissal Code to help employers ensure dismissals are not unfair.

Any business with 15 or more employees – by simple headcount – is now vulnerable to the same unfair dismissal rules that have already resulted in a surge of claims against employers.

In the 2009-10 financial year alone, unfair dismissal applications increased to more than 13,000 – a staggering 63% increase compared with the previous year, before the introduction of the Fair Work Act 2009.

Employment laws in Australia are a highly complex area for small businesses owners to grapple with and many have indicated to us that they’re unaware of what qualifying as a small business means.

It’s critical that businesses hire, manage and terminate employees by the book and we recommend that advice from Fair Work Australia is always checked by an employment relations expert such as Better HR. Cutting corners lands businesses in all sorts of trouble.

Unfair Dismissal webinar

Thursday Feb 24, 2011, 12:00 PM AEDST

To explain the new rules, we’ve scheduled a webinar on unfair dismissals, where we’ll cover:

  • The new definition of ‘small business’
  • Understanding the difference between unfair dismissals, unlawful dismissals and genuine redundancies
  • How to reduce the chances of an unfair dismissal claim being lodged against you
  • Using the ‘Managing’ section of the service to correctly dismiss an employee
  • How to access the ‘Small Business Fair Dismissal Code’ using your subscription
  • How you can use the policies and procedures section to your full advantage
  • How Better HR assist you with your unfair dismissal inquiries

Register now!




This article is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice may be necessary in particular transactions or on matters of interest arising from this article. Better HR Pty Ltd ( is not responsible for the results of any actions taken on the basis of information in this article, nor for any error or omission in this article.