WHEN IT COMES TO FAIR WORK, SMALL MEANS BIG
Urgent action is required by small business to address change in definition
The Fair Work Act has defined a small business as one with fewer than 15 employees. Employees may be full time, part time or casuals employed on a regular and systematic basis.
An employee of a small business is unable to pursue a claim for unfair dismissal unless he or she has been employed for at least 12 months.
A small business is also exempted from paying redundancy benefits in the event that the business makes an employee’s position redundant.
These measures have been introduced to assist small business growth and development and to help insulate them from some of the costs which would impede that growth.
Under the provisions of the Act, it is anticipated that as business grow, they will be able to meet the same costs as larger businesses.
However, the definition of small business has another twist: for the period up to 31 December, 2010, the number of employees is calculated according to an assessment of ‘full time equivalent’ status.
This means, for example, a business employing 20 long term casual and part time staff whose total hours over a 4 week period were less than 2280, would be classified as a small business.
If the number of hours was greater than 2280, then it would not be a small business.
From 1 January 2011, the definition applies to head count only. In other words, the business employing 20 casual and part time staff whose total hours over 4 weeks are less 2280, will be a small business because of the total number of people employed.
The implications for many businesses are significant and will force a complete reassessment of the cost structures which apply to the organisation.
In the example given above, there has been no change in the size of the business, no increase in revenue or sales, and no improvement in productivity: all that has changed is the definition.
This business will now be subject to the application of unfair dismissal and redundancy provisions: if it wants to dismiss anyone, it better do it in December and not wait to January!
Australia’s definition of small business defies logic. Whilst other developed economies have a higher headcount figure (for example, 500 in America and 100 in Europe) they usually also have a revenue or profit component as well.
Australia has opted for a simplistic definition – one which will not serve the interests of small business and may act to stifle growth across many industries.
Businesses and organisations which currently operate under the protected definition of 15 FTE have less than 3 months to review their current staffing profile and take the necessary steps to ensure compliance with the new requirements from 1 January 2011.
You will need to act now – contact Ron Jones Consulting for confidential advice and assistance.
Or email ron@rightworkadvice.com.au
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