Unfair dismissal: a see-saw for small business

2 Nov 2011 |

Owners have to put up with many things that can affect their business. Some things they have control over, such as the quality of the good or service they provide, but there are others that they have no control over such as government policy.

Unfortunately, depending which side of politics is in power, the policies can be beneficial or detrimental. Often the changes in government policy can swing from one extreme to the other. Examples of this are the regulations that relate to unfair dismissal claims for small business owners.

Prior to the changes made by the Howard Liberal government small businesses often found it more cost effective to pay out a spurious claim for unfair dismissal, rather than get bogged down in the cost and bureaucracy of fighting it.

Unfortunately when the Liberals introduced new legislation to protect small business owners from unfair dismissal claims they set the number of employees too high. Rather than the generally accepted number of employees being less than 20 full time employees, they set it at less than 100 employees.

Unfortunately when the Rudd Labor government was voted in, as part of their employment law reforms, the qualifying number of employees for a small business was reduced to 15 full time equivalent employees. This meant where a small business had 10 full time employees and 10 part time employees, whose total hours were less than five full time employees; the business was still classed as small.

The Howard government had pushed the pendulum too far to benefit medium size business. The changes made by the Rudd government swung the pendulum equally as far back to where many small businesses had to meet the unfair dismissal regime that applies to big business.

The situation has gone from bad to worse as a result of changes that came into force from 1 January 2011. Not being content with having a low number of full time equivalent employees the rules have been changed to that of a simple head count. This means an employer that has 15 or more employees must meet the more stringent unfair dismissal rules.

In the previous example the business with 20 employees would not get the benefit of the small business unfair dismissal rules. This means a small business that wants to provide flexibility to its employees by allowing job sharing and working part time can be classed as a big business.

Not being classed as a small business means that employees employed for six months can lodge an unfair dismissal claim compared to 12 months that applies to a small business. In addition instead of having to follow a three step process in dismissing an employee, where a business cannot meet the small business definition, they are forced to follow a seven step process.

It is clear from the changes made to the definition of a small business that the Gillard Labor government is more intent on appeasing the unions than helping small businesses avoid needless bureaucratic red tape.

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