What is a small business employer?

Hi Bare Bones Consulting, I’m finding lots of conflicting information on this one: what is a small business employer?

Hey there! Thanks for your question and it’s a good one; simply because in Australia, small businesses are defined in multiple ways.

The Australian Bureau of Statistics (ABS) defines a small business as an organisation that employs less than 20 people.

The Australian Taxation Office (ATO) considers a small business entity to be one with aggregated turnover of less than $10 million for an income year

The Australian Securities and Investments Commission (ASIC) references section 45A(2) the Corporations Act definition of ‘small proprietary company’ if it satisfies at least 2 of the following requirements:

• Have less than $10 million gross operating revenue for the fiscal year
• Hold less than $5 million in assets at the conclusion of the fiscal calendar
• Have no more than 50 employees

Got that? Good. Now forget all that because here’s the part you really need to know as an employer:

Under the Fair Work Act, a small business employer is an employer with fewer than 15 employees at a particular time. If an employer has 15 or more employees at a particular time, they are no longer a small business employer.

There’s also a few more important considerations under the Fair Work Act when it comes to calculating employee numbers.

• a casual employee is not to be counted unless, at that time, he or she has been employed by the employer on a regular and systematic basis and
• for the purpose of calculating the number of employees employed by the employer at a particular time, associated entities are taken to be one entity.

Which means if your business has an affiliation with another company – such as one company owning the other, or both companies owned by the same parent company – and there are 15 or more employees across these business, you may no longer be considered a small business.

So why does all this matter? Under the Fair Work Act, there are different and less onerous rules when it comes when it comes to ending an employment relationship. These include:

• In most cases a small business employer is not required to pay redundancy pay.
• Employees of a small business must have worked in the business for at least 12 months to be eligible to make an unfair dismissal claim (compared to six months for businesses with more than 15 employees).
• If, as a small business owner, you comply with the Small Business Fair Dismissal Code, you are protected against claims for unfair dismissal claims.

There’s a lot of expenses when you run a business and often, owners feel they can save a few bucks by doing their own HR. Sometimes you can get by but more often than not, you’ll miss something. And with penalties associated with serious breaches of the Fair Work Act running up to $187,800 per contravention for an individual and $939,000 per contravention for companies, it might be a smart business move to take advice from someone with genuine HR experience. We’ll leave it up to you to work out who that might be.