What is a “small business employer”?

The meaning of a “small business employer” is found in section 23(1) of the Fair Work Act (Cth):

 “(1) A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at that time.”

This definition is immediately quite technical as it requires one to look at the definition of “national system employer” to begin with. Please see our previous newsletter where this terminology was discussed.

The definition then requires a calculation to be made based on what is meant by the term “employee”. The Act offers help here in section 23(2) by saying:

(2)  For the purpose of calculating the number of employees employed by the employer at a particular time:

(a)  … all employees employed by the employer at that time are to be counted; and

(b)  a casual employee is not to be counted unless, at that time, the employee is a regular casual employee of the employer.

Key point here - what is a “regular casual employee”? This is defined in the Act as someone who has been employed on a regular and systematic basis. Great. So, what does that mean? Our summary is:

·         Regular means there is a pattern of work not necessarily frequent, often or uniform

·         Systematic means there is a system, method or plan;

and, if there is no clear pattern or roster, these factors are enough:

·         the employer has made an offer of work and the employee made themselves available; and 

·         the offer and acceptance was regular enough that it could not be regarded as occasional or irregular.

Then there is one last rider put in place and this concerns associated entities. On this topic, the Act says:

 (3)  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.

What, then, is an “associated entity”? For this, we again have to turn to the definitions provided by the Act. On this occasion however, the Act simply refers to the definition used by the Corporations Act (Cth). This provides a number of options, however the usual example to be found is where the employer is a company and it has an associated subsidiary company.

It is clear, then, that all employees are to be counted, including a casual employee who is employed on a regular and systematic this basis, and any employees of a subsidiary company. If this tally reaches 14 or below, then the employer is classified as a “small business employer”.

The exercise to assess whether or not an employer is a “small business employer” is very important because small businesses with less than 15 employees have special rules for ending employment. For example, what this means to the owner and/or manager of a small business employer is that:

• small business employers don’t have to pay redundancy pay (in most cases)

• an employee can only make an unfair dismissal claim if they have worked for the small business employer for 12 months or more

• small business employers are exempt from unfair dismissal claims, where they follow the Small Business Fair Dismissal Code (which is available at www.fairwork.gov.au/unfairdismissal)

You now know why this definition is so important and will be able to use this to help you hire employees but also terminate employment when required with confidence.

Whether you are an employer or an employee, if you have any issues in relation to employment matters, please feel free to call James Burke or Adam Stencel on (08) 8941 6355 or email james@bowden-mccormack.com.au or adam@bowden-mccormack.com.au