Crossing the 15-employee line – what changes for your business?

At Akyra, one of the most common questions we hear from clients – especially those experiencing growth – is:
“What’s the difference between being a small business under the Fair Work system and not being one?”

It’s a good question, and the answer can significantly affect how a business manages its people, especially when it comes to dismissals and staying compliant.

Knowing whether your business is covered by the Small Business Fair Dismissal Code is more than just a legal technicality. It influences your HR practices, risk management, and the kind of documentation you need to keep.

In this article, we explain the key differences and what they mean in practical terms for your business.

What is the Small Business Fair Dismissal Code

The Small Business Fair Dismissal Code (we’ll refer to it as “the Code”) is a set of guidelines from the Fair Work Commission. It helps small business owners understand how to legally dismiss an employee without breaching unfair dismissal laws.

It’s not a free pass to let someone go without reason, but it does provide small businesses with more flexibility and protection when managing staff.

Who does the Code apply to?

The Code applies to small businesses with fewer than 15 employees at the time of dismissal. This headcount includes full-time, part-time, and regular casual staff.

If your employee numbers are close to 15, it’s important to do a careful headcount before taking any action.

Downsizing to qualify for the Code can be risky. If you reduce staff just to fall below the 15-employee threshold—and then rehire or redistribute those duties—it could be viewed as a sham redundancy. This could expose you to unfair dismissal claims or penalties.

Once your business reaches 15 or more employees, you are no longer covered by the Code. You must then follow the broader unfair dismissal rules under the Fair Work Act 2009.

Key differences: small vs larger businesses

Minimum employment period

This is a key difference.

• Small businesses: An employee must have worked for 12 months before they can make an unfair dismissal claim.
• Larger businesses: The minimum period is 6 months.

This means if you’re a small business and dismiss someone within their first year, they usually can’t make a claim—unless it involves discrimination or a general protections issue.

Dismissal process

The Code provides a simplified dismissal process for small businesses. It doesn’t mean skipping steps—it just makes the process more straightforward for owners without a dedicated HR team.

For serious misconduct (like theft, fraud or violence), you can dismiss someone immediately—if you have reasonable grounds and evidence.

For other issues (like poor performance or behaviour), you should:

• Give a clear warning
• Discuss what needs to improve
• Give the employee a chance to fix the issue

Larger businesses are expected to follow a more formal process. This usually includes:

• Multiple written warnings
• Performance improvement plans
• Formal meetings and documentation

Dismissal checklist

Small businesses are encouraged to use the Fair Dismissal Code Checklist. It’s a simple form that helps you record the actions you’ve taken before letting someone go. If a claim is made, the checklist shows you followed the Code.

Larger businesses do not have a specific checklist, but they must keep detailed records of all performance and disciplinary actions.

Legal risk and cost

Because the Code offers a clearer process, small businesses that follow it properly are less likely to face successful unfair dismissal claims. This can save significant time, cost and stress.

Larger businesses face a higher risk. Even if a dismissal is justified, failing to follow the proper steps can still lead to a finding of unfair dismissal.

Why the difference?

The Code recognises that small businesses don’t have the same resources as larger ones. Many small operators don’t have an HR team or legal support, and managing complex HR issues can be challenging.

The Code aims to strike a fair balance: protecting employee rights while giving small business owners practical guidance and support.

But it’s not a loophole

It’s important to understand that the Code doesn’t allow unfair or unreasonable dismissals. You still need to act in good faith, follow the right steps, and have a valid reason.

For example

You own a café with 10 staff. One barista is regularly late despite verbal warnings. You meet with them, discuss the issue, and give them a chance to improve. After a few more weeks, the lateness continues. You decide to let them go and complete the Fair Dismissal Code Checklist.

You’ve acted fairly and followed the Code. If a claim is made, the Fair Work Commission will look at your process, and you’ll likely be protected.

Now, imagine you run the same café with 20 staff. In that case, you would need to follow a more formal process. That includes written warnings, a clear improvement plan, and detailed documentation. Without these steps—even if the dismissal is justified—you could be found in breach of the Fair Work Act.

Final thoughts: know where you stand

Whether you’re a small or larger business, the most important thing is to know your responsibilities.

• If you have fewer than 15 employees, the Small Business Fair Dismissal Code applies
• If you have 15 or more, you must follow the full rules under the Fair Work Act

In either case, treating employees fairly, keeping good records, and seeking advice when needed will put your business in a stronger position.