Understanding the Small Business Code: A Guide for Small Businesses
Your guide to the Small Business Code
In this week’s Akyra blog, we’re going to delve into the world of Australian small businesses and discuss a crucial aspect that governs them – the Small Business Code.
To ensure you have a clear understanding of this important code, we will unpack what the Small Business Code is, how a ‘small business’ is defined, and highlight some common compliance mistakes.
What is the small business code?
The Small Business Code, specifically the Small Business Fair Dismissal Code, is a set of guidelines that small business employers must adhere to when dismissing an employee. It came into operation on 1st July 2009.
Who is a Small Business Employer?
Under the Fair Work Act 2009, an employer is classified as a small business employer if they have fewer than 15 employees. This count includes all employees at the time, including the dismissed employee, any others dismissed simultaneously, and those employed by associated entities. Casual employees are excluded unless they are considered regular casual employees.
In a recent case handled by the Fair Work Commission (FWC) in the entertainment industry, an unfair dismissal claim was brought forward. The worker initially joined the workforce through a separate maintenance service provider on July 28, 2023. Later, the worker was directly employed from August 28, 2023, until their dismissal on January 29, 2024. The worker subsequently filed an unfair dismissal claim with the FWC on January 30, 2024.
The FWC’s primary task was to determine whether the worker met the minimum employment period required to qualify for unfair dismissal protection. This minimum employment period varies depending on whether the employer is classified as a small business (6 months for small businesses vs. 12 months for larger employers with 15 or more employees).
To make this determination, the FWC needed to assess the total number of employees to establish whether the business qualified as a small business. Casual employees are only counted if they are ‘regular casual employees,’ meaning those employed on a regular and systematic basis.
After reviewing the evidence, the FWC concluded that the business employed fewer than 15 employees at the time of the worker’s dismissal, thus classifying it as a small business employer. Consequently, the relevant minimum employment period for unfair dismissal protection was one year. The worker had not completed the minimum employment period as an employee, and even when considering their time with the maintenance service provider, the total period was still less than one year.
The Code and dismissal
The Code provides a fair and clear framework for dismissing an employee. It states that it is considered fair to dismiss an employee without notice or warning when the employer believes, on reasonable grounds, that the employee’s conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence, and serious breaches of occupational health and safety procedures.
Where the dismissal is not the result of serious misconduct, the small business employer must give the employee a reason why they are at risk of being dismissed. The reason must be a valid reason based on the employee’s conduct or capacity to do the job. The employee must be warned verbally or preferably in writing, that they risk being dismissed if there is no improvement.
Common mistakes
Some small businesses may not fully understand the Code and its implications, leading to non-compliance. To help provide clarity, we’ve compiled a list of some common compliance mistakes relating to the Code.
- Misclassifying employees can lead to serious consequences – e.g. misclassifying an employee as an independent contractor can result in penalties and fines for sham contracting.
- The Code requires employees are given a reason why they are at risk of being dismissed and be warned verbally or in writing. Failure to do so can lead to unfair dismissal or adverse action claims.
- Not keeping accurate records of employee performance, warnings given and reasons for dismissal can make it difficult to defend against unfair dismissal claims.
- No regular review of business practices to ensure they align with the Code and identify any areas that need improvement.
Avoiding these common mistakes can help small businesses stay compliant with the Small Business Code and avoid potential legal issues.
What does this mean for small businesses?
The Small Business Code provides a clear and fair process for dealing with dismissals, reducing the risk of unfair dismissal or general protections claims. It ensures small businesses have a clear understanding of their rights and responsibilities when it comes to managing their workforce.
It also provides a safety net for employees, ensuring they are treated fairly and are not dismissed without just cause. This fosters a positive work environment, which is beneficial for both the employer and the employee.
In addition, there is leeway in the introduction of legislative requirements related to the right to disconnect and definition of a casual employee in that businesses fitting the small business code do not have to be compliant until 26 August 2025 (for all other businesses, it is 26 August 2024).
Key takeaways
Understanding the Small Business Code is crucial for small business owners in Australia. A copy of the Code can be found HERE.
The Small Business Code provides a clear framework for dealing with dismissals and ensures that both employers and employees are treated fairly.
Knowledge is power, and in the world of small business, it’s your key to success – so, stay informed and stay compliant!
Akyra can assist your businesses with questions concerning the details of, and compliance with, the Small Business Code. Contact us today to book an obligation-free consultation.
Disclaimer – Reliance on Content
The material distributed is general information only. The information supplied is not intended to be legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.
