The meaning of a small business employer and why it matters

Updated: 8 December 2019

The meaning of a small business employer is in section 23 of the Fair Work Act 2009 (Cth).

​We'll break down the legal definition for you and why it matters below.

Meaning of small business employer

In a nutshell, you are a small business employer if you have less than 15 employees.

And why should this meaning matter to you?

Well, the meaning matters to you because: 

• If an employee submits an unfair dismissal claim with the Fair Work Commission, the small business dismissal code will apply; and 
• Small businesses are don’t have to pay redundancy pay to employees.

Now, here's who you can count as an employee:

• all employees are counted; and
• casual workers are counted if they work on a regular and systematic basis; and
• associated entities are taken to be one entity so any employees of those.

And, in the case of employee dismissal, if that employee makes a claim with the Fair Work Commission, count them and others you have let go at that time.

Don't worry, regular and systematic is not a complex concept, we'll explain that next.

What is regular and systematic?

Below is a breakdown of regular and systematic:

• 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, the existence of these factors is 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.

So now you know why the definition matters, it's wise to learn what resources exist to help you hire and dismiss employees when you need to, confidently. 

Bonus resources

Below are some useful resources for a small business dismissal and redundancy:

• Dismissal code: here's a link to the small business dismissal code so you can have a ready checklist to make sure any of your dismissals are fair; and
• Redundancy: here's a link to guide you about redundancy pay.

Questions, comments?

Got questions or comments about the meaning of a small business? Leave them below.

How to use Awards for your Australian business

So what is an Australian Award and how can you use one for your Australian business?

Let's start with the Award definition below.

Award definition

An Award states the minimum terms and conditions for employees in an industry. There are currently 122 Awards in Australia.

And it’s good to know about any Awards that may apply to your business because you can:

(a) pay your workers correctly; and

(b) avoid legal trouble that may arise because of underpayment.

Now, if you have an enterprise agreement for your business, that will apply, and not an Award.

So what sort of Awards exist? Below are some sample Awards.

Sample Awards

• General Retail Industry Award
• Social, Community, Home Care and Disability Services Industry Award
• Clerks - Private Sector Award

Now, how will you know which Award will apply?

Which Award applies? 

The coverage clause of the Award explains which employees are covered by the Award. Tip - you will usually find that most awards follow a similar format, so you are likely to find ‘coverage’ under clause 4 of most Awards. 

Below is a sample extract from coverage clause in the General Retail Industry Award:

Which Award applies for an employee with multiple jobs?

When identifying which Award will apply, the Fair Work Commission is interested in the nature of the employee’s work and the principle purpose the employee was hired for.

Importantly, the Commission won’t simply look at the amount of time an employee spends completing certain duties.

Are you paying above Award?

If you are paying above Award, that’s great because you have a buffer when pay rates increase under the Award yearly.

Each year from July 1 pay rates in Awards change and are published on the Fair Work website.

Bonus tip: you may wish to add this clause if you are paying above Award amounts to an employee:

Awards minimums

Now it's important to note, the Award sets the minimum terms and conditions. You may have more beneficial ones in an employment contract but you cannot pay less than the Award or legislation.

The Fair Work Act 2009 (Cth) (the Act) is legislation that sets out minimum entitlements. 

For example, the Act sets out 4 weeks annual leave per year. You can give your employees 5 weeks annual leave (more than the 4 week minimum) but you cannot give your employees less.

How to use the Fair Work Commission’s resources to hire an employee in Australia

Updated: 8 December 2019

Let’s face it, not all businesses will pay to have a lawyer draft their legals from the start.

Now, that does not mean they need to go without. 

However, I am saying there are resources out there that you can use right now, whatever your situation if you cannot get a lawyer's help.

And if you are hiring a lawyer, read on anyway because it's important to know this information.

So let's begin.

Letter of engagement aka employment contract or employer T&C

Whatever you want to call it, written terms that outline employment terms are key.

Also, while an employment contract can be verbal, written or a mix, it’s hard to dispute an issue if it's in writing.

And for that task, your easy DIY option is the Fair Work Commission’s Letter of Engagement. 

Now, regardless of whether you use the Fair Work template or one prepared by a lawyer, you need to give your employees a Fair Work Information Statement. 

Fair Work Information Statement

So what is it? It's a document from Fair Work that informs employees of their their entitlements. 

And, you need to give your employee the Fair Work Information statement before or as soon as possible after your employee starts work; you can get it here.

Also, on the Fair Work website, there are other resources that you can use for job ads, record keeping, varying hours of work, leave entitlements and managing performance.

Do you have any questions about fair work resources?

Contractor hires – what you need to check first

Updated: 8 December 2019

Are you hiring a contractor?

Importantly, what you will want to check first is that you have correctly classified your worker as a contractor and that they should not be an employee.

Why ?

Because if you get the classification wrong, you could face a sham contracting claim from your worker.

Most important, when reading this post, you want to check that you can answer yes to most of the questions in the boxes under each of the headings below.

Tip - you can download the key points in this article as a checklist below. 

For the purpose of testing whether a worker is a contractor or employee, the courts look at these points collectively.

So, this means... 

There is no one point that is more important than the other... and you ultimately want to avoid a situation where your worker's classification is tested in any court.  

Control

Following this question ... if you ARE giving the worker instructions about how to perform their work, you are treating the worker as an employee.

Likewise, hours of work are a good indicator of your workers classification as contractor or employee.

Hours of work

Unlike a contractor, an employee cannot set their own work hours. They may be given a roster or there is an expectation for them to turn up to work on certain set days of the week. 

In addition to hours of work can the worker expect ongoing work ?

Expectation of work

In contrast to being hired as a contractor, an employee’s work is ongoing, they are not just hired for a specific task.

So what you want to watch out for is a situation where the specific task becomes several other tasks without any clear finish date. 

Tip - if a project has turned into a couple more, you should have any new tasks clarified in a new contractor agreement or if you want to bring a worker on board on an ongoing basis, it may be more appropriate to call them an employee and get an employment agreement drafted. As always, get advice if you are in doubt. 

Risk

To clarify, if something goes wrong during or after the work, will the worker be responsible ?

Unlike a contractor, an employee should not have a requirement to take on risk for completing their work and they certainly should not have to hold an insurance policy.

So from this point, there are two practical applications for your business:

For contractor agreements - you may want to include a requirement in your contractor agreement for your contractor to have run off insurance after their contract term in case any claims come up after they ​complete their work for your startup.

For employee agreements - avoid any unreasonable clauses that require an employee to pay for damage while doing their job because these clauses likely won’t hold up.

In addition to risk, superannuation is another factor to consider.

Superannuation

Generally, contractors pay their own superannuation BUT your contractor could also be entitled to superannuation in some situations e.g. if they are mainly paid for their labour. 

Tip - the Australian Tax Office has a tool you can use to determine if you need to pay superannuation to a worker. You can access the tool right here. 

Tools and equipment

While contractors usually supply their own tools and equipment, employees have these supplied to them.

Tax

Unlike contractors, employees have tax deducted from their pay. 

In addition to tax, the payment method for your worker is another important consideration.

Payment method

In contrast to a contractor, an employee will not submit an invoice for their work. They will be paid regularly for example weekly, every 2 weeks or monthly.

Finally, leave is another indicator of your worker’s classification.

Leave

Unlike contractors, employees get leave entitlements like annual leave and personal/carer’s leave.

Now you can download this article as a checklist below.