What changes when your small business reaches 15 employees?

If your business is growing and you're about to hit 15 employees, or you've just crossed it, congratulations. That's a real milestone. It's also a point where several of your obligations as an employer change.

The Fair Work Act treats businesses with fewer than 15 employees differently across a few areas of legislation, and once you're over the line, small business concessions no longer apply.

Here are three key areas that change.

1. Small Business Fair Dismissal Code no longer applies

This simplified framework for managing dismissals no longer applies. Instead you’ll need to follow the broader and more formal dismissal rules under the Fair Work Act.

Before an employee can lodge an unfair dismissal claim they need to have completed a minimum employment period of 6 months. For small businesses, the period is 12 months.

(We go into detail on this process in our webinar: Navigating Dismissals and Redundancies, you can watch the recording here).  

2. Redundancy pay starts to apply

Small business employers aren't required to provide redundancy pay. Once you're at 15 or more, a permanent employee who has met the 12-month minimum service period and is made redundant is entitled to redundancy pay.

Once again, there's a formal process to follow, largely required by legislation.

3. Casuals can ask to go permanent sooner

This covers how casual employees can request a to change permanent if they believe they no longer meet the casual definition (more details on our casual conversion blog here).

What changes with your business size is the waiting period. Businesses with 15 or more employees can make the request after 6 month months. For those with fewer than 15 employees, the wait time is 12 months.
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When the headcount is taken, and who is counted?

What headcount applies is worked out at particular points in time.

For redundancy, the count is taken before the downsizing decision. As an example, say you have 18 employees and you decide to make 4 roles redundant. The headcount that applies is the 18, not the 14 remaining.  

For dismissals, the count is taken at the date of the dismissal.

We often get questions about who makes up the 15-employee headcount. Is a director counted as an employee? What about casuals? Unfortunately, there’s no one size that fits all and the answer depends on a few different factors/ your specific scenario.

We’ve got a more in-depth explanation here.

What should you do if you're nearing the 15-employee mark?

You don't need to act like a large business, but in some areas, it might help to think like one.  If you have these foundations set early, it will make the transition easier. Here are our tips:

• Keep a running document that records of your total headcount.
• Have a record of casuals who work regularly and systematically, so you know when they might be included in your count.
• Keep track of start dates and probations, our tip is to add reminders to your calendar.
• Have policies and procedures in place— this one is a good foundation to have when you first start growing your team. We design policies to be transitional, so you're protected if you push over the small business threshold without realising.
• Once you hit 15, look at other documentation that will likely need updating, including employment contracts.

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Got questions?

If you're near the 15-employee mark, or you've quietly gone past it, we can help you make sure your contracts, policies and processes meet your new obligations.

Book a clarity call or get in touch with our team to find our more.

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