The Fair Work Act 2009 (“the Act”) defines a small business as a business with fewer than 15 employees.
This is calculated on a simple headcount of all employees (including casual staff) employed on a regular and systematic basis.
Here are five practical legal tips for all small business employers.
1. Ensure you have the correct notice period
The Act contains minimum notice of termination periods based on an employee’s continuous service. When working out a notice of termination period, you should look at the minimum periods, as mandated in the Act, to avoid paying extra notice unnecessarily.
2. Check if redundancy pay is actually payable
Small businesses aren’t required to pay a redundancy when making an employee redundant, unless this entitlement is contained in an EBA, modern award or the employee’s individual employment agreement. Your employment agreement shouldn’t refer to redundancy pay if you’re not obliged to pay it.
3. Take advantage of the minimum period
An employee is only eligible to make an application to the Fair Work Commission for unfair dismissal if he/she/zie has completed the minimum employment period (basically a probation period, which is typically one year for a small business). Use this probation time to assess whether the employee is a good fit. If it’s not working out in the first year, it’s unlikely to get better!
4. Make sure award flexibility is documented
Most industries and occupations are governed by a Modern Award, which sets out minimum rates of pay and other entitlements. Modern Awards generally allow for flexibility arrangements where an employer and employee can decide to pay an employee above award in order to offset other entitlements (i.e. overtime rates, allowances, penalty rates etc.). This is provided the employee is better off overall.
Flexibility arrangements can be useful, providing greater versatility for both employee and employer. The arrangement must be agreed in writing however, and failure to explicitly document it in the employment agreement may mean you risk repaying entitlements intended to be covered in the over-award payment.
5. Make sure you have the ability to terminate fixed term contracts early
If you have staff on fixed term contracts, it’s important to include a provision stating employment may be terminated prematurely with notice. Failure to include this clause may make you liable to remunerate an employee for the remainder of the period set out in the agreement – even if you terminate them early.
As always, Arro’s lawyers are here to help. If you’d like to discuss any of the above matters, please don’t hesitate to call.
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