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Small Business Fair Dismissal Code

Published February 6, 2019 (last updated on April 24, 2024) | Adam Wyatt - Content Writer

employee negotiates dismissal with hr managers

What is the Small Business Fair Dismissal Code?

As a small business employer there may come a time where you will need to dismiss an employee. The purpose of the Small Business Fair Dismissal Code is to give small business owners a framework to follow during the dismissal process to ensure the procedure is fair. It also provides small business owners some level of protection against unfair dismissal claims.

Under the Small Business Fair Dismissal Code, a small business is defined as any business that employs less than 15 staff, including casual staff employed on a regular and systematic basis and employees of any associated entities of the employer.

Small business employees cannot make a claim for unfair dismissal in the first 12 months of their employment. If an employee is dismissed after this period and the employer followed the Small Business Fair Dismissal Code, the dismissal will be deemed as fair.

Summary Dismissal

Under the Code, it is fair for a small business employer to dismiss an employee without notice if the employer has reasonable grounds to conclude the employee’s behaviour is serious enough to justify immediate termination.

The Fair Work Regulations define serious misconduct as behaviour that could cause serious and imminent risk to the reputation or profits of the business, or the health and safety of another person. It can also be deliberate behaviour that is inconsistent with the continuation of employment.

The most widely accepted forms of gross or serious misconduct that allow you to dismiss an employee on the first offence, include:

Keep in mind the severity of the act itself, among other deciding factors, will determine if you have reasonable grounds to dismiss an employee without notice.

In some cases, if the act is serious enough – for example, following an act of violence, fraud or vandalism – having a police report can be good evidence to prove the immediate dismissal was justified. Of course, you must have a valid reason to submit the police report in the first place.

Other Dismissal

When a small business employee partakes in conduct that is unacceptable, but not serious enough to justify immediate dismissal, it is the employer’s responsibility to manage the issue of conduct or underperformance in a fair, reasonable and defensible manner.

For starters, you provide a verbal or written warning to the employee stating their conduct will put them at-risk of dismissal if they do not improve.

Of course, it is not enough to simply tell the employee their conduct or performance is not good enough. You must clearly explain what the issue is, let the employee explain their side of the story, and give them easy-to-follow steps on how they can improve.

After this first warning, you have to give the employee a chance to improve their conduct over a reasonable period of time. If necessary, you may need to provide additional support, training and resources to help the employee improve.

Business Downturn and Redundancy

At some point you may have to dismiss employees due to circumstances out of your control. The most common reason is because of a downturn in the business, or the position is no longer required by the business

When this happens, you have to prove the redundancy was genuine and it was not possible to transfer the employee to another suitable role. Just like a standard dismissal you have to follow the correct procedure and provide the required period of notice.

To learn more about what is and is not a genuine redundancy, please refer to the Redundancy Guide.

Dismissal Procedure

If enough time has passed and the employee’s conduct or performance has not improved, you may have reasonable grounds to give the employee notice of their dismissal.

During these discussions, the employee is allowed to have another person present to assist. But that person cannot be a lawyer acting on behalf of the employee in a professional capacity.

You must make sure the procedure is carried out properly and ensure the correct documents have been filled out. These documents can include a statement of termination or signed witness statement. If the employee is owed unpaid wages or entitlements they must be paid out in full.

If an employee submits an unfair dismissal claim against you, you have to give evidence that shows you were in compliance with the Code. Accepted forms of evidence include copies of written warnings, completion of Small Business Fair Dismissal Code Checklist, a statement of termination or signed witness statements.

Employsure offers specialists in all aspects of the Small Business Fair Dismissal Code. For peace of mind, please contact us on 1300 651 415 to learn more.

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